Recession?

We’re hearing that term more and more lately, and now not just in reference to Michigan. Nationally, property values in many areas have declined in recent months. Economic growth has been slowing, and the stock market has suffered steep declines. Large investment firms have taken significant losses, largely due to investments in the “sub prime” mortgages that were discussed in recent postings. The dollar is worth less overseas and even in Canada than we have seen in years. Listening to some media reports, it sounds like the sky is falling in our national economy.  I’m writing to tell you that it’s not.

For much of the last several years, a strong housing industry has led the national economy to steady growth.  Like all good things, this can’t keep up, uninterrupted, forever. Markets, including the real estate market and the stock market, tend to run in cycles. There are periods of growth, and then some segments of the market pull back. This happens in any free and open economy, especially in our emerging global economy.

Sometimes markets react more to fears than to facts. Economics is, after all, a behavioral science. When we look at the facts, the national unemployment rate is still low, the economy is still growing, albeit very slowly, and there are many tools available to stimulate the economy. Much of the loss attributable to the decline in housing values and the “sub prime” mortgage debacle has already been written off, and the investors are moving forward, cautiously. The surge in oil prices has prompted investment in entire new industries with the promise of major economic dividends in the future. Mortgage rates are still in a reasonable range, and we are likely to see some housing markets, such as the metro Detroit market, begin to stabilize in the next year or so.

So my advice; don’t panic. As I mentioned last week, this can be viewed as a time of opportunity for those wishing to enter the housing market, or for anyone who has faith in the resiliency of the US economy and the American entrepreneurial spirit. Our success will come as it always has, from optimism, forward thinking, and investment in innovation.