My father's an economist by education and was an Auditor for the General Accounting Office (now the Government Accountability Office, a much more accurate name) by trade, so you'll have to excuse me if I get a little amped about things like this.
Markets go up and come down with regularity. It's to be expected. Housing is no different, and just because some bubbles are bursting around the country, it doesn't mean the sky is falling. Please, don't descend into your bomb shelter just yet.
Try telling that to Avery Shenfeld and some other Chicken Littles of the financial world (link):
July home sales will be the chief focus of the markets, and the news probably won't be very encouraging. "The upcoming week will be a reminder that all's not well in the USA," said Avery Shenfeld, senior economist for CIBC World Markets.
Stu Hoffman, chief economist at PNC, says the housing data will be "ugly."
The slump in housing "has gained momentum in the past few months," said Mickey Levy, chief economist for Bank of America.
Sales of new homes are projected to fall about 3% to a seasonally adjusted annual rate of 1.10 million in July. The data will be released on Thursday. Except for February, when the weather didn't cooperate, 1.10 million would be the lowest sales rate in two years.
Um, let me get this straight. Because we're entering a totally normal, cyclical time of correction in the housing market, "all is not well in the USA?" Do we constantly have to GROW GROW GROW and BUY BUY BUY (or in this case, SELL SELL SELL) for things to be going well?
As for me and my house, boy howdy, we thought that $800,000 (on the low end) for a 3bd/2ba in California's Ventura County was just a bit steep. Funny that a few markets that are relatively reasonable, like Atlanta's, have still been seeing growth.
At least there are some voices of reason:
Nearly everyone agrees that housing is slowing. The debate is over how far housing will fall and what the impact the decline will have on the economy.
Some economists say housing won't fall too much further. "We look for evidence of a correction, not a collapse, in the housing market," said Drew Matus, an economist for Lehman Bros.
Thank you, Drew! Someone who isn't just looking for a headline!
The main concern is that consumer spending has been strong in the past few years only because of the gains in the housing market. Once wealth stops growing, consumer spending could slow sharply. And since consumer spending is about two-thirds of final sales, it'd be hard for the U.S. economy to boom without consumers.
Gee, somehow I don't think the US is going to have a dearth of consumers anytime soon. Could be just me.
Seriously, I know that consumer confidence can affect the economy, blah blah blah. But barring some horrible terrorist attack on American soil, I don't foresee the sky crumbling around our ears anytime soon. The housing market was due, I'd even argue overdue, for a correction, and here it is. No big whoop (except for those poor souls who overpaid for their houses and now may suffer loss as they try to sell in a falling market. That is not fun).
Can I have my honorary economics degree now? ...Hello?