Here is an article in today's Richmond Times-Dispatch on the "bumpiness" of the economic recovery. The basic gist is while the economy seems clearly in recovery mode - a position that is endorsed by the Federal Reserve and the Treasury Secretary - that recovery is going to be S-L-O-W and painful. Durable goods orders were up because of the "Cash for Clunkers" program. While new housing sales were up .7%, they are still 70% off the peak of 2005.
The National Association of Realtors just released the statistics for August, which show sales for previously owned homes were down 2.7% from the previous month. Now that surprised me. I thought the First Time Home Buyer Tax Credit, $8,000 free and clear from the federal government, if you qualify, was going to drive sales up as we got closer to the November 30, 2009 expiration date. Apparently, it didn't. That jives with what I've been seeing in both August and September. Sales have been surprisingly sluggish.
So what gives? Why aren't there at least more first time home buyers in the market? That really doesn't make sense to me. I dunno, but I'm happy to hear any theories.
MLS,
I think the economy is dealing with two issues, at least. One is the new liquidity that was pushed into the system by the fed in the past 12 months. But, second, that liquidity has nowhere to go. Asset purchases(real estate, stocks, bonds, etc.) do not 'create' wealth, so much as contractually transfer it. The real activity (and it certainly isn't happening yet) will be when venture capital starts to monetize opportunities with excess returns. I hate to sound like Tom Friedman, but until we can out-innovate the world, no amount of liquidity will be creating wealth. Remember, capital finds opportunity, it doesn't create it.
Posted by: www.facebook.com/profile.php?id=100000224456207 | October 03, 2009 at 09:27 PM