by Gene Wunderlich
Many years ago a friend of mine attempted to teach me how to sail. Having grown up in the mountains of Colorado there were no bodies of water conducive to sailing either because of their size, because nobody owned a sailboat or because they were just too damn cold. Anyway, my friend Brock took me out on Lake Minnetonka, the largest inland body of water I had ever seen up to that point, and tried to show me the ropes – and I do mean ropes and knots and tillers and a variety of nautical things foreign to my eye. I finally managed to get the dingy moving in a brisk breeze headed out from land but try as I might, there was no way I could turn the thing and head back to the dock. Brock’s advice? ‘To be successful, you’ve got to learn to sail in all winds.’
I’ve been reminded of that sage advice at various times throughout my career and it has never been more appropriate than attempting to navigate the economic waters we currently find ourselves adrift in. The housing industry, our city, state and national economies, and our political models have been waylaid by strong headwinds since 2007, with major and unpredictable cross-winds buffeting us at almost every turn.
Right now it appears we may be benefitting from an incipient tail-wind as we set our course for the horizon., But there are still strong gusts with the potential to blow us off course and up onto the shoals.
OK. Enough of the nautical analogies. We’ve navigated through some tough times and, by all indications, may actually be through the worst of it. Consumer confidence has been edging up since November, housing starts are up, unemployment is down, heck there was even a positive housing/economic piece on the CBS Evening News last night (Housing Market Starts to Pick Up). You know by the time the media starts reporting the market is picking up, it’s been picking up for awhile.
The good news is that it appears to be picking up in all areas of the country. Sales are up 8% in the West, 14% in the Midwest, 9% in the South and 4% back East. More good news is that it is driven by basics – compelling affordability and record low interest rates. There are no government incentives or gimmicks, just ordinary people deciding now might finally be the time in spite of all the roadblocks to qualifying lenders have erected along the way. If enough people figure that out we could start to see a real and sustained housing recovery.
The downside? Well, prices are still down and dropping in most parts of the country. Locally January sales ticked up 14% over last January (don’t get too excited, last January was the worst month of the year) but our prices were down regionally by 7%. I’m hearing more agents talking about how many buyers they have and we’re still seeing multiple offers on most homes. Agents who specialized in bank-owned homes are singing the blues because they have no inventory as distressed properties shrink from 92% of our market in 2008 to just over 50% today.
Don’t get me wrong – we’re not out of the woods yet. As Congress debates tax reform their resolution of the mortgage interest deduction issue will be critical. The future of Fannie & Freddie is also a huge concern as is the current credit tightening by those two giants. Did I mention the additional fees being charged homebuyers and owners to pay for the payroll tax credit extension or the possibility of bulk sales of huge blocks of homes to investors to pump up the rental market at the expense of homeownership? At the local level, your redevelopment funds are gone but your housing element demands remain and reassessment of commercial properties means another drop in your revenue stream for 2012-2013.
What’s a body to do? Learn to sail in all winds is probably still good advice. Wish I’d learned how to sail – I’d go right now.