Beginnings of Recovery

You might recall a few months ago that I predicted how the historically huge savings rate in America is going to drive the real estate recovery.

In short, Americans are saving an average of 6% of their income every month. Over the last three decades, we have typically hovered closer to around 1-2%. So, this means that the 80%+ of the job market that is fully employed is sitting on a lot of savings. They have not spent it because they are waiting for signs that the economy will recover; specifically that they will not lose their jobs, too.

So, read the article in the Financial Times (which I can’t link to) today: “Jobs data increase confidence in recovery.” Basically, job growth over the last quarter was higher than economists predicted and the Institute for Supply Management (which tracks manufacturing) was reporting encouraging news.

So, back to my prediction. I said that as soon as those folks who are sitting on wealth start hearing sustained good news about the economy, they will begin to spend.

So, guess what I’m seeing this week? I’m getting more and more phone calls from people who are interested in buying a house. Many of whom are looking for investment properties to spend their excess savings on.

We won’t get out of our troubles tomorrow, but you read it here. This is where it starts. Next, as those folks start buying, watch prices start to edge upward in the housing market again.