|Friday, 04 December 2009 07:37|
December 4, 2009 - Economic Blog
Today we have some surprisingly good numbers on the economy. The unemployment rate fell from 10.2% to 10%. Most economists were looking for it to stay at 10.2%, and even the White House came out with an uncharacteristic comment yesterday, expecting a rise in the rate. Instead of pontificating on the White House's inability to get anything right, I'll refrain and stick to economics.
Why is this important, and what does it mean for real estate? Well, economists always, especially in recessionary times, look to the unemployment figure as a leading indicator of where the economy is going. That makes sense. Employed people spend money, pay their mortgages and add to the overall health of the economy. Couple this with the large banks paying back the TARP money and the health of the stock market, and it actually feels like the worst is over in the US economy.
Here in Crested Butte, we live in a resort economy, ultra dependent on a healthy economy. If people are financially stressed, the first thing they cut back on is discretionary travel. In our case, that means that Texans and Louisianians stay home in the sweltering heat in the summer months, instead of coming here to cool off. Ski vacations get cancelled since skiing is a wonderful, though expensive, choice for a holiday.
The good news is that with the economy improving, or at least bouncing off the bottom, our real estate market is priced to sell. The high end of the market has experienced price reductions sometimes in the seven figures. The low end shows some 2 bedroom ski condos priced in the $100,000 range. Land can currently be purchased at very deflated prices, and there are plenty of construction workers looking for projects. There really is something for everyone, and with the economy improving, I don't expect it to last.
The Crested Butte real estate market is a reflection of the nationwide trends in that speculative new construction has stopped. If you are looking for new construction, currently there are a few projects left over from 2007-2008, but in general, you will be buying land and building a house. I think that puts us in great shape for the recovery. A slight uptick in demand will denote a bottom in our real estate market, and we will shortly be back to 2006 prices. I think returning to 2007 prices may take a bit longer, but a recovery is certainly in order.
(Diane Aronovic is a former Managing Director at Bank of America Securities, and a real estate agent at Red Lady Realty in Crested Butte, CO)
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