Failure of the "Super Committee" and Possible Effects on the Real Estate Market

By
Real Estate Agent with Coldwell Banker Lunsford AB59000049

The failure of the congressional "Super Committee" to reach a compromise on reducing the national deficit came as no surprise to many. The committee of distinguished, experienced congressional people divided along party lines, failed to compromise and therefore, set the stage for mandated, steep cuts in many programs and the elimination of tax reductions when they expire at the end of the year.

The failure to compromise was really no surprise because the committee members are representative of the Congress as a whole and merely reflect the gridlock that has kept them from completing any meaningful task for some time. They seem to be so afraid of offending their power bases that they would rather do nothing than place their re-election chances in jeopardy. No wonder congressional approval ratings have reached single digits.

What are the potential effects of this lack of action on real estate markets? While Congress has the ability to override the mandated cuts and tax increases, there is no gruarantee they will do so and therein lies the biggest effect, uncertainty. Financial markets, business managers and consumers looking at big ticket items like homes, cars and the like, all hate uncertainty. Faced with a lack of clear direction, lenders tighten requirements, business managers put off hiring and expansion and consumers embrace the status quo.

Therefore, regardless of what Congress does or doesn't do, I think we're looking at at least another year of high unemployment, slow growth, tight lending and a sluggish housing market, especially in new construction. Yes, 2012 is an election year, but I think there will be more rhetoric than action in Washington. The President has proposed a jobs program that has gone nowhere, so I think he's going to be limited to what he can accomplish by executive order and that will have little effect on the economy.

I hope I'm wrong, and I realize that real estate markets are local (don't foget to tell NAR). There are a number of localites that have been and are continuing to be significantly better than the national economy. Those don't exist in Muncie and east central IN, however, and it looks like we're in for another year of hard times.

Posted by

Jim

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