Are We? Aren't We? Will We? Won't We?

The questions keep coming ...

"Are we in a recession?"  "Aren't we expected to make a lowball offer?"  "Will we get our money back if we sell in two years?"  "Won't we make $100000 on this flip in just two months like they do on TV?"

Okay, so maybe I haven't gotten that last question - at least not phrased like that - but everything else is verbatim.  Plenty of mixed signals floating around about the real estate market, and it's understandable that people have questions. 

Making matters worse, Scott Rogers posted links to posts entitled "The Recession That Never Was Is Now Over", and "Is Housing Slump At A Bottom?".  I point these out not because I think Scott shouldn't have posted them, I just think that both posts make strong arguments to at least make you consider that perhaps times they are a changin'.  For instance, the post "Is Housing Slump At A Bottom" makes the argument that new housing starts slumped below the one million mark in March.  Historically, every time that's happened in the last 50 years, it's been at the bottom of a recession.  it's hard to argue with history - as a friend of mine says, "hindsight is 40/40".  Yea, she's like me, she was never good with numbers.

I do think there are concerns that need to be addressed. Dependence on foreign oil, uncertainty overseas, among other things, compounded by a constant barrage of negativity and fear in the mainstream consciousness, have people scared. These things need to be addressed in order to begin an upswing in confidence, IMO.

One thing I DON'T understand is how we hear about massive layoffs in industries like auto and manufacturing, yet GDP is up. Wouldn't conventional wisdom say that by laying off in massive quantities, and exporting goods and jobs out of the country, that GDP would go DOWN?  In the last three years, Volvo has announced layoffs of 1000, 650 and 1100 personnel in their Dublin factory.  I've got to imagine that production in the plant slowed down accordingly, not increased ... I didn't do well in Economics, for sure, but what am I missing here?

Comments

[Tom Markiewicz]

Because that is only a part of how GDP is measured.

http://en.wikipedia.org/wiki/GDP#Measuring_GDP

[Jeremy Hart]

Tom, thanks - I had a hunch I might be hearing from you. I broke out in cold sweats reading that wiki, remembering my algebra days. True story - I took Math 101 in college, got a D+. Took it the following semester, same professor, I got a D-. I quit while I was still passing ...

What about Darla? I know Darla's out there and has thoughts on this, when will we be hearing from her?

[Darla]

The problem with the GDP is that too many factors go into it. There are several reasons why the GDP is up when the economy is "bad." One of them is exports - we are exporting more goods and services now than ever, and this factors as a plus in the GDP. Our exports of grains (wheat, corn, etc.), ironically, is one big reasons our economy is hurting and grain prices are so high.

As far as Volvo, specifically, is concerned, I think the reason their layoffs do not jibe with the rising GDP is because their American plants are not exporting - they are creating product for use in the U.S. And Americans' personal consumption is down for many hard goods.

The other thing contributing to a higher GDP is, believe it or not, government spending. When the government spends money, even money it does not have, it results in an increase in GDP. This includes all of our military spending! So we can push our deficit to astronomical levels, but still paint a pretty picture when we talk about GDP. Go figure.

Finally, residential and real estate investments are impacting the GDP negatively right now, meaning that those folks who claim the property market is not in line with the growing GDP are, technically, correct.

As you said, lots of things go into an economic analysis. It's good to see a continuing dialogue, especially as far as real estate goes. Keep it up!

For more info on the GDP from the horse's mouth: http://www.bea.gov/index.htm

[Jeremy Hart]

Thanks for checking in, Darla - I figured we could expect to hear from you.

I understood none of what you said ... no, I'm serious. Too many factors go into it for it to make any sense to anyone, it seems like. Why can't it be something that actually makes sense?

You win, I'm speechless. :)