All economists and our financial markets are betting on this quarter to produce positive GDP. Positive GDP marks the ending of the recession. Unfortunately with low wages and high unemployment the consumer will feel less positive over the next year. Still we are marking an end to the worst recession since the Great Depression and everyone should be pleased with this.
Road to REAL ESTATE RECOVERY
Now let’s talk about real estate and recovery; The regional markets that had received the highest historical appreciation rates during 2003 to 2006 also had some of the largest price adjustments over the past 36 months. States that had these incredible high real estate returns, like California and Florida, have also seen the highest incidents of foreclosures. Logic would dictate that these markets will bounce back the fastest, but unfortunately they too will recover slowly as will the rest of the nation. An economic recession takes time to unwind and buyer exuberance usually only occurs once the entire nation is certain that the real estate market can only have one trend, up.
The psychology of man dictates that a deep recession brings about caution for some time to come (probably a few years). The States that had some of the highest swings will once again have the highest appreciation. Still it is best not to hold your breath for this in areas like California and Florida until old wounds heal (likely a few more years). In the meantime, recovery is with us. Recovery means price declines stop and appreciation kicks in. We are already seeing this in the hardest hit areas with homes priced at or around mean home pricing.
The June 2009 numbers just came out for pending home sales. We had the FIFTH STRAIGHT MONTH of pending home sales increases (up 3.6% month to month) and over a 6% increase compared to June 2008. Real estate, like any form of investment, has cyclical patterns that are dependent upon supply and demand. Optimism will once again kick in and sellers, buyers, developers all become happy over time.