As I have remarked a number of times now, that the economic horizon is not looking good for the next year to year and a half - if not more. Now might me a good time with a weak economy to start using more of their economic clout - automakers, retailers and others will be looking for viable consumer groups, and gays with on average better education and more disposable income should become an even more important market segment. Here are portions of an MSNBC story (http://www.msnbc.msn.com/id/20730894/) on the economy:LOS ANGELES - Ongoing weakness in the housing market will push the national economy to the brink of recession, but growth in other areas should put the country back on a slow road to recovery by 2009, according to an economic forecast released Wednesday.
The quarterly Anderson Forecast by the University of California at Los Angeles predicts growth in the gross domestic product of just over 1 percent for the fourth quarter of 2007 and first quarter of 2008. Economic growth will remain “tepid” for the remainder of 2008 and return to 3 percent in 2009, said David Shulman, senior economist for the forecast.
That growth is just above the traditional definition of a recession — two consecutive quarters of decline in gross domestic product. “Of course, when the economy slows to a 1 percent pace, it runs the risk of falling into an actual recession, just as when an airplane’s velocity dips down to its ’stall speed’ and falls out of the sky,” Shulman wrote. The declining housing market could remain at the heart of the nation’s economic woes for some time.
Shulman also expects housing prices to plunge 10 percent to 15 percent before they start to recover, sometime in 2009. “The small recent minimal declines represent not the end, but rather the beginning of what will be a very painful decline,” he wrote. Housing woes have already started to affect consumer spending and are expected to keep doing so through 2008, the forecast said. Auto sales will reach only 15.7 million units in 2008 — the lowest rate since 1998, Shulman predicted. Housing-related purchases, such as furniture and appliances, were also expected to decline.
Note: A 10-15% drop in home prices will leave a number of homeowners owing more than they can sell there homes for if faced with a job loss or medical cost crisis.
2 comments:
Question: What does this mean for a property owner who needs to sell? Is it a sign that the asking price should be lowered? I'm currently in transition and have two properties in two different states. Since I recently got out of being a landlord, I'm not looking to get into the rental game any time soon. However, the amount of principal and equity gained in the property doesn't seem to justify holding on to the property until 2009. Is there a simple and quick formula that you can use to determine how low to go on the asking price?
I would check with a realtor you deem competent in each location to get a read on the current recent sales in the neighborhood as well as the prices of housing currently pending on the market and try to price your property accordingly.
The other thing that we are seeing in the Norfolk area is increased closing cost assistance to the buyers by sellers. With lenders requiring increased down payments due to the sub-prime mortgage melt down (e.g., almost no one is doing 100% loans anymore), closing cost assistance is a way to allow the buyers to lessen the cash needed to close.
Of course, if you think you can market the properties without a realtor, you can factor out the real estate commission cost and lower your list price and still receive more in net proceeds. Many areas have companies that allow you to have listings on MLS for a reasonable charge.
E-mail me directly with your phone number if you want to discuss this further.
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