Retail Numbers Fall Along with Consumers’ Sense of Trust
Federal Reserve Chairman Ben Bernanke, speaking today in New York, hinted that even with extensive and aggressive measures taken, the nation’s economy is going to take time to get back on the right track. Concurring with sentiments voiced by other economists, it appears the next two quarters will be more of the same as the economy continues to shrink.
His comments came only hours after yet another negative economic indicator was posted as the nation’s retail numbers fell 1.2%, the worst drop in three years. The prospect of another two quarters of decline fit the description of the country being in a recession.
Whew, that’s a lot to digest. Actually, there’s a much greater likelihood that you will be afflicted by a deep sense of nausea upon hearing this news and little chance you will be able to digest it at all.
In a classic “on the one hand” scenario, what this means to the Chicago real estate market is that it’s going to take a while for measures to take root to free up credit to enable consumers to participate in buying a single family home in Bucktown or a condo in Lakeview.
According to Bernanke, “Credit markets will take some time to unfreeze,” he said, and “even if they stabilize…broader economic recovery will not happen right away.”
But bearing in mind “the other hand” of the scenario it is important to recognize that these steps don’t regulate or necessarily shore up housing values. We at The Real Estate Lounge Chicago perceive the intrinsic nature of value as somewhat if not fully subjective. And as such, there is an emotional or psychological element related to value. Without waxing too philosophical and speaking as a Chicago real estate professional, what it will take for buyers and sellers to be at least on the same page as far as home values is grounds for optimism.
Hmm, optimism. Sounds somewhat ethereal. And indeed it is. But when it comes to people willing to do things like buy cars or purchase homes optimism is, for most people, quite concrete. If I don’t feel it, I won’t do it.
And while Bernanke is not a trained or licensed therapist he intimated that we do have grounds for optimism and that we “will emerge from this period with renewed vigor.”
The question, of course, is how long this period will last.
I for one perceive singular activities as playing a role in all of this. And right now as the Bush Administration gets ready to hang the “gone fishin’” sign at 1600 Pennsylvania, the country as a whole is ready for a change. So we may gain some degree of traction on the morning of November 5th. And we may gain even more traction come mid-January as the new president takes the oath of office and names a cabinet to move forward in these challenging times.
For my part? I am hopeful for the change that is coming. And I am optimistic that skilled, caring public servants with the true interests of our nation and the overall world community at heart will achieve the vigor that Bernanke refers to.
And, hey, chances are really good that Chicago will host the Olympic Games as a result of an Obama presidency. And, if I might be just a bit parochial, it is my sense that this will be a very good omen for the Chicago economy.
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Comments
Tom,
I love your post. I do agree that people are not shopping much as they used to because they don’t know what will happen next with the economy. So people are being a little bit conservative about spending. I think the American people are being optimistic about the future and hopefully, the outcome of the presidential election will change the wrong path we are heading right now. When the American people start spending and having the trust with the government, hopefully we will see this inflation and recession disappear.
I do agree. With Obama as the President, he might be bias towards Chicago and hopefully we can hold the Olympics. That would be great for the city.
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