As you probably have realized, when it comes to the real estate market, I’m a “Glass Half-Full” kind of guy. But lately, even I have begun to question some of my core assumptions. I have been predicting inflation, rising rates, an improving economy and a stabilizing real estate market for some months now. Yet January and February have been so slow for real estate, that I’m beginning to think I may be wrong.
Yes, inflation in commodities and rising food and energy prices certainly suggest core inflation is percolating, yet the labor market shows no signs of inflation – there are just too many unemployed to create wage pressure. Retail sales have been improving, a key to an improving economy since 70% of the economy hinges on consumer spending, however, even those latest numbers are disappointing. Perhaps it’s the weather; perhaps it’s just a typical slow start to the new year. But from my vantage point, things are starting to look a little like the 1st quarter of 2009, a time fear and uncertainty. There is one big difference between now and then. In Q1 2009 the stock market was in a free fall and panic was felt everywhere. Fast forward to Q1 2011, and the stock market is not on its way towards 6500 but rather touching new highs; the employment numbers really are somewhat better and there isn’t that sense of sheer panic like there was 2 years ago. So why then, am I filled with so much trepidation? I suppose it stems from my general sense of uncertainty. Uncertainty in the Middle East; uncertainty about the deficit, both in California and the Nation; uncertainty about rising interest rates (I’m certain they’ve risen, but uncertain what effect that will have on housing); and yes, my uncertainty of whether the glass is still half full, or just perhaps it’s become half empty.