NORTH AMERICAN & INTERNATIONAL ECONOMIC HIGHLIGHTS
The Exit Lane From the Road to Ruin
When times are tough, stories of doom and gloom sell newspapers. And analysts reports. There’s a notable temptation to conclude that there’s no exit lane off the road to ruin.
Indeed, in every economic downturn, the question is asked: if jobs are disappearing, won’t consumers keep spending less and less, forcing further declines in employment and business investment, and so on? We heard that view in 1991, and admit to being old enough to have heard it in the recession a decade before that.
True, this is the worst US housing downturn, and the worst global banking crunch, that we’ve seen in the modern era. But the prior US recession featured the worst business investment and equity crash in many years. The oil shock and subsequent interest rate hikes of the early 80s were equally unprecedented. Yet we managed to escape each of these downturns without replicating the Great Depression.
Remember that growth is the natural state of the economy, at least one with a growing population and a longer-term trend towards higher productivity. It takes steady pressure to hold it down. Cure the sectors that are in the worst shape—get them flat as opposed to showing further declines, and the economy will return to a better growth path.
For the current crisis, the seeds of that cure are already being sown in US housing, where the crisis started. A plunge in building permits and starts points to a drought in newly built homes coming on the market six months hence. Ongoing house price declines, likely to continue in the second half, will improve affordability and help clear the market of excess supply. None of that is going to kick-start growth in homebuilding, but even a flat construction sector early next year should eliminate the roughly 1% drag on real GDP growth that the US has suffered over the past four quarters.
Consumers aren’t going to be left to fend for themselves. Congress won’t shy away from another stimulus package, and could turn to that issue after the summer recess.
Even the financial sector will eventually find relief. Bottom feeders will buy up some of the assets now selling at distressed levels. Financial markets remain willing to help the better positioned firms recapitalize, either through equity issuance or takeovers. There will be casualties, but lending capacity should begin to improve after a period of restraint.
This will still be a stagflation world next year. But let’s not bring out the Great Depression analogies either.
When we help prospective buyers locate a new home we listen carefully to their goals. What are their criteria for selecting a neighborhood, what style of house do they prefer, what price range and floor plan meet their needs? Will any special considerations go into making the homebuying decision? When we have a good picture of what the buyer wants, we will go to work to find the best property on the market that will accommodate those needs.
Our real estate agents succeed when they can make the buyers’ goals their goals. Finding the perfect home is a collaborative effort. The buyers communicate what they want, why they want it, and where compromise might be possible, and the agent listens carefully and selects the homes that come as close as possible to meeting the needs expressed. When there is trust and communication between the buyers and the real estate agent, miracles can happen! Creating these miracles for buyers and sellers is “Job #1″ for us.
With condominiums becoming increasingly popular among today’s homebuyers, it is a good time to clarify the terms of ownership that seem to confuse many people. Condo-type residences most commonly fall into two categories - condominiums and townhouses.
A condominium is usually a multi-story structure. Each owner-resident has a deed of ownership for his own unit and owns the space within the unit, but not the land under the structure. Therefore, condo units can be stacked vertically. Condo owners share title to the common areas of the development, including land, exterior of buildings, hallways, roofs and swimming pools — all areas used by all occupants. Each owner pays property taxes on their unit. Also, a monthly fee is paid to the homeowners’ association that is used for managing and maintaining all common areas.
A townhouse, or town home community is usually a series of single- or two-story housing units, each linked to each other horizontally by common walls. Each owner hold title to their unit and the land beneath it, thus these units cannot be stacked vertically. Typically, a townhouse unit will be a two-story residence, with the living area downstairs and bedrooms upstairs. Common areas belonging to the townhouse development are owned jointly. Each townhouse owner pays property taxes and association fees.
