The Sky is Falling! The Sky is Falling!


We’re facing a crisis unlike any in our history.  Jobless rates are at historic highs, the economy’s in a freefall, real estate values have seen their greatest decline in years, and Armageddon is just around the corner.

The sky is falling!  Right?

Or is it?



 


It seems that almost every day we wade through an onslaught of negative speeches or reports from those with some type of political or media-related agenda.  I don’t know all their reasons, but it seems that many of the news stories we’re fed are all sensationalism and no truth.

Consider this…

Just last week, I heard an extremely-prominent political figure actually claim that unemployment was at an all time high.  Really?  All-time huh?  Sure you don’t want to check your figures?  Maybe you’d like to read up on the Great Depression and get back to us?

According to the US Bureau of Labor Statistics, national unemployment at the end of January 2009 was 7.6%.  Higher than any of us would like, but a far cry from the 23.6% rate recorded in 1932.

Locally, we’re at 6.1%.  Highest ever right…?  Wrong!  Just in the last 30 years, Colorado’s had 10 years with worse unemployment rates than we’re experiencing right now (1980, 1982, 1983, 1985, 1986, 1987, 1988, 1989, 1992, and 2003).

Yes, but the economy’s in a freefall!  Right?

Freefall?  Are you sure?  I certainly won’t deny we’re currently in a recession.  But how serious is this recession?

Our economic growth is measured by the amount of goods and services we produce – we call this measure Gross Domestic Product (GDP).  The definition of a recession is when our nation has two consecutive quarters of GDP decline.  By that definition, the current recession didn’t even start until January 1, 2009 (less than 60 days ago)!

If you’re interested in the data, the US Bureau of Economic Analysis shows we experienced growth in the 1st and 2nd quarters of 2008, a 0.5 % decline in the third quarter, and a 3.8% decline in the fourth quarter.  Despite the slow holiday sales in the 4th quarter, GDP actually grew in 2008 by 1.3%.

In case you were wondering, it’s not time to start playing Tom Petty’s “Free Fallin.”

O.k., so unemployment and economic growth aren’t as bad as they’re being portrayed, but my home values are seriously hurting!  Right?

If you ever have the chance to listen to Lon Welsh speak about Denver real estate… take it.  He’s extremely intelligent, and one of the things he’ll tell you about is how localized real estate markets are.

In other words, you can’t apply what’s happening in Florida real estate to Oregon real estate or Colorado real estate.  Nor should you even apply what’s happening in Green Valley Ranch, CO, to real estate in Parker, CO.

Consider this… during 2008, median home values in Las Vegas fell 35.8% (ouch!) but grew 9.4% in Boise, ID (nice!).

From January 2008 to December 2008, median home values in Brighton, CO fell 13% but only fell 0.5% in Parker, CO during that same period.

It’s always refreshing to read a news report that accurately reports a situation or a recent study like this one does:
Rocky Mountain News – Metro Housing Holding Its Value – 1/15/2009

In the article, John Rebchook reports on a nationwide study by the PMI Mortgage Insurance, Co., tha shows the Denver-Aurora metro area as one of the safest real estate markets in the U.S.

The article indicates that Denver home values may be at the bottom of the market and cites the study’s finding that Denver home values have less than a 1% chance of declining in value during the next two years!

In the past six months, I’ve heard quite a few people tell me they needed to delay their construction project, because they were concerned about the economy, the stock market, their home values, or their employment status.

But I’ve heard more talk about the wonderful opportunity that the current markets have created.  Home values historically have been much less volatile than financial markets, and with financing for new home construction or purchases tougher to come by, many people have created more value in their existing home with remodel or addition projects.

It just makes sense.  If financial markets are still volatile, how much cash do you want tied up there?  If home values are at their bottom, putting money into your single largest investment is the smart play.

A remodeled kitchen can add value and provide instant ‘wow’ factor for a potential buyer.  A well-designed basement can add usable square footage now and a nice return later.  Functional outdoor living space is the perfect way to spend time with family and friends, and is increasing in demand with buyers.

So buck the naysayers, ignore the negativity.  Things aren’t as bad as they want you to believe.  And nothing will get us back on track faster than returning to a sense of normalcy anyway.

Of course, if you think I’m full of it, you can always pick up your sign and join the sensationalists shouting…

The sky is falling!  The sky is falling!