Tuesday, December 2, 2014

December 2, 2014 Real Estate Report - Polar Vortexes and Predictions

We have had some pretty optimistic projections recently from economists. For example, the following is from the Wall Street Journal's monthly survey of economists ...Faster job growth and stronger consumer confidence are already putting the U.S. expansion on a steady trajectory heading into 2015 and falling energy prices are offering another boost... While we share this enthusiasm, we also must remember that absolutely the same predictions were made at the end of last year. What happened? It was the weather. By the time America dug out from all the snow, it seemed the economy was playing "catch-up" all year. Well, the weather this November reminded us how important Mother Nature can be. Just ask Buffalo, the recipient of five to eight feet (that is feet, not inches) in a week. Of course, we are hoping that winter is over in December and it is not just starting! On the other hand, the weaker start to the economy was not just about the weather. The real estate recovery also took a pause in 2014. The early bad weather hurt, but in reality slower real estate sales were not just about a weaker market. The real estate statistics were pumped up previously by investors buying foreclosures -- many times in bulk. As foreclosures have decreased, so did these sales. Meanwhile, real estate sales have been increasing steadily during the second half of the year despite the loss of this segment of the business. In essence, the market is normalizing and we fully expect that the first time homebuyer will again replace the investor as the most important segment of the real estate market. It will take some time, but the fundamentals are in place. Meanwhile, this week we get another important reading on the employment sector. This will tell us if we will continue to have momentum heading into the new year and whether the Polar Vortex is providing another temporary respite from the recovery. Keith Stewart 773-529-7000