Things are looking up

More than just real estate.

There was a flurry of unexpectedly good economic news recently, and it gave rise to a little optimism in the real estate sector, something we haven't seen in quite some time. Maybe this is the start of something big.For starters, Federal Reserve Chairman Ben Bernanke said there are signs of a bottom in the housing market and that consumer spending had stabilized. These pieces of the economic puzzle are important because spending represents some 70 percent of our economy, and because confidence pays such a large part in the home buying decision. And remember, these words of encouragement are from a man of few words, and his words are often intentionally vague. Atlanta Federal Reserve president Dennis Lockhart was slightly more reserved, but unmistakably positive last week when he told a group on Jekyll Island that "conditions are now calmer, but it is too soon to breathe easy." OK, no easy breathing yet! But just look at all the good news:New job losses were lower than expected, and well under the benchmark of 600,000 that some economists think signals a declining versus recovering economy. And consumer spending for the first quarter showed unexpected strength after a dismal fourth quarter last year.And even though the stock market is largely unrelated to housing, the recent surge of 35 percent in the S&P 500 Index has boosted consumer confidence at all levels, reflecting Americans belief that the economy is moving toward recovery mode.On top of all this good news, I received the results of the RBC CASH Index. CASH is an acronym for Consumer Attitudes & Spending by Household. Here are their findings in a nutshell:* The RBC Jobs Index saw a rise of 9.2 points in May to 54.4, compared with 45.2 last month. Ratings of 50 or better imply optimism. This is the second consecutive increase in the jobs index following six straight months of decline. Interestingly, it seems that jobs confidence is improving even as overall unemployment is growing across the nation. Expectation for future employment showed the strongest improvement.* The RBC Expectations Index showed that 36 percent of consumers believe the economy will be stronger next month, while only 20 percent expect it will continue to weaken.* their Investment Index rose to 49.6, reflecting an improvement in respondents personal financial conditions and growing comfort with investments and major spending, such as buying a house.And it’s more than just me seeing the writing on the wall. There is a growing belief among financial experts that the recession is over. Barry Knapp, a strategist at Barclays Capital, wrote recently that the economy appears "to be in the sweet spot of a recovery" and that the recession may have ended last month, according to Bloomberg News. Liz Ann Sonders, chief investment strategist at Charles Schwab, said on "Good Morning America" recently that she agrees with that conclusion. "It isn't any brilliant prescience on mine or anybody else's part," Sonders said. "There's certain indicators we can look at to set the turn, and I think we have seen that turn." Sonders warned that unemployment is a lagging indicator and, historically, employment figures don't begin to recover until six months after the end of a recession. That means that this time around, unemployment likely won't peak until the end of this year. But, she added, there are already positive signs on the employment front. Layoffs are slowing, and unemployment claims are starting to edge lower. Meanwhile, there is more good news in housing: "We're hitting some trends that show that we may be approaching a bottom, or we may be at a bottom right now," said Pat Lashinksy, the CEO of online broker ZipRealty. A leading indicator for the housing market is inventory, the number of homes on the market. When the number of homes for sale goes down, prices rise and the market improves. Lashinksy said that's what's happening now. New data from ZipRealty shows that buyers are moving into the housing market at levels not seen in two years. "Inventory levels are actually declining, and median home prices of homes available for sale have actually gone up," Lashinksy said. ZipRealty said that as of right now, it would take 8½ months to sell all the homes currently on the market, down from a high of 11 months in October 2007. Most market watchers feel that an inventory of about six months creates an equilibrium between buyers and sellers. "The fact that inventory is declining is suggesting that soon we may see home prices begin to stabilize. In some markets, it may begin to turn upward. But the downturn in the housing that we've had for the last three years may be coming to an end," said Lawrence Yun, the chief economist for the National Association of Realtors. "Buyers are a lot more engaged," Yun said. "There's an excitement and a passion that hasn't been seen in the last 18 months right now." What's motivating buyers is low interest rates on mortgages, lower home prices and a new $8,000 tax credit for first-time buyers. In addition, some first time buyers in Georgia will qualify for up to $14,000 in additional grants under the Georgia Dream Loan program.So, is this recession over? It’s too soon to tell, but the signs are beginning to look encouraging.

Information from AJC 05/09