WHAT a difference a decade makes.
We start 2020 in good financial shape. No, let’s change that—sound financial shape.
It was not so with the past three decades. In 1990, we were coming off the financial uncertainty of the late 1980s and about to enter the recession of 1991–92.
There was the technology bubble of the late 1990s that led to a recession in 2000 and most of us remember the financial mess America was in back in 2010 as the Great Recession was playing out.
I cannot think of another decade in this country’s history that ended with the U.S. economy on a more solid footing. Interest rates are at unprecedented lows and the unemployment rate is the lowest it has been since World War II.
All three of the major stock market indices climbed to record highs in December and there are no detectable bubbles anywhere in our economy.
Better yet, most of the industrialized nations in the world also start 2020 in good financial shape.
There is no sign of a recession and inflation, thanks in great part to moderate and stable gasoline prices, is not a problem.
President Trump and China reached a truce of sorts last month in the trade war that exists between our two countries and Wall Street is hoping a long-term deal can eventually be worked out.
Our economy is so stable that even the impeachment of the president of the United States did not cause the stock market to falter.
About the only thing that financial analysts could find to worry about was the fact that existing home sales fell in November by about 1.7 percent. Some found this difficult to understand because interest rates are low (you can get a mortgage for under 4 percent) and most people are working and have steady incomes.
A couple of things come into play here. First of all, millennials are not buying houses like the generations before them. Many are not marrying and starting households until they are well into their 30s and some of those who are settling down don’t want the responsibility of a house. Mowing a lawn is not their thing.
The second reason for the drop in homes sales is a bit more complicated.
About once a week, I run into a Realtor friend at lunch and I always ask, “How’s business?” For months now, she has replied that business is good, but lately she has been adding that it could be better.
When I asked why she says that, it is because of low inventory. There just aren’t enough houses on the market.
The November numbers, released just before the holidays, bore this out. Nationally, as well as locally, there is only about a three-month inventory available.
Why? Maybe homeowners are satisfied with where they live or maybe they’re using low-interest home-equity loans to turn their old house into a more modern one.
The result of low inventory is that there is more competition for those houses that are on the market, which causes prices to rise. The average price of a house (nationally) in November was reported to be just over $271,000. In our area, I’m sure it was higher.
Higher home prices mean that more potential buyers can’t qualify for mortgages. Remember that rules are stricter now than they were before the real estate bubble of the early 2000s and the foreclosures that followed.
Then, too, there is no inflation, which means that wages are not rising in correlation with house prices. The higher the cost of the house, the more people, especially first-time buyers, that are priced out of the market.
Bad weather in various parts of the country could also factor into the lower November existing home sales, so that number seems of little concern.
Other than that one blip, we enter 2020 in great financial shape. Even the talking heads on the financial networks have ceased, at least for the time being, to preach doom and gloom.
When holiday retail sales figures are released, I’d bet that this Christmas season will go down as one of the best ever. Most of us have money, and we are spending it.
Let’s hope the year—and the decade—end on the same financial note.