Uncertainty over serious issues such as the European Debt Crisis, unemployment in the U.S., and Stock Market declines, continued to occupy headlines this past week, and put into question whether an improvement in the real estate sector could be sustained. The talking points to use this week, especially with sellers are as follows:
News for Sellers
U.S. Unemployment– According to the Bureau of Labor Statistics, U.S. employers pulled back on hiring with only 69,000 nonfarm jobs added in May, the fewest in over a year, causing the jobless rate to increase from 8.1% to 8.2%. The dismal report showed only half as many jobs as predicted by experts. To add to the frustrating news, March jobs numbers were reduced from 154,00 to 143,000 and April’s numbers were reduced from 115,000 to 77,000. The dismal report increases the odds of the Fed introducing further monetary stimulus through the release of QE3. Dave Rosenberg, of Gluskin Shef, has stated that there are now 18 million unemployed Americans competing for 3.7 million jobs. Worse even yet are the global unemployment numbers. Spain has 24.3% unemployment, Portugal is at 15.2%, and France and Italy are at 10.2%. Rosenberg claims these are modern day Depression statistics.
Worsening situation in Europe– Europe’s recession deepened as Spain saw yields on Spanish debt climb to 6.5%. Concerns over the possibility of Greece leaving the European Union, have caused a Flight To Safety, as investors purchased U.S. Treasuries and British gilts.
Yields on British debt are now at their lowest levels since the founding of the Bank of England in 1703 and U.S. Treasury yields on 10-year notes are now at a record low of 1.5%. . Investors appear to be willing to lend the U.S. and England money at little or next to no interest and actually lose money after adjusting for inflation, rather than keep their money in riskier investments.
Elections will be held on June 17, in Greece. This could be a very big day of world-wide economic recovery. If a selection towards austerity is made, the situation could improve. If not, the worst fears for Europe could be realized. Over a third of all deposits have already been estimated to have left Greek banks in the past 3 years. If this trend isn’t reversed, banks in Europe may have to sell their government bonds to cover the outflow of deposits. This would push yields on debt higher, causing even greater deficits for struggling economies, especially Spain and Italy.
Stock Market– The Dow Jones Industrial Average took a big hit and dropped 2.7% on negative news about jobs and concerns about Europe. At 12,118, the market is in the minus this year and has lost 20% in the past 12 months. For stock market investors looking for a return, the prospects of investing in real estate should be discussed.
For your Buyers
Not all the news is bad. Keep in mind that corporate earnings, total employment, retail sales, housing activity and bank lending are all significantly higher than they were a year ago. Additionally, the election of a chairman at the European Central Bank that is willing to use monetary policies to head off bank collapse could also help.