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2.9% Contraction, Worries Economist of Double Dip Recession

Per the US Commerce Department on Wednesday 6/25/2014, the US economy contracted at 2.9%, which was much greater than predicted. To put this in perspective, our economy hasn’t contracted this much since 1^st quarter in 2009, when our economy had shrunk a little more than 4.5%.

In light of this news, economist are scrambling to place blame and figure out what happened. Some of the proposed culprits are….

1. Unusually cold winter. Some economist are blaming cold weather in winter however, other economist are saying that even with cold weather in winter, a contraction of 2.9% is just too large to blame on just cold weather.
2. A down revision of consumer spending. Consumer spending is the single largest impact on our GDP. In fact, this metric accounts for nearly two thirds of our economy. It was originally reported that during this time, consumers spending was up 3.1% however, it was later revised down to only 1%. Economist are pointing to the decrease in consumer spending is a major drag on the economy. Furthermore, they are pointing to the lack of consumer spending being a bigger issue about consumer confidence….or at least the lack thereof.

So, what does this mean to Nashville real estate and your home value?

Home values have proven over time, they are a safe long term investment. They provide owners a way to build true wealth through forced savings and tax subsidies so, for those people who intend to stay in their home at least 5 years the immediate ups and downs of your homes value shouldn’t be a major economic concern for you and your family. Hold tight and you will weather the storm.

For those who will be looking to sell their home in the next 6 – 24 months, your home value is going to greatly depend on the stability of your neighborhood and the attractiveness of its amenities to potential buyers. Now, more than ever, it’s not just a homes upgrades and features that are going to protect your homes value. More often in turbulent economic times, home values are protected by neighborhood and community amenities like, ease of livability, ease of access to employment and ease of access to entertainment.

In recessions, the homes at the greatest risk to see a reduction in value are those homes located in neighborhoods where commuter times are lengthy, access to shopping means traffic and congestion and few to no entertainment venues are immediate available. Home with deferred maintenance or suffering from neglect will see the biggest fall in value. Neighborhoods with low pride of ownership will see the second biggest loss in value and finally, communities with high mortgage default rates or have very little access to viable employment opportunities will be third in line to see the biggest loss in value.

Homes that will stabilize and maintain value or possibly even increase in value will be those homes that are located in high desirable neighborhoods. If we had learned one thing in 2007 / 2008 Great Recession was, highly desirable neighborhoods can hold their value….and some can thrive.  They are far and few between and definitely don’t necessarily mean just because you live in a nice neighborhood that your neighborhood is highly desired so understand, each neighborhood is different.

To learn your homes value and receive a free email report pulled directly from the local real estate boards sales sheets, visit www.MyNashvilleHomeValues.com

Are any of you watching what is happening to housing right now? As reported by Forbes.com’s Eric Carlyle Existing Home Sales Fall 5.1% In January 2014, To Lowest Level Since July 2012 and yet, our S&P still gains ground…..hhhmmm…..

As reported by Lucia Mutikani with Reuters, Housing Starts, Permits Tumble; Mortgage Applications Fall and yet, our S&P still gains ground….hhmm….

As reported by Greg Robb of MarketWatch.com, Philly Fed Manufacturing Weakens in February, index dropped sharply….to a negative 6.3 from a positive 9.4 in January and, yet our S&P still gains ground…hhmm…

As reported by Emily Fox at CNN Money, even consumers are holding back as her article headline reads, Wal-Mart Wars of Soft Start to Year and, yet our S&P still gains ground…hhmm…

Some anaylsis say the weather and cold temps are to blame however, sure, the cold weather may not have made things better but, if our country is so weak, it can’t even take a colder than “normal” (Whatever that is) winter…then I am left to ask, just where are we fiscally…really? Better yet, how is it the S&P can make modest gains in this atmosphere of negative reports?

Oh…I almost forgot, let’s not forget about the last two job reports…..can we say ouch! At some point, the market can’t sustain, especially now with the fed pulling back on Quantitative Easing this year. I am sounding the alarm once again and I really do believe I am correct, this is the year of the “double dip” recession. I say “double dip” in quotes because, I never believed we ever came out of a recession in the first place but, let’s go with the popular misconception we did, hence the quotations around the word, “double dip”.

More now than ever before, since 2007, if we stumble, we will take a much larger hit than any of us that didn’t live through the Great Depression will experience. Why do I say that well, it’s simple, our economy isn’t starting off from a place of strength, as I outlined above. Back in 2006, when the real estate bubble burst, our economy was booming so, the hit we took was bad, even worse than the Great Depression but, most Americans in the Middle and Upper class didn’t make many significant changes to their daily lives whereas the lower class was obliterated. This time around, our economy is not in a position to take another hit like that and if it does, you will see middle class America take the brunt and once again, the lower class will receive the equivalent to a economic nuke being dropped on their heads.

Now, let’s add in expected increases in health care cost due to our Presidents fundamental transformation of our country, increased taxes as we don’t have an in power opposition party to the liberal / progressive agenda being pushed in Washington DC and well, 2014 will be a year we won’t forget, that is for sure.