Fear: Component Number One In National Recession (by Adrian Aguirre for John Thurman)

The US economy is driven by consumers and capitalists alike: consumers stimulate cash flow and capitalists invest their share by stimulating new jobs and opportunity. Recession is among us due to some unfortunate pattern of events which lead to job loss, decreased cash flow and left only a despairing search for new jobs. Fear is what initiated this mess in the first place. What can citizens do to promote these inefficiencies and help kindle some beneficial changes?

In the events leading to economic recession, news channels would constantly cover breaking news in regard to factories closing, banks foreseeing bankruptcy, corporations downsizing, etc. This initial fear is what promoted the first force that erupted into a panic volcano. Employees of suffering companies lost jobs and were desperate to find new ones; all other workers feared their position could be replaced and would have to find a new job in a suffering economy. Moreover, jobless people decided to not spend money because there was none to spend; fearful employees decided to save their paychecks to avert potential loss; and in the most extreme of cases, people took their assets out of the bank and other investments. This panic led to decreased cash flow in an already-damaged economy, which created a powerful undercurrent that led to more job loss (due to companies downsizing or enduring bankruptcy (which happened because revenue was too low)) which led to even more fear. The truth is, when it comes to finances, risk can be frightening. The biggest problem is that most people have non-existent financial plans and retain inhibitions as a result. What’s the answer?

While government officials are doing their best to promote a surplus of employers and regain that much-needed cash flow, we citizens ought to ponder “what is best for our United States?” The answer: information. Working people need to be informed about the dangers of credit, the disadvantage of not investing, and the catastrophe aligned with inadequate plans.

Capitalistic residents realize the potential to create wealth by feeding local/national/global economy; Average Joe employees realize that their needs are fulfilled by working for a company, who are much needed for the prosperity of business in general. Employers and employees need to become informed to not only help themselves, but to also help our country and our interdependent counterparts to get back on top.

Senator John Cornyn’s Newsletter on The Economy

Update from U.S. Senator John Cornyn

Monday, March 16, 2009

Senator John Cornyn hit it on the head when he said he had to fight for Texans who are hurting in the current economic downturn.  The following is an exerpt from his most recent newsletter.

“As Congress prepares to debate President Obama’s proposed budget, I will keep fighting for Texans who are hurting in this economic downturn and oppose any budget that spends recklessly and borrows too much. We can’t tax and spend our way to economic prosperity, and we must find solutions that help small businesses, which are central to getting our economy back on track. As a member of the Budget Committee, I welcome the opportunity to tackle the proposed budget and attempt to make it more responsible, transparent, and geared toward American families and small businesses.

After a vigorous debate, the Senate voted last week on the Omnibus Appropriations bill, which combines 9 separate appropriations bills that fund government agencies and programs. This bill, which was written last year before Congress passed the so-called Economic Stimulus in February, was bogged down with frivolous, duplicative spending. In fact, 122 programs already funded by the stimulus bill were again included for funding in the omnibus.

I tried to work with my Senate colleagues to trim down this $410 billion bill, but Republican attempts to reduce the size and scope of the bill were blocked by Senate Democrats. President Obama’s campaign promises of bipartisanship and fiscal responsibility were nowhere to be found in this legislation. I simply could not support a bill that contains so much redundant and wasteful spending, imposing even greater debt on future generations of Texans.are shrinking and jobs are disappearing across the nation.”

Since President Obama took office 56 days ago, Congress has already spent more money than the previous Administration spent on the Wars in Iraq, Afghanistan, and the response to Hurricane Katrina – combined. It is unfathomable to me that Washington lawmakers continue to spend so frivolously at a time when family budgets

 

Senator Cornyn, keep up the good work.  The government is spending our children’s paychecks of new programs but leaving the current taxpayers in the lurch without jobs. 

Crude Oil Price and Real Estate

March 16, 2009 Bloomberg.com reported this evening that Crude Oil has declined in price over the weekend by as much as 5 after OPEC decided against cutting production further.  They correctly believe that cutting crude oil production will further worsen the world economy.  Consumer Confidence and real estate values are closely tied to each other and the availability of competitively priced energy is essential to the development of the confidence numbers that will drive the world’s economies out of the current recession.   Had OPEC cut production further, the price of a barrel of oil would likely have gone over $50.00 and that would have had a severe impact on consumer purchases.

The NIKKEI has climbed so far this evening by 184.83 points on this and other news.  American Stock Exchange Futures are off slightly for Monday’s opening bell.  There remains enough bad news out there though.  Investment funds that purchased lower rated bonds during the credit boom have ceased buying.  This could easily stop President Obama’s plan to pull the economy out of the doldrums. Once very viable firms like Blockbuster are looking at bankruptcy.

Preparred by John Thurman, Broker, www.HeartofTexasRealty.com 

San Antonio Doing Well Vs The Nation

While the World Economy continues show little signs of improvement and saying anything about any market that is positive, Texas is faring better than the rest of country and San Antonio is among the best places to be in the country at the present moment.  The recession started with toxic mortgages and it moved from there to Wall Street.  Main Street reacted through a freeze in the credit markets and even Hollywood has now become involved.  Even the producers of Sesame Street have announced layoffs.  US unemployment rose sharply to better than 7.5% in January. February’s numbers have now come in at over 8%.  If we drill down to see how the numbers are put together, we find that marginally employed workers (those who are no longer seeking employment plus those who are now working part time in order to earn whatever income they can, then the rate of those unemployed on the national level is close to 15%.  Historically a number like that has been referred to as a Depression.   Since employment and the Gross Domestic Product “GDP” are closely aligned, and the national numbers point to a decline slightly in excess of 6% on an annualized basis.  A decline that significant engulfed every segment of GDP for the last quarter of 2008. 

Deflation appears to have become an issue.  The Consumer Price Index “CPI” fell by approximately .15% in January of 2009 compared to the same month the year earlier.  On the brighter side, prices increased by approximately .3% from 1-December 2008 through 31-January 2009.  Only two month of declining prices does not of its on merit signify a deflationary period but it is worth watching.  According to ABC News, the average family is carrying approximately $8,000 in credit card debt and that is up sharply in the past few months.  This suggests families are using credit cards to pick up the slack for lost income.  This scenario could become very dangerous to the economy in the very near future.  Housing is not much of a bright spot either though prices appear to have stabilized nationally.  Prices in San Antonio are beginning to fall somewhat more precipitously

The San Antonio economy is percolating more favorably than the rest of the country.  The Texas economy has lagged the rest of the county but the recession is clearly affecting our economy negatively.  Unemployment has risen to better than 6%.  Texas’ leading index has declined continuously for the past five quarters suggesting that the Texas economy will continue to retract for the foreseeable future.  For comparison purposes though, San Antonio’s unemployment rate increased in January to just under 6%.  Only Austin and Houston were lower.  Even though there is a lot of bad news tempered with gloom and doom  out there, San Antonio’s economy is doing almost as well as Houston, the strongest one in the state.   San Antonio is likely to follow the national economy in its downward trend.  However it is not likely to get as bad as the rest of the country and as the rest of the country comes out of the recession, San Antonio will likely begin its climb upward at the same time thus avoiding the worst of the economic valley.

SAN ANTONIO “SHINING BRIGHT” by Adrian Aguirre for John Thurman

(Analysis and summary for San Antonio Business Journal’s “Alamo City attracting thousands of jobs despite national recession”)

               “There are not a lot of bright lights out there right now. But we’re one of them,” explains our own Bexar County Commissioner Kevin Wolff, in reference to San Antonio’s economic standing. San Antonio has been nearly recession-proof, with new jobs constantly arising. “Employers understand that San Antonio remains a good place to live and to do business,” claims Keith Phillips, senior economist of the Federal Reserve Bank of Dallas. In 2008, the San Antonio market added 14,900 jobs and ranked third in the nation, in allusion to employment growth. Integral national companies realize San Antonio’s potential and for obvious reasons they wish to set camp right here in the Alamo City.

               While the job loss expectancy is at about 1% for 2009, based on Phillips’ calculations, there will be plenty of new ones to take their place. Caterpillar Inc. is planning to construct a new plant in Seguin, which is expected to generate approximately 1,400 jobs. In addition, USAA is currently merging existing positions in non-San Antonio branches and moving them here. Moreover, the expectant addition of new jobs is a thousand. While big companies are helping our local economy, the US government is also doing their part.

               The outcome of the Base Realignment and Closure (BRAC) commission is expected to result in an addition of 4,000 jobs due to the U.S. Department of Defense’s decision to relocate some of the nation’s operations. Likewise, Congress’ American Recovery and Reinvestment Act is expected to gain a whopping 30,000 jobs.

               While many of the nation’s biggest and most prosperous cities are undergoing an immense blow, San Antonio is merely feeling a subtle nudge. This is promising for local economy, including employment increase, which will (among other things) allow for lower mortgage rates and decrease crime.

Rackspace – San Antonio’s Crown Jewell

Rackspace is one the many companies that got their start in San Antonio, TX.  Are you thinking about relocating your family or business to San Antonio, Texas.  Rackspace.com is an excellent example of what that is such a good idea. 

Rackspace is headquartered in San Antonio and they manage 22,000 computer servers in eight data centers in the US and Europe.  Fortune Magazine ranked Rackspace as one of the 100 best companies to work for in 2008.  That’s a good thing because they are also hiring more people to occupy thier new office and data complex that is being readied for them in San Antonio at the corner of Walzen Road and Loop 410 in San Antonio.

The City of San Antonio approved a boundry change in August 0f 2007 allowing the City of Windcrest 221 acres of land so the city can establish a campus for Rackspace Managed Hosting at Windsor Park Mall.

For San Antonio real estate, contact  John Thurman www.heartoftexasrealty.com  (210) 481-6767

San Antonio – Growing in Population, Jobs and Real Estate Values

Financial Market Bail Out – Or Fix The Housing Crisis?

The fact that the San Antonio real estate market is faring better than most other areas of the country does not cause the local market to be immune from being significantly influenced by the international problem that exists.  The malaise of the financial markets is generally believed to have been seriously impacted by the implosion of the mortgaged backed securities market.  That is generally believed to have been precipitated by the fact that the US Government encouraged lending into what is now being called the sub-prime market.  Mortgage backed securities were clearly not the only problem that existed out in the world’s financial institutions.  Consumer savings have been at low level for years and consumers have been on a spending and consumption binge for years and that is reflected in the credit card debt load.  Regardless of how the US economy got to where it is, is generally irrelevant to the question, how do we get the US economy out of the financial calamity?

 

Texas A&M University’s Mark G. Dotzour created a report that may be downloaded from their web site through THIS LINK  Mr. Dotzour reported that the problem is really very simple: One to two million homes in the US need tenants and homes that are currently unoccupied are not being cared for.  This causes a deteriorating quality of life in the surrounding neighborhoods.  The deteriorating quality of live feeds further declines in values. This leads to more foreclosures, etc. and endless spiral in to an abyss.  You can watch Dr. Dotzour’s video on this subject at THIS LINK.

 

Admittedly I am paraphrasing Dr. Dotzour’s comments in this post but I am also including my own observations as well. 

 

Much of the US economy has been supported by the mobility of our people.  As companies grow and create job opportunities, they need qualified people to fill their positions.  In many cases, the person who has the talent they need to fill their positions resides in a distant community.  That should not be a problem.  The company who has an employee need advertises for the position or a recruiter locates candidates for them.  Interviews occur and offers are made.  Then, the logistics of the situation begin to appear.  In many cases, the qualified employee owns a residence in a distant city that they can’t sell at a price they need to make them whole.  As Dr. Dotzour points out, the problem of overpriced housing did not arise overnight, but it is a resolvable problem that can more easily be fixed with tax policy rather that printing money and pouring it onto the problem.

 

Dr, Dotzour has a four point plan:

 

1.      Reduce or stop the flow of new homes into already challenged markets.  If we already have more homes in inventory around the country, building more to add to the current over supply makes little sense.  He notes that falling home prices are at the core of the current economic and financial debacle the country is facing.  But, new homes are still being built.  He notes this is occurring in places like Detroit where 1,528 new home permits have been issued.  When new-construction homes are built in challenged markets, the outcome is simply more trauma for the market and existing homeowners.

2.      Reduce the flow of homes coming into a market through foreclosure.  The judge and jury are clearly still out on this problem but having the federal government buy down one person’s mortgage without doing so for other neighbors in the area may create serious repercussions for the entire neighborhood as well as the national economy.  Bond investors are not likely to continue buying bonds if the government is going to rewrite the terms of those bonds later.  Dr. Dotzour notes that only the stigma of default will limit this trend.

3.      Demand for homes must be increased, and the process of doing so must occur expeditiously.  This may occur by simply giving investors an incentive to buy, hold, and put tenants into the vacant or soon to be vacant properties.   The days when an investor could buy a home with zero down are over.  But, investors are willing to take risks if they have a reasonable probability they will get a return on their investment.  Should the government lower the depreciation schedule to about +/- six years, and reduce the capital gains tax on the home to zero if the investor keeps it for at least five years, investors would be very interested in purchasing them.

4.      Reduce mortgage rates and do it quickly.  In recent weeks, mortgage rates have been coming down, but the lower rates are not easily acquired by anyone whose house is overvalued.  But, if the government were to fully guarantee Fannie Mae  and Freddie Mac bonds, and mortgage rates were based on US Treasury Notes, most people should be able to refinance their mortgages to about 4.5%

 

While the situation is indeed complex, it may be reduced to a supply and demand scenario.  Since we have too much supply and too little demand, only public policy will address the fundamentals that must be addressed to resolve the issue.

 

Thank you Dr. Dotzour for putting it into perspective.

 

Posted by John Thurman   www.HeartofTexasRealty.com (210) 481-6767

San Antonio Real Estate Housing Sales Down

According to the San Antonio Board of Realtors, existing single family housing sales declined by 18% in actual units for the year to date as compared to a similar period for the year before. In the 2007 YTD category, units closed were 20, 936 but in the like period for 2008, unit sales were 17, 100.  Sales in dollars declined by 17% for the like period from $3.8 Billion to $3.1 Billion.  However, the average price of a home that sold in San Antonio during 2008 was $189,000 vs. $183,000 for the like period of 2007.  Thus, the average price of a home that sold actually increased during this window and that is consistent with data found elsewhere.  Listings filed in 2007 YED were 40,632 vs. 35,961 in 2007, a decline of 11%.  This indicates that San Antonio real estate homeowners who do not have to sell are choosing to keep their homes off the market rather than to allow them to compete in a soft market.

 

The San Antonio real estate sales statistics for the month of November paint a grimmer picture than do the year-to-date numbers.  Home sales closed during the month of November of 2008 were 932 vs. 1,302 for November of 2007, a decline of 29%.  San Antonio real estate home sales in dollars were $165 million vs $238 million last year, a 31% decline.  In this example, the average price of house that sold during November of 2007 was $183,000 vs $179,000 for November of 2008, a decline of approximately 2%.  Even though, the number of listings filed this year-to-date is lower than last year, sales are down even more, thus resulting in a 9% increase in total San Antonio real estate homes listed for sale this year vs. last year.

 

The October-November 2008 time window was the period during which the world financial markets took the worst hit.  The market’s experience clearly had an impact on real estate sales.

 

Posted by John Thurman   www.HeartofTexasRealty.com (210) 481-6767

San Antonio Housing Sales Fall But Prices Up

San Antonio Business Journal reporter Tricia Lynn Silva reported in the SA Business Journal’s December 12, 2008 issue that while San Antonio has clearly felt the effect of a destabilized housing market with rising foreclosures, the San Antonio real estate market is still one of the best in the country as far as real estate investments are concerned.   San Antonio real estate housing values rose by near 2% between September 30, 2007 and September 30, 2008 according to the Federal Housing Finance Agency (FHFA).  Ms Silva noted that while the increase to be robust in the midst of a recession where home values plummeted by more than 20% over the same period in states like Nevada, California and Florida, an increase of any amount in housing prices and values may be seen as an indicator of market strength local experts say.  Local new housing industry spokesperson, Jack Inselmann, Vice President, Metrostudy, a Houston based housing forecasting company, said the increase is in line with his research findings for the market.  However, the number does not necessarily serve as an indicator of times to come of the experience of the market subsequent to the September 20, 2008 date when this specific study ends. 

The FHFA notes that San Antonio real estate home values did slip slightly between the second and third quarters of 2008.  Inselmann notes that San Antonio real estate home values did not experience a similar run up in values as did the Florida, California and Nevada.  Inventory of available new and existing homes remained stable with existing homes tracking at an annualized rate of approximately a six month’s supply on hand during the period.  This compares to an inventory that ranged as high as twelve months supply on hand during the 80’s

Andrew Leventis, FHFA Senior Economist, noted that the most significant pain in housing prices is occurring in markets that experienced astronomical jumps in home values during the recent economic boom cycle.  John F. Wasik, Bloomber.com writer reported that in other markets, in many areas hype seems to be the order of the day in selling homes in markets that experienced significant run ups in value.  But in other markets such as San Antonio, where the appreciation rate was more moderate, home should continue to sell at near their historical values.

 

Posted by John Thurman   www.HeartofTexasRealty.com (210) 481-6767

Two ways to deal with “NO”

I’m reading a blog post from a daily RSS feed I receive from the consumate blogger, Seth Goden.  Dealing with a no response to my overtures in what I have come to know as a trial close in the steps to a sale, has always been challenging to me in my career of delighting customer through the sale of San Antonio real estate, or even State of Texas real estate, or for that matter, the national real estate market.  Seth notes that getting a yes answer to your overtures for a sale may not always be the best alternative .   How we as members of the National Association of Realtors  have to deal with this scenario almost every day.  I have had several situations in which I received a call from a very gracious buyer or seller in which they informed me they did not plan to use my services. I knew that whatever I said next would determine whether I would ever see a deal from that prospective client again.  I got a call like that this past week.  A long time client wants to use a neighbor to sell her $750,000 house now.  I pointed out that putting a house in that price category on the market during the November / December, 2008  time window,  right in the middle of the national financial market meltdown, could result in her selling the house at a major discount well under what she may sell it for if and when the market improves.  I have already received feedback from from sources close to this past client that she felt the advice was in her best interest and she has taken the advice.  I don’t know that I will get the listing, but I’m betting that I will.   The other agent was willing to list the house now and risk having it age market well into the spring before an offer is likely, thus potentially harming the ability of the seller to get a fair price for her home.  In this case, no now, is better than yes.

Thanks’s Seth, for a very good article in your blog.

posted by John Thurman   www.HeartofTexasRealty.com (210) 481-6767

First-Time Home Buyer Tax Credit, Opportunity?

Aspiring home buyers have recently found their goal of purchasing a home to be suddenly illusive.  My good friend, Chris Cowley, recently noted in his blog that people may well be very skeptical of what the US Government is offering.   The use of the term, “tax credit” carries with it the suggestion that the $7,500 that is being bantered about is in fact some kind of gift rather than getting credit where credit is due.   That may not be entirely true.  The Federal Housing Administration web site reports that the offer may in fact be the opportunity of a lifetime.    The credit only applies to buyers who do in fact purchase their first home between April 90, 2008 and July 1, 2009.  Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. 

Here is the caveat!  The credit works like an interest free loan and must be repaid over a 15 year period of time. The Housing and Economic Recovery Act of 2008 authorizes the $7,500 tax credit for those first time home buyers who qualify.  The buyer must not have owned a home for the past three years, so being a first time home buyer has at least this one exception to the rule.   The credit may be claimed on your tax return

All the rules are available on the Federl housing Administration’s web site.  But, keep in mind its only a tax credit on your current tax return.  Long term, it’s really a non-interest bearing loan to you by the federal government.

 

Posted by John Thurman   www.HeartofTexasRealty.com (210) 481-6767

Long-term effect of financial market bail-out on real estate

The real estate industry is likely to be permanently harmed over the national bailout of the financial markets.  I concur though that from the current vantage point we aren’t going to have much influence on the near-term outcome.  However, the emphasis on keeping our economy afloat is masking the larger issue of whether or not the US is positioning itself to once again create value people will want to pay for.  The politically correct path obscures the problem of value creation in the interest of protecting our current and past view.  The perception of needed change and the change that results from cause and effect are not necessarily connected concepts.  Failure of our leaders to focus on the long view shifts the burden of the larger value creation issue onto future generations.  It also significantly reduces value circulating around the national economy in the near term which ordinary people may use to buy homes both now and in the future.

 

Arguably, the iceberg that hit world financial markets was subprime lending in the mortgage sector.  That scenario created a Mecca for speculators, and for a time, everyone involved enjoyed the ride.    It is really not fair though to put all the weight of the problem on that issue.  Government business regulation and taxation policy have long been contributors to the exportation of jobs in both blue collar and white collar manufacturing and management service industries   Had sub-prime lending and the cash-out refinancing of mortgages not occurred after 9/11, the financial crash would likely have already occurred much earlier but it’s affect may have been considerably less severe.  In reality, the financial storm has been on the horizon for decades and it has been building steadily as is evidence by the fact the big US automobile companies can’t build a car for much under $80.00 per very automated labor hour but the foreign manufacturers can do so for around $40.00 per hour right here in the US.   Infusing cash into a broken system hardly fixes it.  Fixing the broken medical system with more taxation, more government oversight and regulation and universal health care will likely also serve to reduce the standard of care that industry is capable of providing to all of its publics.

 

Unfortunately, the weight of the present scenario seems to justify obvious change.  However, even in this sea of chaos comes incredible opportunity.  Einstein said, “We can’t solve our problems at the same level of intelligence we were at when we created them”.   Abraham Lincoln said it differently, “This Too Shall Pass”.  And, when it does, the problem we dealt with won’t be in the present.  Though genuine public discourse, these issues may be adequately vetted and solutions devised.   But, the forum for such discourse is fragmented at best.

 

The issues seem so foreboding that our influence appears to be functionally insignificant.  I believe nothing is further from the truth!  Should the real estate community community lead this charge of creating a public forum for constructive discourse, Realtors® will be seen as the force that came together to rally the community for the long-term benefit of society.  That’s a message essential to the survival of our profession.  Moreover, doing so does not require inordinate effort or statements policy.  It’s important that the real estate industry provide a forum where the factions can tell their stories.   

 

Therefore, I propose that the leadership of real estate community, through the local boards, and association, take a look at creating a monthly leaders’ summit where members of national factions who represent opposing viewpoints are invited to present to our audience.  The conservative movement is looking to rebuild itself and those representing other points of view are looking perpetuate their momentum.  It’s not a new strategy to position one’s organization between two warring or disparate factions.  But, it will serve the purpose of communicating to the people who use the services of real estate professionals that industry practationerers have the greater good of the general public at heart.

 

Posted by John Thurman   www.HeartofTexasRealty.com (210) 481-6767

UTSA Gets Approval For NCAA Football Program

San Antonio’s real estate market received a nice bonus this week as teh University of Texas System Regents approved the University of Texas at San Antonio’s initiative to field an NCAA football program.  The initiative calls for UTSA to build a clost to $90 million competitive athletic complex and add a NCAA Football Champtionship Facility.  UTSA’s goal is to field football within the NCAA’s Football Bowl group previously known as Division I-A

Posted by John Thurman   www.HeartofTexasRealty.com (210) 481-6767

Caterpillar Relocating to Seguin – San Antonio

December 18, 2008, San Antonio, TX Caterpillar Corporation announced that the company will be consolidating its assembly plant and operation in Sequin, Texas, a satelite city to San Antonio, Texas.  The company will be moving construction of its plant immediately.  governor Rick Perry announced the move today in Sequin.  He also announced that the move will create over 1,400 jobs.  The move will invlove relocating the company’s testing facilities and manufacturing from Illinois and South Carolina.  The San Antonio – Seguin area has been influenced in a similar manner to other communiteis but the economic base for the city and the San Antonio real estate market has not experienced the same downturn that other areas of the country and nation have experienced.  The infusion of approximately $169.7 in capital investment in the the San Antonio – Seguin area will be the second larges project Texas has seen during this biennium.  The San Antonio metropolitan area economy will benefit extensively as will San Antonio area real estate  sales.  The investment will have a significant impact on the state’s oveall economy and will further diversify the states economic makeup according to Governor Rick Perry

Posted by John Thurman   www.HeartofTexasRealty.com (210) 481-6767