Listing Courtesy of RE/MAX ABOVE AND BEYOND
Rehoboth Beach's economy, like all others, is largely dependent upon consumers doing what consumers are supposed to do: buy! Why they make their decision to behave or not is every bit as complicated as you would suppose. It’s the product of how their own careers are faring; how the greater economy (and the economy in Rehoboth Beach) are doing; even how the world economy is behaving—or seems likely to behave anytime soon.
In all of this, the hard facts about how the economy is actually doing are not just backward-looking, they’re also slow to arrive. Worse yet to those who think numbers should mean something definite, the numbers are frequently recalculated later. The latest ‘jobs’ numbers or the ‘housing starts’ numbers, when they are announced, are often accompanied by a statement that the previous quarters number has been "revised to" x. If you are a local business person who makes projections based on the best information available, that wouldn’t be the new number—it would be the previous, now revised number: very old information.
There is one way around this, though, and that’s fortunate. Everybody has the same reliability and timeliness problems, yet have to have some basis for making discretionary spending decisions. The usual solution is to rely upon measurements not of the actual economy’s activity now or in the past, but of what most people expect that activity to be in the future.
Yes, that kind of measurement is ‘soft’—opinion, rather than hard data. But if those expectations are widely publicized, they affect what actually comes to pass. If consumers are bullish on the future, well, that’s reassuring news! Rehoboth Beach businesses are encouraged to stock their shelves. People are more likely to list their Rehoboth Beach homes for sale. The local economy looks better and better! On the other hand, if consumers are depressed about the future, caution will prevail. Businesses will hold off on new hires and trim their inventories. You can’t be too careful, after all. To some degree, consumer expectations often become self-fulfilling prophesies.
That’s why latest consumer confidence reports are the best news for the future of the economy we’ve heard for some time. Last week, Reuters ran the headline, "U.S. Consumer Sentiment at Eight-Year High"; the Business Insider, "Consumer Confidence Crushes Expectations." Reuters attributed the burst of citizen optimism to "improved prospects for jobs and wages, and on lower gasoline prices…"
The University of Michigan co-sponsors the index upon which the numbers are based, which showed December’s reading of consumer sentiment at 93.8, "the highest reading since January 2007." That was a full 4 points above the median that had been previously forecast by 70 economists. It was also 5 points higher than the final reading for November.
If the Rehoboth Beach economy perks up as anticipated, area real estate watchers should expect a noticeable uptick in activity—particularly if mortgage interest rates stay low, and inflation remains a non-factor (the same survey pegged consumer inflation expectations at 2.9%). If you are an Rehoboth Beach homeowner or prospective buyer with an equally upbeat outlook, it’s good reason to give me a call to discuss how your plans dovetail with a rebounding market!
“Are we in a real estate bubble?” can still be a nagging thought for prospective Delaware home buyers. It turns out that it might not be the most relevant question.
When you buy a home in Delaware, you commit to what is actually a two-pronged proposition. One part is ultra-conservative: its practical utility as shelter. Being master of the roof over your head doesn’t just let you feel like you have a grip on the future—it removes a sizeable chunk of the unknown from your family’s prospects.
It’s that other aspect of owning your Delaware home that can trigger hesitation. When all is said and done, this is also an investment vehicle—perhaps the largest most people will ever acquire. Although this aspect, too, is often considered to be quite conservative, within the past decade there was a time when common wisdom had it that buying homes was such a risky financial gambit that only the bravest (or wealthiest) were tempted to take the plunge.
So—which is it? Is it simply a 50-50 proposition—or is there a straightforward answer to whether buying a home in Delaware is more of a chancy venture than a prudent one?
For the risk-averse, the good news is that history does give us a reliable answer—one that depends on just one qualifier. Owning your home is a high-risk investment only if the frame of reference is short term. Over the long haul, it’s about as conservative as an investment can get.
Here’s why. Last decade’s Great Recession—and the residential real estate bust which accompanied it—were preceded by what was unarguably a full-blown real estate bubble. All the earmarks of a real estate bubble were present, here in Delaware , across the nation, and internationally.
For a buyer who purchased at the height of the bubble, the fall in value was precipitous. From 2007 to mid-2008, the drop in U.S. residential prices was nearly 33%—a plunge not seen since the Great Depression of the 1930s. For a buyer who had purchased at the height of the bubble, selling within a short timeframe could result in a significant loss. In that case, their investment would have been almost as risky as a stock market speculation (the S&P lost 50%).
Yet for homeowners who had no reason to sell, the actual dollar losses never materialized. By this time last year, buyers in most parts of the country were willing to pay prices that exceeded the heights of 2006. Inflation has had an effect—yet current moderate residential price rises have been outstripping inflation in recent years. In fact, last week the Economist found that “across America, prices appear to be at fair value when compared to their long-run averages.”
So the more important question may not be the one about real estate bubbles at all. It’s about whether a prospective home in Delaware is intended as a short or a long-term purchase. In all cases, I hope you’ll call me to supply my experience and up-to-the-moment market insight. Call/Text me Russell Stucki at (302) 228-7871, email me at email@example.com, visit more listings at www.beachrealestatemarket.com.