Homes on the Brink as Economy Shrinks

Fritz Pfister
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Posted: Apr 19, 2013 12:01 AM

Another act of terrorism in America by a coward(s), this time in Boston, broke the collective heart of America. The thoughts and prayers of a grieving nation go to the victims and their families. People scratch their head wondering how this could happen? But happen it did.

While a shocked, and heartbroken nation’s attention was distracted; the economy faltered again and not just in America.

Germany had a flash crash in their stock market, had car sales plummet, and had their rating downgraded. This the stalwart of a Europe in recession. This does not bode well, for Europe is a primary consumer of American goods.

China the world’s second largest economy is slowing.

On the home front Goldman Sachs revised their outlook for the economy this year saying weak March retail sales, falling consumer confidence, and a falling savings rate was due to consumers living paycheck to paycheck following the hit to their disposable income from the 2% tax increase. Slow consumption growth would make it difficult for real GDP to grow much more than 2%.

Bank of America echoed Goldman’s sentiments stating the current slowdown in the economy is worse than expected at this stage. Thus if stocks and credit are counting on the economy to pull through the near term challenges they must believe strongly in an underlying more independent source of growth (other than QE & ZIRP) such as a housing market recovery.

Housing on the surface continues to look good, however when you peel back the layers of that onion it appears to be growing only due to bubble inducing Fed policies.

The news on building starts is a prime example. Along with permits dropping from 939 to 902 thousand in March, single family starts fell from 650 to 619 thousand.

Many will be misled because the government reported over 1.036 million housing starts. Sounds good in the headlines but the increase was due again to multi family starts. To put this in proper perspective the record for single family starts was in January of 2006 with 1.823 million. In other words single family starts are one third of the high.

What Bank of America calls an ‘independent source of growth’ I call organic. With the labor market continuing to languish there can’t be enough new family formations to add to demand in housing. All the Federal Reserve has been able to accomplish is to pull pent up demand into the market and attract investors looking for higher rates of returns.

We are now in our fifth year of government as the solution producing more of the same results. As businesses across the nation prepare for full implementation of Obamacare paring hours and workers prior to the June 30 deadline we won’t see any improvement of significance in the labor market.

The next challenge for the private sector will be how the federal budget is resolved and how the debt ceiling will be addressed. You can bet a push for more revenue from the private sector by the big government spenders to help revive the private sector madness will continue.

Just as our campaigner in chief will continue to press for the fundamental transformation of America. Obama’s government as a solution had two big setbacks this week. The billions of dollars spent on the multiple national security agencies even with the end all Department of Homeland Security, could not prevent the Boston bombing.

No matter the emotional plea using the victims of Sandy Hook as the carrot that we must do ’something’, gun control initiatives that would have done nothing to prevent another Sandy Hook were rejected in the Democratic controlled Senate.

The next major distraction will be the Gang of 8 immigration back room reform bill. Hopefully if this is bad legislation it will be rejected too. That’s what the American people want.

Gallup released a poll this week on the primary concerns of the American people. Gun control and immigration tied near the bottom of concerns, with only 4% of the population listing them as their chief concern.

Leading the list of concerns for America? The economy and jobs.

So what can we expect from our president? More of the same. After some photo ops in Boston my guess is Obama will be back on the campaign trail trying to revive his attack on the second amendment, and to pass the Gang of 8’s backroom deal, again ignoring the economy and jobs.

The more things change the more they stay the same.

The opinions expressed here are solely those of Fritz Pfister or identified sources, and not necessarily those of RE/MAX Professionals of Springfield or RE/MAX International.