In the 1976 movie, Marathon Man, the character played by Laurence Oliver tortured a young, clueless Dustin Huffman and repeatedly asked Is it safe?
We are asking the same question, Is it safe? Will the economy stop torturing us? Economists provide various predictions, leaving us to call a soothsayer, astrologist or a witch-doctor to confirm. Whose tea leaves should we read?
The statistics employ their own spin masters. Headlines scream that housing will be the savior of our economy. Realty Trac reported 2012 foreclosures are down 37% in Phoenix compared to 2011. CoreLogic reported a 7.4% year-over-year increase in home prices in November. The masters would love for us to believe the Phoenix market is so red hot it is boiling. No doubt the housing market is showing strength but the lack of inventory will take us into a different type of recovery. Millions of homeowners, who wish to sell, are sidelined until they can get their values above the waterline. Mortgage restrictions have firmly established a new era of buying and selling homes
Housing starts or the numbers of new-builds are dramatically improving. But, as reported by Diana Olick with CNBC, 30% of all housing starts in 2012 consisted of multi-family apartments; not the single family residences the statisticians would have us believe. That is the highest share in over 20 years. Whether it is apartments or a house, building is good for the economy. Builders buy flooring, appliances, furniture, fixtures and other construction items.
The Gross Domestic Product (the value of all goods and services produced in the U.S.) fell or contracted for the first time in three years, spreading fear of another recession. Place the blame on Uncle Sam’s spending cuts and cautious businesses. Is there another economic downturn in our future? Following the history curve, the answer is yes, but maybe not today. There were 20 recessions over the past 100 years.
If you could use Barrett Jackson as an economic indicator (call it the Batman phenomenon) people are back to buying things they do not need. Holy Money! Tens of millions were spent on cars. And how much money did the highly-restored humans who walked the grounds spend on their improvements?
Is it safe yet? The answer is: it is never safe. Housing, stocks, oil, crops, technology, global concerns all have their crazy ups and their wretched downs. All we can do is to keep looking into our crystal balls. Prepare for the worst but expect the best.