The pessimism will never stop, but at some point reality will settle in and the American economy will ignite. Many analysts would argue, Jim ‘Mad Man’ Cramer from Mad Money being one of the bulls—boasting every night that the US economy is roaring and that “we need to get in the game.” The reality is that the Dow Jones Industrial Average and S&P 500 have broken their psychological barriers of 12,000 and 1,300, respectively. The economy is getting better, companies are flush with cash, while Wall Street and big banks are healing rapidly. At some point, corporate America will start hiring again.
Dave Wilson of Bloomberg reported today that Tobias Levkovich, Citigroup chief U.S. equity strategist, believes the recovery will continue with U.S. banks greasing the wheels of economic growth for U.S. businesses. The thesis that Citigroup’s Levkovich argues, is that more bankers are easing “loan criteria” for U.S. companies, than those tightening lending standards. According to Levkovich, the ease in lending standards will have a positive impact on economic growth. Unfortunately, there is a nine-month lag for the market to feel the ease in credit. This is a good sign for corporate America and those looking for a job.
On the flip side, you have the pessimistic analysts, aka the bears, that keep pulling the market back after it appears to be gaining its footing. This could be one of the many reasons the labor market has not bounced back as quickly as previous recessions, which in turn affects the housing market. According to the Bureau of Labor Statistics, the unemployment rate did fall in December to 9.4% from November’s 9.8%—little slice of optimism.
The obvious—real estate is local, so, what does a homeowner in the suburbs do if they need or want to move? The first step is to see how your neighborhoods real estate market has fared during the Great Recession. Just because national home prices have dropped 2,000% (forgive my sarcasm), does not mean your neighborhood has experienced the same abysmal price declines. Ask your local real estate professional to pull the sales comparables for the last 3 months in your neighborhood. To be a little more specific, you want to investigate the sales in the last thirty days within ½ to 2 mile square radius of your home. This will give you a sense of your homes value.
Recently, Zillow released a report that forecasted home prices to fall, however, the
"four largest 20 markets analyzed by the company did not decline in value: Los Angeles, Boston, Riverside (Calif.) and San Diego. The gateway cities -- Boston, New York City, Seattle, San Francisco, Los Angeles and San Diego -- are bouncing back, according to Rosen. The Central Valley in California has not yet stabilized. Silicon Valley is doing well with job creation, and home sales have picked up in the area. Washington, D.C., continues to grow."
Massachusetts Association of REALTORS® released a report last week that home sales in December were up for the first time since June. Although median price declined less than two percent, the increase in home sales is a positive indicator for the Massachusetts housing market. The low interest rates and lower prices have been a bright spot for residential real estate. Laurie Cadigan, MAR President, stated in a recent article that she sees sales improving in the first quarter.
Where does this leave us? In my opinion, we are going to have a volatile market for the remainder of 2011. Many potential buyers are going to sit on the fence to make sure they buy at the bottom of the market, which some buyers will inevitably miss. If you are in the market to buy a home or trade up, this is your time. With historically low interest rates and markets flooded with short sales and foreclosures, you are bound to find a good deal. Be patient, do your homework and research, and you should discover a diamond in the rough.
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