I recently came across a news article that was trying to envision Florida real estate prices actually RISING over the course of the next year. I’m not joking about this.
The piece by James Thorner over at TampaBay.com was summarizing data put out by a data crunching firm which recently published findings that indicated that in spite of the rash of FL foreclosures that are steamrolling housing values across the board, we’ll probably see a 3.88% RISE in values between now and September of 2010. Now in light of the current conditions in relation to job losses, untold amounts of “phantom” foreclosure properties being stockpiled by the banks behind the scenes, and the anticipated double-dip recession pattern on the horizon, I don’t know how First American Corelogic can make such projections. There must not be any type of “common sense” metric in whatever number crunching algorithm they are using.
Supposedly, the Tampa Bay area is suppose to beat the odds as well with values climbing a full 5.56% during the same time period. Oh, and let’s not forget to look beyond the borders of Florida. If we turn our focus to California we find more good news with values projected to climb almost 9.36%! Now THAT should be the kind of figures people can get behind in order to get our housing market and our economy back on track, right? I mean, seriously. Who can look at what is going on right now OVERALL in the world and still come to the conclusion that ANY state can pull off a 10% appreciation in the next 12 months? (Also, why did James post an article two days prior that speculated on a coming DIP in home prices?)
We need to remember that all the voices in the “slow recovery” crowd are guarding their words with every news report that they publish. The reason for that is that they don’t want to get caught with their pants down when things go the other way. They obviously have enough of a fear of that happening that they won’t speak with confidence on the subject of economic recovery which, when translated, means that you better not making adjustments to your budget based on hopes of a recovery. Any refinancing that is done right now should be with the goal of getting that payment down and locked in…no other good reasons exist right now.
There are a lot of people out there that are setting themselves up for failure. These are the same people that are going to be crying out for another round of government bailouts when the recovery is NOT sustained and their home becomes just another in a long serious of FL foreclosures that shows no real signs of letting up anytime soon.
For some reason, the people in these think tanks and research centers that use their super-computers to crunch terabytes of data are thinking that the Mid-to-High End Americans (MTH) are going to carry us through this mess in some way by using their dollars and purchasing power to fuel the recovery and keep it going until the other demos can pick up some of the burden after jobs are being generated. Only problem is that this is unlikely to happen. If you want to know more you can read Mark Hanson’s Blog, but in short these rich and semi-rich people have experience a significant hit to their net worth over the last few years. People with money are no more happy to see it disappear than someone that is living paycheck to paycheck.
One major difference is that MTH people can make SIGNIFICANT cuts to their spending habits without making a significant change to their lifestyle. If someone making $300,000 p/year is used to leasing a Lexus every 24 months, it’s not a HUGE step back to buy a used Lincoln Town Car that’s only two years old and has a few miles on it. Not a big deal for him, but the economic impact is that his dollars are not being passed through the economy in the form of purchasing new goods…and we all know that our economy doesn’t work well anymore unless people buy stuff.
The end result is that these MTH types are NOT going to carry this economy to the point where they can pass the “recovery baton” to the next runner with that next runner being jobs being created in response to rising demand for goods and services. People think of the sub prime problem as and obstacle that has been overcome and is fast disappearing in the rear view mirror. Unfortunately, as Octavio Nuiry pointed out in an article published on RealtyTrac.com, high end foreclosures are rising among top tier homeowners. It’s going to be nasty. The sub prime was only the tip of the iceberg.
So, Remember, you heard it here first. I’m making the call right now in November of 2009. When holiday shopping figures come in even worse than expected regardless of the optimistic news relating to the recovery, stock prices are going to begin falling again. Jobs are already shed to the point where purging more of the workforce won’t be an option for many companies if they want to continue to make their products at all. The natural result will be reported loss of earnings and profit and the stock market will take another significant dip. Once the temporary road-blocks preventing FL foreclosures from being processed in a timely manner are washed aside, the inventory of REO properties will wash the real estate market in a flood of vacant homes sending values down further. At that point, the recovery will be called off and next spring the term “double dip recession” will be used in news reports about as much as they report on “short sales” right now.