Good morning! I just finished reading the Seattle Times online (www.seattletimes.com) about J.C. Penney announcing reduced earnings forecasts for the first quarter of 2008. What followed were a series of short interviews with people around the nation about the state of our economy. Most of them said that they were cutting back. Yes, there's still a huge air of uncertainty out there about where our economy is headed. Probably quite a bit of it is psychological in that unemployment is still fairly low (4.9% at last count) and wages are not declining. Some of the data is real though such as higher gas and food costs.
We've been luckier than most here in the beautiful Northwest but the real estate market is still awfully slow. I haven't done any purchase transactions this year with realtors and the few clients who were interested in buying decided to rent for now. That's in spite of the fact it's a buyers market with low interest rates and high inventory. One of my friends who is an experienced loan originator has gone from a high of 120 transactions/year to 60. And they're the top producer in their office. So the signs are all around us that the market and the economy are slowing.
My question to you is how long do you think this slowdown will last? Generally, an economic downturn lasts 15-18 months. Which begs the question when did this all start? In Seattle, business was much slower in 2007 and ground to a standstill starting the end of last summer. That would make the case for a rebound starting near the end of this year or the first part of 2009. I've seen some pundits claim that the housing market won't start correcting until 2010.
There have been a number of positive measures taken by the Federal Reserve or by private companies (think Bank of America's proposed merger with Countrywide and Chase's proposed buyout of Bear Stearns) to right the ship. But I still see lenders tightening the belt. In other words, it's going to take some time to rebound. Most of the time these days, I have to inform borrowers that I can't help them given market conditions.
I personally believe that a correction will start next year. And it will be nice to have. In my business, we've endured hit after hit. I realize it was necessary and that there needed to be some weeding out. Those of us that are in it for the long haul will survive. It would just be nice to bear the fruits of our labors once again. Right now it's very tough. As always, I welcome your thoughts. What do you see out there? How are you coping? Let me know. And have an awesome day! There is always a silver lining!