Hopeful news, but
wait to celebrate

By John Adams

For the AJC

There have been several hopeful signs on the housing horizon recently, signs that the recession may have already ended, and possible signs that a housing recovery is, indeed, on the horizon. But it may be too soon to break out the champagne and caviar.

At its most recent open market committee meeting, the Federal Reserve issued a statement saying:

● The Fed believes that “economic activity is leveling out,” which is Fed-ese for a belief that the worst of the recession is behind us, and that more normal economic growth lies ahead.

● In addition, the committee reports “conditions in financial markets have improved further in recent weeks.” In other words, the stock market is showing a level of confidence not seen in the past two years, and that the central bank sees that as a positive sign going forward.

● “Household spending has continued to show signs of stabilizing” means that you and I are not as worried about everything as we were earlier in the year. In fact, the Bureau of Labor Statistics collects tons of data on what the average household spends on everything from food and housing to transportation and health care. The more we spend, the healthier the economy.

● Finally, Federal Reserve chairman Ben Bernanke and the Federal Open Market Committee said they are anticipating “a gradual resumption of sustainable economic growth” and that they expect inflation to remain subdued “for some time.” In English, that means they think interest rates will be low for awhile and that cheap money will help the economy recover faster.

While it’s hard to draw joy from any Federal Reserve announcement, this most recent communication was about as upbeat as one can expect from the typically conservative Open Market Committee.

Couple that with the recent news of an upturn in new home construction, and we may have the makings of a recovery.

Why, you may ask, is the new home market so important? Here’s your answer:

According to a 2008 study by the National Association of Home Builders, each new home built represents about three new jobs, and adds about $90,000 to local, state and federal coffers in the form of taxes, permits and fees.

In contrast, the resale of an existing home adds far less to the economy. And according to government statistics, new home sales were up in July for the fifth straight month.

Builders in metro Atlanta say that one important part of that recovery has been the Federal Tax Credit for First Time Homebuyers. It provides a direct cash credit of 10 percent of a home’s purchase price, up to a maximum of $8,000. But that program is currently slated to end on the last day of November, and no one knows how buyers will react.

Until then, let’s keep the cork in the bottle.


John Adams is a broker and investor. He answers real estate questions on radio station WGKA (920am) every Saturday at noon. For more real estate information or to make a comment, visit www.money99.com.