Archive for the tag 'market'

The Economy 2008 Quarter 3 Update

Amy August 13th, 2008

from the AmyBSells Chief Economist Ryan Detrick

I think it is important for those who read this blog to look at the economy on a broader scale and understand that housing affects many other parts of our economy, and is affected by many other parts of our economy. These things should be considered when understanding the market as a whole. To do this, I have recruited a client and friend of mine who knows the market very well, all aspects, and he does not focus on housing. If you read his bio, he is something of a celebrity appearing weekly on television for his thoughts on the economy and the stock market. I think that my clients and readers of my blog should have nothing but the best, so I give you, Ryan Detrick, AmyBSells Chief Economist extraordinaire…

Let’s talk about the economy. As we all know things aren’t that great, but is it really that bad? Well, two weeks ago ex-Fed President Alan Greenspan put it simply, “the US economy is on the brink of recession.” Yes, housing and banking have been without question two of the weakest areas - but manufacturing has held up extremely well and consumer confidence is slowly improving. This coupled with an economy that lost 51,000 jobs last month - and in my opinion you have a weak, but not collapsing economy.

Taking a closer look at the economic data - manufacturing has remained strong. Much of this is due to the lower US dollar and strong foreign demand. In fact, earlier this month the ISM manufacturing survey came in at 50.0 - suggesting flat growth over the past year. Anything over 50 suggests growth and this number was much better than expected. Personal spending remains strong and the recent consumer confidence survey showed steadily increasing confidence. Given consumer spending is nearly 70 percent of overall GDP - we need consumers to continue to spend to keep our economy afloat.

On the downside, we have year-over-year inflation growing at nearly five percent (a two decade high) and GDP growth in the second quarter of only 1.9 percent. When inflation is growing faster than what you can make in a money market (around 2 percent), economic conditions are tough - plain and simple. And finally, with oil about 60 percent higher than it was a year ago, the ‘oil tax’ is alive and well and hurting everyone.

Last week the Fed kept short-term interest rates at 2.00 percent. Earlier in the year the consensus was they would be forced to increase rates, but as the economy continues to muddle along - this isn’t the case. In fact, last week the Fed took a more neutral tone in terms of what they plan on doing with rates (meaning they aren’t looking to hike or cut rates anytime soon). There are two schools of thought in regards of interest rates. One, the Fed needs to increase rates to thus prop up the US dollar and this should push oil lower (remember the dollar and oil trade inversely). The other school of thought is they should leave rates where they are to potentially spark the weakening economy. Without a doubt the Fed is in a tough place, but my personal opinion is they should leave short-term rates at 2.00 percent and stop worrying about oil and inflation. As long as we continue to see banks going under and weak housing numbers, their main concern needs to be improving the overall economy. Also does anyone really expect higher interest rates during an election year? I for one don’t.

The bottom line is things aren’t good for the average US consumer. With higher inflation, higher oil, a slowing economy, and a weak stock market - things are tough out there. One thing to remember is we’ve had recessions before and we’ve always come out of them stronger than we were before. I don’t expect the current environment to be anything different.

About Ryan Detrick

Ryan Detrick, CMT, is the Senior Technical Strategist at Schaeffer’s Investment Research in Cincinnati, Ohio. He joined Schaeffer’s in September 2003 and recommends trading strategies for Schaeffer’s clients, and has over eight years of financial industry experience in the investment and financial services area. Strengths include short-term trading with an eye toward timely technical- and sentiment-based market and trading strategies. Mr. Detrick is frequently quoted in various print media outlets such as The Wall Street Journal, BusinessWeek, USA Today, Reuters, Bloomberg, The Associated Press, and others. He has also participated in broadcast television and radio appearances including numerous appearances on CNBC and Bloomberg television and radio. Received a BA in Finance from Xavier University and an MBA in Finance from Miami University.

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Oversupply Continues to Drive Sale Prices Down

Amy July 27th, 2008

Another article about the over supply of homes, this time focusing on new construction, suggests that the bottom is not here yet. A Wachovia economist suggests that the housing market will not hit bottom until mid 2009 to mid 2010. While I agree no one has a crystal ball, mid 2009 is over a year from today, and next summer or the summer after may be the bottom. What that means to the home SELLER, SELL NOW! If you don’t want to lower your price today to get your home sold because you want more equity, next year will likely give you even less or bringing money to the closing table. Which is worse, less money this year, or having to pay money next summer or the summer after?

From the MSNBC Article: http://www.msnbc.msn.com/id/25821231/

No sign yet of a bottom in home prices
Rising foreclosures, big new-home inventory push recovery into next year
by Paul Sakuma / AP file

When will home prices stop falling?

The answer is critical to millions of American homeowners who are watching their home equity melt away or are unable to move because falling values have sent potential buyers to the sidelines. Even if you don’t own a home, the question is central to your chance of getting a good night’s sleep if you’re worried about your job, your bank account or the investment in your 401(k).

In the latest evidence that prices are still sliding, the National Association of Realtors reported Thursday that the median price of existing homes sold in June fell to $215,000, down 6.1 percent from a year ago. Sales fell 2.6 percent from the month before — far more than analysts had expected.

Richard Gaylord, president of the Realtors, said a recent survey found that nearly one-quarter of potential home buyers are “waiting on the sidelines.” A major housing package passed by the House Wednesday after months of debate could help boost the market by offering a credit to first-time home buyers, the group said.

The Wachovia economist further suggests that the nationwide priced drop will go from last years decrease of 6.1%, to falling an average of between 22 and 29 percent. So, we have a while to go. Now is the time to sell if you are going to sell, and not a good time to have unrealistic pricing expectations. The market is stressed today July 27th, 2008, but who knows what will happen in a month, will rates go up even 1% it will take buyers out of the market, and if prices continue to slide down as they are expected to do, your home will be worth less.

Another economist quoted in this article suggests that “Bottom line, we probably have a year or more to grow into a better balance in the housing market,” meaning until prices come into alignment from when housing prices peaked in 2006.

Yet another Merill Lynch economist estimates that excess inventory of new homes and condos is nearly 30 percent higher than historical levels.

My professional recommendation for the outlook on selling housing in Cincinnati is this: If you don’t have to sell, don’t sell until prices have stopped decreasing. If you have to sell, do it now and get it sold quickly, listen to an experienced Realtor’s pricing suggestions. Pricing comparables need to be recent (less than 90 days ago) and take into consideration your competition. Always hire a Realtor that knows the area and sells more than 10 homes a year!  An experienced and practiced Realtor who knows the area will be the best thing for any seller. With the time it takes to sell a home these days, be sure that that Realtor has individual time for pricing and preparing your sale. Someone with 30 or 60 listings does not have time for your individual needs! If you can, interview more than 1 Realtor to see the differences in knowledge in pricing and aggression in marketing.

Call or email Amy Broghamer if you find you need to sell, 513-377-3637. In this year’s Hyde Park area market, I am selling homes in an average of 35 days and selling at an average of 97% list price, I sell more than 30 homes a year and am in the top 2% of Cincinnati Realtors. I only carry 15 listings at a time or less, all price ranges, for motivated sellers. Let me know if you would like a private consultation!

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