Real Estate Blog - The Great Recession Has Been a Bumpy Ride

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The Great Recession Has Been a Bumpy Ride

It is hard to believe just two years ago in October the Dow Jones industrial set a record high of 14,164. According to the Associated Press, just one year after that it was at 8,451 in mid October 2008. Today the Dow is around 9,800. Stocks have rallied recently on signs that retail sales are improving. The last two years have been a bumpy ride.

The AP recently broke down the economic numbers, putting into perspective just where the U.S. economy stands today. "The panic of last fall has been replaced by the resignation that the worst is over but it might be years before the economy booms again." It seems for every gain there is something else to put in the loss column. For example, while the stock market is steadily gaining ground, the total losses in the stock market from the peak of October 2007 to the bottom of March 2009 was a mind-boggling $11.2 trillion.

A positive sign is that after steadily declining for fourteen months, retail sales increased 2.7 percent in August. But the unemployment rate in October 2008 was 6.2 percent and today it is 9.8 percent. Consumer confidence, which is measured on a scale of 1 to 100, was at a record low of 25.3 last October and this month it is 53.1. To put these numbers in perspective, two years ago consumer confidence stood at 95.2.

Some oddly positive side effects of the Great Recession have been the increase in personal savings rate from 0.5 percent in 2005, when home prices were soaring, to 6.9 percent in May 2009. Also, credit card debt held by Americans last September was a staggering $975 billion. That number is down 8 percent now to $899 billion.

To put the housing numbers in perspective, 2005 was a record year with 7 million home resales. January 2009 the annual rate of home resales was 4.5 million, but rose to 5.1 million in August. On the other hand, the median price of homes sold in 2006 was a record high $245,000. The median price of homes sold last October was $213,000 and dipped to $195,000 in August.

Some other signs of the time: Starbucks launched an instant coffee product in September. PepsiCo Inc announced recently that it will continue to offer and develop products with price in mind, feeling customers will continue to be price-conscious even after the recession ends. Retailers will need to stay creative to entice shoppers this holiday season amid rising unemployment. Wall Street may be seeing a smoother path to recovery, but it's still a bumpy ride on Main Street.

Ki works in Austin real estate. He works to help buyers find the perfect property. His website provides general information on Austin real estate. It also allows buyers to search for homes in the Austin MLS along with providing a free mortgage calculator.

Posted by Ki Gray - Austin Real Estate on 10/16/2009 04:25 AM

Comments (29)

Economics in the Real Estate Market Channel

recession, stock market, housing, home resales, real estate, austin real estate, austin mls, unemployment, economic recovery

Originally posted at: Ki's Austin Real Estate Blog: The Great Recession Has Been a Bumpy Ride

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29 Comments on The Great Recession Has Been a Bumpy Ride

OCT

It's a sober reflection, but one that readers need to understand. We are, indeed, in for a bumpy ride.

All I can say to folks is "save your money and stay out of the mall".

In spite of all the positive signs we are a long way from seeing the light at the end of the tunnel Karen

Nice Ki. Here's my two cents:

It appears that people have adjusted their purchasing patterns and reduced their personal consumer debt at a significant rate over the past 7 mos. Consumers are buying less and what they do buy, they are definitely using less credit for. It is possible that this is a paradigm shift (as many believe) that was long overdo in the "have anything you want" society we're living in. If this is correct, then consumer demand is likely to be more moderate for many years, with the result being higher base unemployment rates than we have seen in the past.

A bumpy ride it will be.

Ki...

I think that some of the reduction in credit card debt may have been mandated by the cardholders. Lowered limits have left many families strapped for cash.

Good info. There is a much better feeling in the Real Estate market, I do think people in my area are holding their breath a bit for the winter months.

We are a long ways from being out of the woods, let see what Christmas sales look like. I would expect bankruptcy will hit a high next year and foreclosure or now they are called short sales will be through the roof. The gold rush is on.

Ki,

I agree that we aren't out of the woods yet. One of the real problems with the recession has been the loss of jobs in the auto sector. They're gone forever.

Brian

I really don't see that things are turning around. I'm suspicious of the retails sales increase in August. Retail sales result in state sales taxes. When I do a Google search for "state sales tax receipts" I'm still finding most of the stories reporting that sales tax receipts are down 5-15% year over year. That's comparing it to a year where we were already 8 months into the recession.

Many don't have any more equity in their homes to tap with a home equity line.

Credit cards are lowering their limits. Have you looked at the rates recently. I pay my balance off every month and have an 800 credit score and my credit card interest rate got jacked up to 25.9%. How can we have an economic recovery when people are having to pay such outrageous rates.

I hope we are past the bottom but I'm going to just pretend that it's going to last a few more years and act accordingly.

It ain't over but at least there are signs of a come back..at least there is hope..

I agree with the commenters on credit card debt. They are slashing credit limits and upping rates. This holiday season will be horrible because of it. Not to mention retailers aren't stocking items like they used to. It will be interesting to see what happens.

It is going to be a long ride to when consumer confidence come back and we can stabilize the dollar.

Yes we have experienced bumps too, with a job loss, 21 months of unemployment, my income going down, 401K gone while we lived off it, struggle to pay this and that but our personal recession is on the rise and I hope the same for many others in the same boat. It teahes you a lot of things and how not to be frivolous.

We are still in for a continued bumpy ride. With unemployment being what it is and consumer spending down it will be interesting to hear the reports for the holiday season.

Interesting for Starbucks to put out the instant coffee what, 3 weeks ago and raise their prices yesterday by 40 cents on the drink I buy! Irritating! May no longer be buying that anymore!

(I am not a spokesperson for Starbucks, nor am I being paid by Starbucks to mention them in this response )

Thank goodness that President Obama is not telling us like Bush to go to the mall and spend our way out of economic trouble. Foreclosures are expected to rise dramatically through 2010. Isn't it interesting that people say that the jobless rate slwoing down is a good thing, since it keeps rising. As Bette Davis said as Margo Channing in All About Eve, "Fasten your seatbelts, it's going to be a bumpy night".

@ Joe...I do not think that Obama has the answers either.

@ Ki...thank you for sharing the real facts about this. We are definitely doing the two steps forward and one step back dance! :-)

We still have a LONG way to go!! But I feel like we are on the road to recovery!! MITT '12!!!! All the best!!

There goes that media thing again, a recession must be territorial because if people get much broker here even Wal Mart has threatened to leave town.

I also think we have a long way to go, and the unemployment numbers are staggering.

So are you saying the recession is over?

Ki, thank you for sharing. I agree, we are a long way from recovery. There are signs of improvement when you look at Wall Street. The fact that the Dow went over 10k this week and wholesale gasoline is under $2.00 are great signs. We just need to get through these times working as smart as possible.

Thanks for sharing this information. I think we are on our way to recovery but it will take a good while to get back to were we need to be.

I agree with Karen....I think this recovery is going to be very slow...

Ginger

THe good thing about this down turn is I have a better understanding of my financial pictures and what I have to do to improve it.

hi, Ki:
I was out shopping for clothes for a funeral last weekend in Round Rock -

If consumers are decreasing their spending, it's not in my neck of the woods. Packed parking lots, long lines, etc... it was not unlike the Christmas season. Old Navy looked like it had been ransacked. Restaurants had packed parking lots.

We're ahead of the curve, having taken control of our spending in 2006. We went into this recession with a large savings, and no credit card debt. We're in a much better place than many friends and neighbors.

The Stage Coach Austin Home Stager

Although it is going to be painful for a while for many people, a slow recovery is probably the best thing that could happen. Like you mentioned, it could be a paradigm shift for many people. Hopefully everyone has learned their lessons about over leveraging themselves and the difference between wants and needs. Over the last couple of decades we've become a very spoiled nation. I can't stand to hear people say that they NEED a big screen T.V., or the latest gizmo/gadget/game/whatever. People have finally realized that when it comes to having a Wii or having a roof over your head, you better choose the roof. Good post and best of luck to you.

I agree that I believe there is less available credit out there right now. Many have maxed their cards just to survive !

I think we have a long way to go yet!! I'm staying optimistic though.

Patricia/Seacoast NH

Some positive signs though far from out of the woods with unemployment where it is.

The world is always changing. The best method to survival will always be ADJUST. And that's what people are doing! Good to see!

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