Lions, and Tigers and Oh Yes, Da Bears

In 2011 I wrote an article entitled Lions and Tigers and Bears, Oh My!   In it I discussed the consumer confidence as being a drag on what could be an improving housing landscape.  We had just seen that the number of homes in the foreclosure process had dipped from 1.9M to 1.7M.  Bernanke had estimated GDP to be around 3%.  I expressed some cautious optimism, but the lagging consumer confidence was a sprinkle of pessimism.  Without consumer confidence, the US consumption-based economy is in trouble. Fast forward to today and we have an entirely different picture and yet…

This week has been another roller coaster for US equity markets.  If you’re watching @CNBC or @Foxbusiness, you’ll hear things like, the stock market is in bear market territory.  Investors are repricing risk assets (tech companies that don’t necessarily make any money.)  Interest rates are rising at the fastest pace in 40 years in response to rising inflation [Check out what your home is worth here]. OMG, the sky is falling, run for cover!  Uh… really?  Some economists have even been making statements like this: “There’s a 24-43% chance we goCredible-inflation-forecast-iStock-1317087986 into a recession in 2023.”  What is this @Anchorman?  They sound like Paul Rudd’s character Brian Fantana when he says of his panther cologne, “60% of the time, it works every time?”  Seriously?  If the economy is really in trouble prove it!  And if there’s trouble on the horizon, how is it that continuing claims for unemployment (insurance) are at a level not seen since 1970 and still declining?   That’s right, not going up, not leveling but still declining.  We would realistically need to have 3 months with an average increase in unemployment of 3% or more, to indicate a recession is coming.  There is no evidence of that.

Consumer sentiment, however, is a wild card.  As I wrote in 2011 when the news was still negative, consumer confidence was negative.  This became a self-fulfilling prophecy in that if the consumer feels on edge or like they might lose their job, they stop spending money and this of course begins a spiral of slower growth and one thing leads to another [Find us on social media here].  Clearly the declines in the stock market are concerning.  If you watch your 401K drop by 10-20%, it’s alarming.  And yes, inflation is a real problem.  Gas, food, it’s all adding up and even though we are making more money, we’re feeling the pinch.  But is the consumer really that worried?  My answer is no.  Why?  Simple really, we have jobs, better jobs than we had 5 years ago.  We’re making more money and changing jobs means we can make even more money.  The Great Resignation it’s being called.  There are 1.9 openings for every 1 working person.  Now you can argue that in itself is a problem, but then we’d have to start discussing immigration policy and this is supposed to be a real estate blog… But no, we are not likely heading into a recession soon.  Clearly the Fed is trying to cool the economy and slow things down, so there’s a possibility of one eventually.  After all it’s not a question of if there will someday be a recession, rather when.  OK, so what about housing?

You know I had to circle back to that which I am intimately involved with, didn’t you?  I will say this: Housing is changing.  There is no doubt that with rates in the mid 5%’s the cost to buy a house is growing and it’s getting more than a little painful.  ARM’s like the 7/1 saw a 14% increase in

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Oaknoll Villa Condo For Sale

applications this past week.  So, buyers are adapting and moving to a longer-term variable loan to offset the rising 30-year mortgage.  Inventory is rising but it’s still so incredibly low that so far, it’s only reducing the number of offers we see on a hot new listing.  The listings are still selling and still in many cases with multiple offers over asking.  What is changing is my phones are quieter.  This is interesting because spring is usually my busiest season and I’m not getting the calls to list property.  So, what does that tell us?  For one thing, inventory isn’t going to explode.  If it were, I’d be fielding lots of calls. 

It’s worth pointing out that from mid-May to mid-June, the real estate market is historically herky-jerky.  Mother’s Day, Memorial Day, Father’s Day and graduation, have historically been bumpy and the quiet phones could well be nothing more than usual market behavior.  I don’t have a crystal ball and I’m not an economist, though I play one on TV (kidding), but until we stop seeing “Now Hiring” in every window and as long service and supply chain related delays are common place, conspiring to further fuel pent up demand, I just don’t see how we go from boom to bust; from a massive post pandemic hottest ever economy, to a recession in a matter of months [Contact us here].  I would like to see the Fed stop pussy footing around and catch up to the bond market so that if a recession should begin to develop, they’d be in a position to lower rates quickly, but that like the immigration-labor policy discussion is for another day.       

About Tim Freund

Tim Freund has been a licensed real estate agent/broker since 1990. He spent 14 years as a new home sales rep, ran his own boutique resale brokerage for 5 years and is currently an Estates Director for Dilbeck Estates/Christie's International Estates in Westlake Village, Ca. Tim is a Certified Residential Specialist (CRS), an Accredited Buyer's Representative (ABR), a Corporate Mobilty Specialist (CMS) and a Senior Real Estate Specialist (SRES). Tim has successfully negotiated a loan modification for a client and has been a professional short sale negotiator. Tim sells along the Los Angeles and Ventura County lines, “from LA to Ventura..”. Tim has been married 31 years, has 2 children, is a native Californian and has been a resident of the Conejo Valley since 1991.
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