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Gray Economic Clouds, Silver Data Linings

By Brian Summerfield, Online Editor, REALTOR® Magazine

In these troubling financial times, people want to hear something, anything, positive about where the market might be headed. As we speculate on when a recovery will arrive and what that might look like, analysts, specialists, experts, authorities, and pundits are all sifting through the copious quantities of economic research for some small data point of hope.

So, is there any information out there right now that points to a near-term improvement? I recently caught up with Kathleen Hays, on-air reporter for Bloomberg Television, to find out.

Hays, who served on a panel of housing industry experts during the Real Estate Summit at NAR’s 2009 Midyear Legislative Meetings & Trade Expo, said there were reasons for REALTORS® to be hopeful about an upturn. Although much of the panel’s discussion centered around the unavailability of credit and the serious problems facing the commercial real estate sector, she said the tone of the conversation was suprisingly upbeat.

“I think the panel was actually kind of hopeful on everything the government’s doing right now, especially the role of FHA,” Hays told me. “There’s also a sense that we’re certainly through the worst of [the downturn in housing]. We might still see some price declines – and different regions have different conditions – but there’s a sense that even if we’re still in the woods, we can see some light through the trees.”

Regarding positive economic indicators, Hays pointed to a couple of recent developments. First, she said the new-orders component of the Institute of Supply Management’s monthly manufacturing survey jumped from 41 points in March of this year to 47 in April. Although this didn’t really get a lot of play in the media, Hays insisted that this was a key change.

“That’s a very powerful signal,” she said. “And there are more of these signals that indicate that things are getting less bad.”

Hays also said the housing sector appears to be nearing it’s bottom. “In some regions, prices have started to slow and even stabilize. Ground-zero areas like California, Arizona, and Florida are starting to see some stability. Broadly, inventories of unsold houses are still fairly high. But we heard a lot today about how low new home building is. One of the panelists said that today there’s virtually no new home building going on. A lot of people hear that and think, ‘That’s terrible,’ but it’s really good. If you’re pulling back on inventory, that’s one of the first steps to setting up more sales.”

Even the employment picture seems to be getting better, she added. “In terms of the broader economy, the labor market is still in bad shape, but job losses don’t seem to be as big as the were.” [Note: The May 2009 unemployment report comes out this Friday, and many have predicted it will be above 9 percent.]

While Hays declined to venture any specific predictions about when we might see a general economic recovery, she said a stabilization in the housing market would herald any rebound.

“The degree of diversity [in economic forecasting] is interesting,” she said. “There are some who say we could have a housing recovery in the second half of this year, and others who say it won’t happen until next year. But however you gauge it, there are more people who say we’re getting there. And if housing stabilizes, that will help banks stabilize, that will help the value of toxic assets to stabilize, and that will help get our economy back on track. It all fits together.”

Brian Summerfield

Brian Summerfield is Manager of Business Development and Outreach for NAR Commercial and Global Services. He can be reached at bsummerfield@realtors.org.

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