On The Road To Recovery – Not…


Spare Change for a hotel, 2 hookers, and an 8-ballIf you are like me you have heard any number of pundits – TV talking heads, guru columnists, radio talk show hosts – give any number of dates – like next spring, 3rd Q 2010 – spewing as to when the “recovery” will begin. The actual date when the economy will begin to recover, according to me, is the day it actually begins to recover.

I probably should end this post right here but since I’m a windy type let me try to support my brilliant observation. For starters, it is no secret that the supply of unsold homes continues to bulge, foreclosures continue to rise and prices continue to fall. It is also no surprise that unemployment rates are rising.

The latest to announce layoffs is American Express. By July, AE will have laid off about 11,000 people. I would bet at least some of them own a home and are making monthly payments. I would also bet some of them will be entering that wonderful ga-ga land called foreclosure as a result of losing their job. Just a thought mind you.

Homebuilders Say…

Two homebuilders, Pulte Homes Inc. and Centex Corp., combined earlier this year and became the largest U.S. homebuilder. Being the biggest doesn’t always guarantee losses will go away and profits will continue. In fact, all it did for these two companies was narrow their quarterly losses. Unfortunately they continue to be battered by falling prices and a glut of unsold homes.

D.R. Horton Inc. is currently the industry’s No. 1 home builder. Guess what, DRH also reports its losses had shrunk, but like the aforementioned companies DRH said it still faces challenges from foreclosures, high inventory levels, tight homebuyer credit, low consumer confidence and job losses.

Do any of these factors sound familiar? They should. Given they are facts of life in this economy, how can anyone tell us the recovery will happen next spring, next summer or next anytime?

Truth is, they can’t. However, does that mean it won’t improve for you? Obviously not. But, in the big picture, most of us can see life as it is in our area. We know who is laying people off, who is downsizing as well as the size of the renter’s market, etc.

GM Strikes Locally

I don’t mean the union called a strike. I mean they are closing a dealership in Reno. The effect will be minimal as only 10 people will be looking for work. However, several of these people have insurance through our office so I know they are renters. When the dealership shutters its doors, these people will no longer be renters, insurance policy holders or consumers of services other than welfare services.

This might seem like a small matter but multiply it by God knows how many cities across the country. These same folks help keep the engine we call an economy running so the rest of us can have spendable dollars. In fact, one of the soon to be laid off, rents from a friend of mine. My friend knows it and admitted he won’t be able to fill the vacancy. Our rental vacancy rate is over 18%, and climbing.

Again, small potatoes but potatoes nonetheless. You probably recognize the size and shape of those potatoes because you keep up with your corner of the world. After all, if you are investing in real estate, you better be cognizant of your corner of the world.

To sum this all up, let me repeat my statement in the opening paragraph: The actual date when the economy will begin to recover, according to me, is the day it actually begins to recover.

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About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded BiggerPockets.com when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.

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