SEPTEMBER 2006 IN
RICK ASTER’S WORLD

Real Estate and a Reluctant Economy

National statistics bear out what I’ve seen locally: it’s a slow real estate market. It’s not a classic buyer’s market, which would have falling prices and a large number of properties for sale. Instead, it seems that hardly anyone is in a hurry to buy or sell. Most properties are staying on the market for a long time and selling for less than their original listed prices, as you would expect to see in a buyer’s market. But there are relatively few properties to choose from and many sellers are willing to wait for a better offer — usually characteristics of a seller’s market.

It seems to me that this pattern in the real estate market is also happening across the economy. Not many people or companies see the current economic climate as a good time for new initiatives, and what initiatives there are seem to be coming along at a slow pace.

This can be seen in the response to high energy prices. The increase in the price of energy has many people looking for energy-creating and energy-saving technology, such as solar panels LED lights. But few people are rushing to purchase this cutting-edge technology, in part because of high prices and shortages. Prices for LEDs and solar cells are high and supplies are scarce because suppliers are hesitant to add more factory capacity. I could use a solar panel myself, but I feel it would be better to wait and see if the shortages go away in a year or two.

I see a similar situation when I look at the job market. Companies have plenty of vacancies but, in a year, may fill just half of them. Workers who are only partially employed or working in lower-paying jobs are looking for better job situations, but they seem to have little sense of immediacy. A better job will surely come along eventually, but there is little reason to hope for it to happen right away.

This state of the economy resembles a depression in some ways, but it could hardly be called a depression, as the total amount of work being done and money being spent is not falling. However, it seems to me the economy could be described as reluctant or hesitant. People are holding on to what they have and, for the most part, waiting for things to get better. There are some initiatives, but most are being postponed.

In economic terms, there is a tremendous amount of excess capacity — workers and equipment that could just as easily do more than they are doing. What this says to me is that the economy could support a boom similar to what we saw a decade ago. There are plenty of workers ready to go to work on something new, plenty of machines that could run two hours a day instead of one. Of course, supporting a boom isn’t the same as creating one, and it’s hard to imagine where a boom could come from in the current economy. Still, it’s nice to know that the economy is strong enough to do something big, even if it doesn’t feel ready to do it.


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