It's not over yet!

You’ve seen and heard the bad news about home mortgage delinquencies and foreclosures which are on the rise nationwide. In some areas they are at record levels. While I wish I could assure you that the bad news is over, I can’t; because, I think it is likely to continue well into 2008. I think it is almost guaranteed, given anticipated interest rate resets on adjustable loans. Also, something that has been almost completely overlooked in the news is the effect energy costs are having on buyers’ decisions. Home energy prices have been rising for quite some time. Also, vehicle gas prices have had an effect on where people buy, and how far they are willing to drive in order to get their “dream home.”

Okay, so much for the gloom. Here’s the good news. Jobs and exports are way up. Fortunately the U.S. economy continues to expand and provide jobs despite the setbacks related to the housing market. There were nearly two million job gains over the past 12 months, and an average wage increase of 4% which is generating $700 billion in additional income for households this year! That easily offsets the negative impact of rising mortgage payments due to resets. Exports grew by nearly 7% in the latest quarter which shaved off a big chunk of our trade deficit. That translates to almost 1 % more in GDP! Here’s the bonus: the weak dollar will almost assure the U.S. of much stronger expansion due to exports over the coming years. These are all important to the real estate market. Don’t overlook what corporate profits are doing. They are solid, and double what they were in 2000; now at $1.5 trillion. The impact can be seen in the stock market which has been bouncing all over, but is still holding on strong compared to the great year of 2000. There are no predictions of recession, and that is what everyone should find joyful to their ears.

Okay. Where does this all lead us? Soft home sales for now; but, healthy job growth, and higher incomes will lead to more people wanting housing. Home prices will be going back up again. It is just a matter of how soon, and how much. I think mid to late 2008 will reveal my prediction. If you have a different opinion, let me know.