Wall Street's Symbol of Optimism, Courage, Hope.
Owners and Investors in real estate can’t be consumed by day to day emotions. As we see improvements in the economy and weigh changes in Unemployment, GDP, or Residential Investment from week to week, we must be cognizant of the endearingly local and forward thinking character that real estate engenders.
From the Bureau of Labor Statistics:
The unemployment rate fell from 10.0 to 9.7 percent in January, and non-farm payroll employment was essentially unchanged (20,000), the U.S. Bureau of Labor Statistics reported today. Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs.
Because job losses are affecting different sectors and industries of the economy differently. In New York, we feel poised on the brink of a large bonus season on wall street even as restauranteurs and many other small businesses suffer from limited credit conditions. Some have taken being laid off as an opportunity and have founded thriving businesses. Many others, still, continue to struggle.
However, despite the similarity to past recessions, we should not hold ourselves under the same illusions -illusions that there could be a V-Shaped recovery in the same manner that many post world war II recession have demonstrated.
I maintain this point because THIS RECESSION will define the winners and losers starkly and profoundly. Individuals who are unemployed are more likely to be unemployed for longer:
People who have lost their jobs are struggling terribly to find new ones. Since the downturn began in 2007, companies have been extremely reluctant to hire new workers, and few new companies have started. The economy and the job market are churning very slowly.
Try thinking of it this way: All of the unemployed people in the country are gathered in a huge gymnasium that’s been turned into a job search center. The fact that this recession is the worst in a generation means that there are many, many people in the gym. The fact that the economy is churning so slowly means that there is not much traffic into and out of the gym.
If you’re inside, you will have a hard time getting out. Yet if you’re lucky enough to be outside the gym, you will probably be able to stay there. The consequences of a job loss are terribly high, but — given that the unemployment rate is almost 10 percent — the odds of job loss are surprisingly low.
This paints an interesting picture for property owners and investors as we weigh mixed news about the shape of the economy.
It means that now, more than ever, the owner must cater successfully to a niche. This does not mean that this niche is only the winning side – those workers who feel safe in their jobs. Everyone needs a place to live. But to be successful, we must understand why people are moving, and what they want to hold onto or gain as the relocate.
Via Calculated Risk:
This graph shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 4.0% over the last 12 months.
Consumer credit has declined for a record 11 straight months – and declined for 14 of the last 15 months and is now 4.8% below the peak in July 2008. It is difficult to get a robust recovery without an expansion of consumer credit – unless the recovery is built on business investment and exports (seems unlikely to be robust).
For the current recession, employment peaked in December 2007, and this recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only early ’80s recession with a peak of 10.8 percent was worse).
