This was a big week for economic data, especially concerning the fate of our ailing housing market. I try and avoid belaboring statistics because, well, they’re boring as heck. These numbers, however, are pretty staggering.
First, consumer confidence hit a 28 year low this month. John Q. Public is afraid of our problematic economy and the media is aggressively cramming that agenda down his throat. No surprise there.
Consumer Price Index numbers came out this morning, which are commonly seen as the most accurate depiction of inflation as it effects the general public. On an annualized bases, the CPI rose 4.2% which was a tad hotter than economists expected. The majority of the move upwards was, you guessed it, skyrocketing gas prices. The good news in the report was that core inflation, measured by the CPI minus food and energy, came in at a tame 2.3% growth rate. The markets generally liked this data, suggesting inflation’s flare up may not be upon us quite yet.
While we’re on the subject of inflation, economists are divided concerning the Fed’s next move. Many are calling for an immediate rate hike to strengthen the dollar and stop any inflationary trend. Others would believe that inflation-targeting would drive up unemployment. These Phillips-curve huggers would have us think that a little more inflation is acceptable as long as it keeps a lid on job losses. In a closed economy, I would probably agree. But we’re global these days. People can borrow money from across the world and currency strength (especially our own, which most of the world’s commodities are priced by) is becoming all the more important. My estimation would be the exact opposite of these guys. If we are to promote business expansion, we need to maintain a competitive labor-cost advantage. Should prices get out of control, labor unions everywhere will rally for higher pay and inflate our comparably inexpensive labor costs. No good for growth of payroll employment.
Bernanke moved the markets again on Monday night when he gave a speech headlining the rising threat of inflation. He did not, however, indicate that the Fed was in any huge hurry to hike rates beÂcause of the “slack” in the economy that will inevitably dampen any price increases we may experiÂence. Hiking rates in the very next meeting after lowering rates would send a big red flag to the world that we do not have our economy under control. Regardless of what is best or worst for the economy, I am placing all bets that the Fed will do nothing at their late-June meeting and remain stalwart in their rhetoric.
But the big enchilada of housing data this week has to be about foreclosures. Remember 12 months ago when we were complaining about ALL of the foreclosures plaguing our neighborhoods? Our country’s foreclosure rate is up 48% year-over-year, with 1 in every 483 homes in foreclosure. And you thought it was bad a year ago. Florida remains in the top ten states (#4, to be exact) with the highÂest rate of foreclosures, up 72% year-over-year with 1 in every 228 homes getting papers stapled to their doors. At the major metropolitan area level, the Sunshine State holds 2nd place (Cape Coral/Ft. Myers area with 1 in every 79 homes) and 10th place (Port St. Lucie/Ft. Pierce area). These areas were bloated with speculative investors, and now we’re seeing the fallout. It hurts, no question. But ultimately it will be healthy for the continued growth of real estate both locally and nationally.
For anyone who is worried about the long-term future of Florida real estate, allow me to remind you that the baby-boomer generation is retiring and old people love to buy homes and retire in sunny FlorÂida. Probably will also be good for the Bob Evans restaurants, too. And Buick dealerships.