RealEstate Investing:Seller Beware

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Consumers are smart, and they are adaptable. Several years ago, retailers decided to stimulate holiday sales (and combat the encroachment of Internet sales) by discounting thier products. It worked–for a while. Then consumers adapted and waited until later in the season to buy, reasoning that more discounts could be coming.

And retailers gave it to them, again and again. Finally, sales could be bumped only by sacrificing margin, in both good economies and bad. Now we have August retail sales numbers up more strongly than any in over a year. That’s great news and another sign that the recession is over. But a large portion of August’s gain was the result of the “Cash for clunkers” program that subsidized consumers to buy new cars. That program is history, and we don’t know if the auto industry will sink back into the slough it was in during the first half of this year. It may be the same for housing. The first time buyer tax credit expires November 30, and there’s no guarantee that it will be renewed. Home sales are up, but what happens when there is no more subsidy?

Have we borrowed sales form next year?

And will the market–in the absence of any employment growth–sink once more? These are questions that will be answered early in 2010. Yes, the recession is over, but don’t throw any parties yet.