2011Dec12 Location, Location
For the first time in a while we get to start off with a little good news from the real estate world. The most recent Case-Schiller survey predicts that national home prices are expected to grow at an annualized rate of 3.2% between 2011 and Q2 2016. But just up the road a little from our Port Orchard home office in Bremerton the outlook is even better. They expect prices to increase at 9.7% over the same time frame. Home prices have fallen 26.4% from the Q2 2007 peak and the median price is now $252,000. The city also has a median income of $74,300 and a relatively low unemployment rate of 7.9%. This combination is what fuels the Case-Schiller optimistic forecast.
It would appear that reality has set in over the weekend. Pessimism over the outcome of the most recent European economic summit has all three major U.S. indices down over 1.5% at the time of writing. The German DAX index is down just about 4%. So what happened to the victory declared on Friday?
For starters there was an expectation that the ECB was going to act more aggressively once the summit was over. While it did approve of the deal, it has remained silent on any additional bond buying. The EU was hoping the ECB would greatly increase its buying of sovereign debt to prop up the weaker economies.
Next came word from Moody's that they were not impressed with the actions being undertaken, or talked about being undertaken, and all of the EU countries will be under review in the first quarter with downgrades likely. This will increase borrowing cost to every downgraded country and further handicap recovery efforts.
Just last week, S&P's managing director of sovereign ratings expressed his lack of faith in the ability of European leaders to arrive at an effective consensus for curing the Eurozone's fiscal ills.
"There have been a series or summits that have ended in prolonged public disputes among policy makers about the right diagnoses and the right approach," said Moritz Kraemer, during a conference call on Dec. 8. "That piecemeal and hesitant policy reaction has so far not been able to stem the crises let alone reverse it or return investor confidence."