How to interpret current housing woes | VailDaily.com
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How to interpret current housing woes

William DesPortes

Paltry numbers and reports have been released over the past couple of weeks regarding the status of the U.S. housing market. Specifically, sales of existing homes plunged 8.4 percent for the month of March; the worst one-month decline in 18 years. Inventories of unsold homes rose to a 7.3-month supply, which is the highest level in six months. The National Association of Realtors’ Pending Home Sales Index fell 4.9 percent in March. However, new home sales did actually rise 2.6 percent in March over February, but new home sales are still down 23 percent for the past 12 months. These figures certainly raise a few questions and made me consider the status of our economy. Do these recent declines indicate a slowing economy with interest rate decreases in the near future? Or is the slowdown in the housing market a natural correction without any indication of the overall health of the economy? To properly analyze and attempt to answer the question, there are other factors that first must be reviewed. In 2006, consumer spending accounted for 70 percent of the U.S. economy. The U.S. consumer drives national and global economies by buying goods and services. The goods and services bought by the U.S. consumer lead to companies and corporations paying taxes, deficit reductions, global import and export trade commerce and job creation, among many other factors. Yes, homes are included in the goods mentioned.The current status of our employment market should be considered in the housing dilemma as well. Although the number of new jobs added in April was a less-than-expected 88,000, an average of 129,000 jobs have been added per month in 2007 and a staggering 189,000 per month in 2006. The unemployment rate remains at a healthy 4.5 percent. The national labor market is thriving, with wages growing by 3.7 percent over the past 12 months. So, the housing market looks dismal, while the employment market remains strong? We need to peel back another layer of the equation. In March, U..S consumer spending rose at a less than expected pace of 0.3 percent which is a significant decrease from the 0.7 percent increase in February. This indication that consumer incomes are growing but consumer spending is down is a dangerous economic pattern. It is indeed an interesting debate as to whether or not a slowdown in housing is a harbinger of a slowdown in the overall economy. For right now, Chairman Ben Bernanke and the Federal Reserve Board believe that the slowdown in U.S. housing is not an indication of an entire economic slowdown. Their belief is that a strong employment market and summer selling/buying season will pull the U.S. housing market out of its slump.I hope that their experience, wisdom and forecasts are correct. However, I am in the residential real estate business, and I can tell you first-hand that a lot of professions make their living within this business. Real estate agents, mortgage professionals, appraisers, title agents, lawyers, surveyors, home inspectors, home decorators and designers, and moving companies are only some of the professions that are directly and predominantly tied to the buying and selling of residential real estate. If you have been through a residential real estate transaction, you know that a lot of money changes hands. In addition to paying for all of the listed services, states and counties make money with transfer taxes, stamps, recording fees, etc. A slowdown in the housing market could affect the incomes of many consumers. Less income means less spending, which could have devastating effects nationally and globally. A slowdown in housing certainly has made me step back and think about the current status of our economy. While residential real estate sales is certainly not the only business that makes our economy go round, it is one that many professionals are directly tied to. It remains to be seen what the effect of a slowdown will have on us and if the slowdown will persist. William A DesPortes is a managing member of DesPortes, Selig & Associates, Professional Mortgage Services. He can be reached at 970-949-0653, wdesportes@qwest.net


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