Continuing the Friday Chart series … this week we are looking at the number of real estate transactions in the first three quarters:
As always, raw data after the jump.
Looking at the number of transactions so far this year* in the Charlottesville MSA – Charlottesville, Albemarle, Fluvanna, Greene, Nelson – for all kinds of property – condo, attached, single family, farms … in this dataset there are going to be outliers and anomalies, but with a set this large, we’re really looking for trending analysis. Your market is different, whether you’re in the area around NGIC/DIA, the Grayrock neighborhood in Crozet or the Belmont Lofts in the City. These numbers lead more toward the macro aspect of our micro market and towards buyers’ psychology.
Maybe we are witnessing the “new normal” for the Charlottesville real estate market, and it’s something that we’re just going to have to get used to. From a “volume of transactions” perspective, we’re 50% off the peak in 2005, but that’s a mostly irrelevant comparison, as the “peak” is and was an anomaly.
A better comparison is the 1999-2002 era of about 2000 transactions in the first three quarters. If we can find our way to that level, I think we’ll be ok.
Delving into the logic behind the New Normal thesis is like peering into a Pandora’s Box of economic ills. It’s not for the faint-hearted.
Americans have to deleverage: Households went into the crisis with more debt than at any time in U.S. history. They have to pay that load down, either by saving more or by defaulting. Neither is conducive to economic growth. Government debt is also at levels not seen since the end of World War II. Our leaders can either commit to years of austerity to pay it down or ignore the problem and let inflation and devaluation solve the problem. Again, neither will help economic growth.
Demographics could undo us**: In simple terms, economic growth equals labor force growth times growth in productivity. Our labor force will stagnate as the baby boomers retire and the U.S. population’s growth rate slows to a crawl. While dramatic increases in productivity could theoretically take up the slack, that may be too much to ask of a generation whose education, for the first time in American history, ranked in the bottom third of developed nations. And who, for the first time, went to college in lower proportions than their parents.
Globalization will reverse: In an Institutional Investor essay called Paradise Lost, economistNouriel Roubini and political risk consultant Ian Bremmer argue that 2008 cost the U.S. and other advanced economies the ability to set the global agenda. â€œThe trend is most visible,â€ they write, â€œin the transition from a G-7 to a Group of 20 model of international decision making which includes influential and deep-pocketed developing countries like Brazil, China, India, Saudi Arabia and the United Arab Emirates. Without these countries, multilateral efforts to solve pressing transnational problems wouldn’t have much credibility. But getting this varied group to agree on anything will be profoundly difficult.â€ In the resulting power vacuum, protectionism will rise and the global free trade that fueled a half century of international growth will recede.
* So far = 1 January – 30 September.
** More on the demographics aspect in a later post.