Too Early to Plan Around the Election?

I've heard a lot of discussion lately about planning real estate decisions vs. a vs. the next presidential election.  While we all realize that speculation is often just that, it is true that people do try their best to suss out what they think will happen to the economy, and therefore to real estate, if one or another person becomes President.  Obviously, many thought that Trump, as a real estate developer, would make choices that would be good for real estate investment on every level.  While that has not been universally true, it does seem true that, even in Connecticut, where 47% of those polled recently said that they were thinking about leaving the State within the next five years, there is a feeling of being better off than four years ago.  Is that because we are four years further from the last recession, or because interest rates and unemployment are low? Or is the scary stock market leading to moving money to "safer" places?  It doesn't really matter.  Real estate seems to be in favor as an investment again.

I've written about the opportunities buyers are finding along the Shoreline, now that hurricane fears seem more distant, and summer family gathering places more important.  I've also talked about the potential for real estate investment, especially in warehouses and flex spaces, based on location, and the type of needs that follow residential apartment expansion.  All of those things are true.  It does seem to me that our market in general is somewhat better than in other places, mostly due to the lack of a run up causing a subsequent downturn.  Whatever the cause, we are behind the curve, as we have been for a long time, and for now that is a good thing.

Should you wait for November of 2020?  It's a long way away.  Weigh your personal life goals against the choices, and make a plan.  Personally, I think there are too many unknowns, and the knowns tend to favor real estate investment now.

Unemployment Insurance in CT

I am really starting to feel like a right-wing conservative.  Today's rant is about the rates for unemployment insurance in CT, which are the highest in the country. For every $100 a Connecticut employer pays in wages, it pays $2.30 to the State against unemployment claims.  One other state is at 2.1%; California, famous for the outer reaches of costs, is third at 1.8%.  The average is .60 per $100, or about a quarter of what we pay here.  And we wonder why jobs go elsewhere?

In another unfortunate move this week, the city of Stamford added an extra tax on real estate sales over $1 million. That may not be so bad in another part of the State or country, but a million-dollar base picks up a fair number of houses there.  What will that do to future home sales?

Connecticut, stop taking us for granted!  Many people have a choice of whether or not to move here, or buy property here.  Indications are that many are choosing not to invest, and our average home prices have just gone down for the eighth month in a row.  Compare that to everywhere else, and you will see why business owners worry.

Conn. Economy Falls Behind State Posted Negative Economic Growth for 2012.

Wall Street Journal, June 6, 2013
By JOSEPH DE AVILA

Connecticut was the only state to post negative economic growth in 2012, the latest indication of its sluggish recovery from the recession and the financial crisis.

Connecticut's gross domestic product shrank by 0.1%, the worst performance in the U.S., according to a U.S. Bureau of Economic Analysis report released Thursday. Job losses in financial services, the real-estate industry and federal, state and local government were the big reasons why.

New Jersey and New York both grew 1.3% and ranked 36th and 37th in the U.S. respectively. The rest of the country grew more rapidly. The nation's GDP expanded by 2.5%.

"The Connecticut economy is coming back inch by inch instead of yard by yard," said Don Klepper-Smith, chief economist at DataCore Partners, an economic and demographic research firm in New Haven, Conn. "The recovery has been spotty at best."

Connecticut's Democratic governor, Dannel Malloy, pointed to weakness in the European economy—an important trading partner—as one reason why the state's economic performance has been shaky. "We need to do better," he said. "I'll go with the statistic that there is general agreement on—that we created 26,000 private-sector jobs in the last two years, the fastest two-year increase in jobs since the 1990s."

Mr. Malloy has made investing in technology and engineering one of the pillars of his economic-development plan. The Legislature on Wednesday approved a $1.5 billion plan for the University of Connecticut to expand its focus on science and technology. The state also spent $291 million to lure genetics research nonprofit Jackson Laboratory from Maine.

Those are long-term projects that can't fix the state's short-term jobs slump. It has regained only 47% of the jobs it lost during the recession, the state labor department said. The state's unemployment rate is 8%, compared with 7.5% for the U.S.

Connecticut's poor GDP growth took some economists by surprise. "I wasn't expecting it to be so bad," said Steven Lanza, an economist with the University of Connecticut.

That surprise stemmed from Connecticut's high marks in 2011, when the Bureau of Economic Analysis pegged its GDP growth at 2%, among the best in the U.S. On Thursday, the 2011 number was revised to -0.1%.

The weak performance from financial-services and real-estate firms shows the financial crisis and the collapse of the housing bubble continue to drag on Connecticut's economic performance, Mr. Lanza said.

The financial-activities sector, which also includes real-estate jobs, fell by 2,200 between December 2011 and December 2012. Construction jobs fell by 1,800 during that same time.

Government layoffs also have weighed down economic growth in Connecticut, the federal report said. Only Florida, Wisconsin and Louisiana's governments shrank more. "One of the things that Connecticut has done…is shrink the size of its government faster than just about any other state," Mr. Malloy said.

The state shed 1,000 government jobs from December 2011 to December 2012.

Economists said the U.S. has begun to experience a housing rebound that Connecticut has yet to join. Median sales prices in Connecticut are still down 30% from the peak levels of the housing boom, Mr. Lanza said.

"You don't have a sustainable recovery until you have a housing recovery. And we don't have a housing recovery here yet," said Peter Gioia, an economist with the Connecticut Business and Industry Association in Hartford, Conn.

There were bright spots in the BEA report for Connecticut. Durable-goods manufacturing and management of companies—which typically reflects corporate headquarters—both posted gains in 2012.

Connecticut's Slow Recovery

Recent press releases by those studying CT economics suggest that our recovery here still has a long way to go.  New Haven is first among 142 metro areas as a buyers' market, meaning that prices are still flat or declining, making it a good place to buy.  This is a little misleading, because the flip side is that prices never went down the way they did in places like Arizona and Florida, which are at the top of the list as far as sellers' markets go.  The reason is that they have little inventory now, and low prices.

We are also near the bottom on a national basis for recovery statistics.  Our unemployment is at 8.8%, vs. 7.7% nationwide.  Our state has only recovered 25% of the jobs lost, as opposed to 52% nationally.  A list of states by recovery amount puts us 46th.

The most interesting thing about these facts to me is that we are busy in commercial at Pearce!  I have been meeting this week with agents, and they are mostly very optimistic and have a lot going on.  We will finish the year at least double last year's totals, and have some fairly big transactions left to close in early 2013.  I am also getting inquiries about commercial real estate as a career, and have hired two agents in the past month.  That hasn't happened in a long time!

What this suggests is that the Pearce results may reflect market share increases, as opposed to market increases, but that the sector is primed to take off, and that 2013 will be an even better year.  So it won't be a buyers' market for long--act now!