It’s Still “The Economy, Stupid ” 20 Years Later
“It’s the economy, stupid.”
This was one of three key phrases campaign strategist James Carville coined to help Bill Clinton win the 1992 election.
It is now 20 years later, and we’re on the threshold of another presidential election. And it is still about the economy, although neither candidate will be able to do much about it.
The other day I was scanning news articles and found myself on Reuters. As I looked at the headlines, I had to laugh. At the top of the list, I saw:
“Strong new home sales brighten housing picture”
But then at the bottom of the same list, there was this:
“Home resales slip, housing recovery still eyed”
New home sales are often considered a leading indicator. If new home sales are picking up, economists generally expect that the rest of the real estate market will pick up, too.
But new home sales only make up a fraction of the total market. As of September, new home sales are on track to hit 389,000, while resales are on pace to hit 4.75 million. That means new home sales represent just 8% of the total housing market.
So new home sales are up a tick, resales are down.
A friend of mine who also lives in Parker, Colorado recently listed his home for sale. He’s in no rush, but would like to rent on some acreage where he can raise small livestock and grow a bigger garden.
After a week, he’s had just two scheduled showings, one of which was a no-show. He asked his realtor if this was due to his home or the market in general.
The realtor said that it was not his home, but that the last three weeks in Parker have been the slowest he’s ever seen. This realtor has six homes listed currently, and only two showings total between them all in about 10 days.
Of course, this could be caused by the uncertainty leading up to the election. Or it could be a genuine softening in the market.
We have record-low interest rates, yet very few can afford to buy a home. They don’t have the necessary credit score or down-payment. Many lack both.
Speaking of record-low interest rates, you would think buyers would be coming out of the woodwork to capitalize on the low rates, but they’re not.
Existing homeowners are refinancing, though. This is about the only thing keeping mortgage brokers afloat. If rates increased even half a point, refi business would dry up and many mortgage brokers would be closing up shop in three months or less.
So I find it somewhat disingenuous when the media frames nearly all economic news in light of “the fledgling recovery.”
The numbers suggest we’re experiencing anything but that.
For example, 22% of homeowners are still underwater on their mortgages… as much as 90% of foreclosed home inventory is being kept off the market (because this “shadow inventory” would crash home prices)… and real unemployment rates are stuck at 22% to 23%.
Is this what a “recovery” looks like?
I believe economic conditions in the U.S. will continue to erode through the rest of this year and into 2013.
And this will force marketers and entrepreneurs to think more creatively about how to maintain and grow their businesses.
What do you think?
-Ryan M. Healy