“Is this the bottom?” the buyer asked.
“Yes.” I replied. “Yes, it is, and there will be 6 more weeks of winter too.” Like Punxsutawney Phil, I make predictions at this time of year. Unlike Phil, I actually consider the indicators. I’m pretty confident I can best his 40% success rate. (source: National Climatic Data Center)
Here are a few reasons I believe we may actually be at or near the bottom – offered with WAY more authority than Phil’s suggestion of a prolonged winter.
1. In 2011 outstanding mortgage balances went down $30B every month. Steady, sustained improvement means momentum. Momentum is what pulls you out of troughs like this.
2. Job gains are accelerating. January brought 243,000 new non-farm jobs to the US economy. More momentum.
3. Unemployment hit 8.3% last month, continuing a slow downward trend.
4. Boston’s housing market, an early barometer for RI, is back. Over 1,000 new luxury residential units were announced for downtown Boston in the 3rd quarter of 2011 – the highest level of activity since 2006.
5. Boston is the dominant source of second home buyers in greater Newport. More luxury residences in Boston? More vacation home demand in greater Newport.
5. Credit is loosening slightly. Banks now lend up to 3.5 times earnings up from 3.2% during the depth of the crisis according to Capital Economics. 8% of the deals that fail, fail because the buyer can’t get a mortgage.
6. Restaurant business is up. People are spending less, but they’re going out. Look around. It’s better.
7. Demand for commercial space on Thames Street and the waterfront business district is stronger. It no longer has that ghost town feel that was so alarming a couple of years ago.
8. Car sales and chain store sales are up. Even I bought a new car this year, (but only after the indignity of arriving at the dealership on a tow truck.)
9. The stock market has been stong and is now approaching pre-recession levels.
10. I predict Punxsutawney Phil will be wrong this year, and there will be continued mild weather until spring. Warm weather increases real estate activity and that’s good for our real estate market.
In summary, for all you bottom seekers, yes, this feels like “the bottom.” Time to buy a house from a beleaguered seller, borrow at the lowest rates in recorded history and enjoy your piece of this beautiful, investment-worthy community.