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 1st 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….
- 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.
- 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
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We at Realty Pilot started to notice a change in the market in March of this year when the number of offers on properties started to decline along with the number of unique buyers also declined. Across the board the number of offers made on a property went from 1.9 to 0.8 month over month since February to today. That is a nationwide average. That means a home will receive an offer in about 45 days if it is price properly. The values and number of loans vs. cash buyers has also decreased. These are all signs we have hit the top and already are in a downturn.