The month of September brought unexpected financial data showing more strength in the economy than was forecasted in early August. If you recall we were told in August that the economy was slowing and the recovery, which was slow, was losing steam.
September brought better results than were expected and the double dip talk has stopped. September marked the largest September gain in the Dow in 71 years! The Dow rose 773.33 points, or 7.72 percent, the best September result since 1939. At the beginning of October, retail sales and consumer spending were also reported up more than expected.
What does this mean for us? I think this means a more optimistic consumer. We have already seen sales (open escrows) rise after dropping unexpectedly in July. Going forward I would predict:
1. Slightly higher interest rates in the coming days and much higher over the next year.
2. Banks have drastically improved their balance sheets to where they are very well capitalized. (The opposite of a year ago). This will enable them to get rid of non performing loans at a higher rate which will mean more REOs.
3. Inventory levels have doubled since January and it appears will continue to increase. This increase has been due to an increase of non-distressed sellers who are buying up, and the increase in distressed properties I am predicting.
Certainly, in my mind this could keep prices from rising, and even put a little downward pressure on prices, although I think a more optimistic public will cause more sales and keep this minimal, if at all.
The extension of the $729,750 loan limits will also be a huge help. If your clients are waiting for higher prices to sell, I don’t see that happening in 2011. For buyers I just don’t see it ever being more affordable than now as higher rates will more than offset drops in price as far as low payments, in my mind.
To sum all this up. Uncertainty is a “deal killer”. I see less uncertainty going forward than any time since the end of 2007 when the mortgage credit markets collapsed. It looks like we are nearing the end of what was one of the toughest real estate markets ever.
I am quite optimistic and very grateful to all of you. Thanks to your hard work the last few years have been pretty good for Rodeo. I think economists are going to look back at September as the turning point in our economy. Let’s see if that ends up right.
Have a great weekend and GO SELL SOME HOMES!
Syd