It’s Official … The Recession is Over!
Friday, May 22nd, 2009
Remember, you heard it here first … or maybe second … or may even third. I guess it depends on how many newspapers and websites you read. But, just in case I am the first one to break the news to you, let’s go to the instant replay and I’ll show you what I mean!
As reported by Donald Luskin, of SmartMoney, Professor Robert J. Gordon, an economist working on the Business Cycle Dating Committee of the National Bureau of Economic Analysis (the group designated by the US Government to officially designate the start and end of recessions and other economic cycles), has stated the recession is over right now! Professor Gordon claims the decrease in claims for unemployment benefits tells him that the economy has begun to turn around.
The San Diego Daily Transcript reported that the unemployment rate in California and San Diego fell during the month of April. While the number of unemployed continued to rise, the rate of the increase has slowed. Employment is typically viewed as a lagging indicator of economic activity. Employers tend to delay hiring back workers until they are certain that economic activity is on the rise.
A leading indicator of economic growth is the real estate market. BusinessWeek.com asks, “Can a Housing Recovery Gain Ground?” Acknowledging that housing numbers are better in a monthly and year-over-year comparison, James Cooper of BusinessWeek.com states “the more than three-year plunge in home sales appears to have bottomed out.”
The members of the American Economic Association have decided that real estate is on the rebound. “Predictions by economists a year ago appear to be on target today, and that indicates good news for American homebuyers and sellers. Findings from a survey of economists in July 2008 on issues related to the hard-hit U.S. housing market are on the verge of being realized, according to the Keller Center at Baylor University’s Hankamer School of Business” according to NewsWise.com.
Jeffrey Mezger, the CEO of KB Homes agrees that housing is ready for a recovery. Daniel Taub of Bloomberg News reported that Mr. Mezger is feeling more confident about housing prices and sales. “If you go to Southern Cal, as an example, we’re seeing a floor on pricing. We don’t see prices going down right now, which is a good thing, because then you can set a baseline.”
In another San Diego Daily Transcript report, Jen Lebron Kuhney highlighted the recent San Diego home sales activity. Home sales are up 10% and prices are up 3%, comparing April to March 2009 numbers. Low home prices in Southern California and good mortgage rates are driving buyers back to the market.
The Los Angeles Times reported that mortgage interest rates should stay low throughout 2009. In a story by Mary Ellen Podmolik, she reports “the lending industry’s consensus is that rates won’t change dramatically soon.” She attributes the prediction to a couple of factors, first the Fed continues to buy large quantities of mortgage backed securities and second, the weakened economy seems to assure that the government will continue to keep the money supply high.
As further evidence of the swelling interest in real estate sales, take a look at the little town of Manteca, California, a town with a population of 64,000 and a median income of $59,300. In the heart of the Central Valley of California, surrounded by some of the best agricultural land in the world, this little town is closing escrow on a home purchase every 6 hours and 18 minutes of every day in 2009! Now that sounds like a real estate industry moving forward!
Last thought … the California State Tax Credits continue to push home sale forward. The plan was originally designed to run for 12 months, through March 1, 2010. A $10,000 state tax credit for the purchase of a new home, it was suppose to re-invigorate home sales and construction. Well, over 60% of that allocated tax credit has already been claimed and we haven’t even made it through the first three months of the plan. I would say that the plan has been a resounding success.
I would also say that the real estate market in California has been to the bottom and it is moving on up, taking with it the economy of the state and maybe even the nation. So, the ruling of the referees is upheld, after review of the instant replay, its’ official … the recession is over!
Steve,
Great Blog! Very uplifting and very timely. Now that the recession is over, when can we talk about doing 3rd party construction inspections for your division?
Dave
Hey Dave!
Thanks and spread the word! Confidence in the minds’ of home buyers will lead us out of the recessionary blues and back to economic growth. Today’s Consumer Confidence report was a big boost to the markets and tells the business world we are ready for economic growth. We need more media focus on these good news items and less “woe are we” stories.
Steve
Nice post and research to back up the claim. I do hope this recession is over and that things turn around. I think they will, just need the confidence factor to jump in and help out.
I read this tonight and last night I read this – http://tinyurl.com/q3bsvy, hopefully last nights post was just more noise.
Are sales picking up in your communities?
Hi Jayson,
I saw the same article. Potential problem, but the first batch of these “new foreclosures” did not create the tidal wave of inventory we feared. It appears the mortgage programs put in place by the federal government are working.
I don’t have the exact numbers, but as I recall, less than 1/3 of the home owners receiving foreclosure notices actually lost their homes from this first batch. Foreclosure is a three step process (for accounting and legal purposes). First, the lender files the notice of foreclosure. These are the big numbers and they are the ones that get reported. Second, the lender files a notice of Trustee Sale. This means the house will be sold in a certain time frame. And, third, the house is sold (or taken back by the lender) and the home buyer is out.
The percentage of sub-prime buyers going from step one thru step three was over 50%. The recent figures on the new foreclosures (all types) show less than 1/3 going from step one thru step three. This is the good news. Refinancings, short sales and loan modifications are helping more home owners today stay in their homes.
On the flip side, we are seeing more buyers at our new communities. The tax credits, low prices and low mortgage rates are bringing people out to new home communities. This is also good news.
I’m not saying the recession becomes a boom period any time soon. I am simply saying we have seen the bottom and now is the time to start turning this economy back upwards.
Take care,
Steve
Hi, Steve,
I used to work for you and Lora at Americana in Scripps Ranch.
For the past year and half at my current project, which is in San Diego,
I have seen largely relocation buyers. Some have been intrastate but most are interstate. Obviously, they are very motivated since they have to start work here and get their families relocated. In the past couple of months I have been seeing more and more renters looking. While they don’t seem similarly motivated yet, they are out looking. Ours is not a first-time homebuyer community. Are you seeing this trend in your move-up markets and if so, what do you think will finally motivate them?
Thanks for the blog, Steve. This is helpful to everyone.
Lorene
Hi Lorene!
Nice to hear from you. We are seeing more motivated and qualified buyers at the upper end. Those in good financial shape are making buying decisions today. They understand the market is at the bottom and the want to take advantage of the California Tax Credit, today’s great rates and pricing.
I believe the trend will continue and the upper end buyer will be back to quality communities in strong markets, much quicker than some others might think. As the new home market settles in, you will see interest rates climb, not to prohibitive levels, but I predict 100 basis points or so by year end. So, work with your buyers to get them to understand the strength they have today, before the market takes it away from them.
Good luck,
Steve
As a follow on to my post of last Friday, MSNBC announced today that “Evidence mounts that recession may be ending”. You can find the article at “http://www.msnbc.msn.com/id/30979615″
Steve
Good news blog Steve…thanks for carrying the torch and being at the “point of the spear” for San Diego’s recovery. I know we share an optimistic view and see blue and sunny skies ahead of us…hopefully with more new construction sharing the viewscape on the horizon! The smart companies have prepared and are poised to take advantage of the early stages of this recovery. Let’s do it together!
Scott
Thanks, Scott!
Spread the word! Confidence is contagious!
Steve
Thanks for the good news Steve!
I’m glad to hear such optimism from the eye of the storm from the tipping point mid-’09 when fortune starts to fall back in our favor.
I look forward to the return of safe, steady growth in housing and construction, as do I imagine the nearly 3 million in the construction industry.
Great site, and thanks for all the informative links! Looking forward to working with Brookfield once again after the storm has passed.
Thanks Home! Spread the word. Confidence is a major psychological factor in overcoming this economic slow down. If we fear for the worse, we can watch it happen. If we act for the best, we will surely prosper.
Steve
[...] 4th, when IHS Global Insight reported that housing prices in San Diego were 21% below normal. Or May 22nd, when Professor Robert J. Gordon, an economist working on the Business Cycle Dating Committee of [...]