My home is not for sale

Are you paying attention to the housing market? Most likely, since it seems to be the most important cocktail conversation since IPO’s and internet stocks in the late 90’s. Well, if you are paying attention, you are not alone. I have been paying close attention. During my travels in the past month I have been focusing of the number of homes/condos/apartment buildings for sale. The “results” have been quite…hmmm, remarkable. Everywhere I have been from New Haven, CT to Ocean City, New Jersey and all places in between, with the exception of Detroit, MI, I have noticed what seems to be a rather large (on a relative basis) number of “for sale” signs. Yes, we are heading into the “spring market,” a time when most people decide to put a home on the market, but the sheer number of homes on the market seems quite staggering to me. On a five block walk in Philadelphia today, I pasted three apartment buildings for sale. These buildings, especially in Rittenhouse Square, have been very difficult to come by the past.

I am not certain what this is signaling, but it could be the downturn that everyone has been squawking about for the past two or three years. Yes, there is other empirical evidence to suggest this (read KB homes most recent report), but the economists have been calling for this for a while. Finally, maybe the average consumer believes it and is stepping out…or simply reducing her risk profile.

Sales of certain properties do seem a bit odd to me. With interest rates heading up and properties at relative highs does it really make sense to liquidate a good investment, when you are going to deploy that capital in an investment (assuming real estate) with a higher risk and lower return profile? Being in the market, I have found it extremely difficult to find good or great investments. In fact, my most recent investments have developed via “guerilla” tactics. We will call guerilla tactics, “smiling and dialing,” pounding the pavement and knocking on doors.

So with this potential crisis in real estate confidence, why is the average consumer so strong? Most Americans attribute a majority of their net worth to their homes. Yes, these homes have seen dramatic gains in the past three to five years (some declines in the past year), but with the trend tailing off, should the consumer still be spending as much?

The concluding question is…(drum roll please)…..is the American economy headed for a bit of a recession?

Other items to think about:

The stock market is essentially stagnant, what will get the consumer/investor excited again, leading to wealth creation and incremental confidence?

How will the Michigan real estate market stabilize with its largest industry (automotive) floundering?

Will a good deal of motivated sellers hit the market as variable rate mortgages rises, leading to home payments that the mortgagee can not afford?