Carole Rodoni Gives Dynamic Presentation on the Economy

The “Main” Membership Meeting happens on the first Tuesday of the month at 9:00 a.m. in the Mack Powell Auditorium. Terrific speakers bringing information that you need, Starbucks coffee, Ettore’s pasteries all free.

If you missed Carole Rodoni’s economic forecast at the February Meeting, you missed a dynamic and highly entertaining presentation. Ms. Rodoni, who has headed several major real estate firms, peppers her economics with biting humor

Rodoni prefaced her 2011 forecast with a brief overview of what brought us to this economy. Following the dot.com bust in the early 2000s the federal government wanted to stimulate the economy by having homeownership grow from 56 to 70 percent. As a result, the market grew from five to seven million homes sold annually – one half of those to investors.

Homes were appreciating 50 to 100 percent a year as compared with the normal seven percent average appreciation. The sellers’ market, which usually lasts about 18 months, lasted for five years and the deepest downturn in real estate history resulted.

Subprime loans in the marketplace moved from 7 to 25 percent and then were bundled and sold abroad. For example, New Century which was publicly traded on the NYSE had a $50 billion portfolio of subprime loans. At the same time, one in four Countrywide loans was subprime.

Rodoni reported that we are now technically out of the great recession with a 2.5% growth rate in 2010. However, an economy the size of the U.S. needs to expand by five to six percent annually to show signs of strong recovery.

But this has been more than a recession. We are at the beginning of a globally interrelated economic restructuring. Technology and the recession have put people out of work and some of the jobs will not be coming back. Some will require retraining. Some will be new and also require special training in the fields of energy, biotechnology and other industries that will emerge. The next wave of technology and electronic mobility is being developed and will need additional yet specialized employees.

In the national economy, big business is doing well as reflected in earnings reports and the movement of the stock market above 12,000. Small businesses, on the other hand, which hire 65 percent of the work force, are saddled with regulations and unable to get business loans.

Seventy percent of the economy is spurred by consumers. While Americans are said to have a Black Belt in shopping, unemployment remains at between 10 and 16 percent, straining personal budgets and spending. Basically, it is going to take longer than usual to get employment rates back to a normal range – say 2015.

We will see energy and especially food prices rise significantly in 2011 with political turmoil and unusual weather patterns challenging output. Given more time than in past downturns, the capital markets will correct themselves. But expect slower growth in the future.

China is already emerging as a world power, having just eclipsed Japan as the number two economy after that of the U.S. General Motors sells more cars in China than it does at home.

While the real estate industry will continue to struggle in 2011, the local market will begin to improve. We will see a move from foreclosures to more short sales as another wave of resets hits this year. Pensions and hedge funds will invest in mortgages.

Some consumers, especially those in the 25 to 45 age group, have been jaded by the recession. They need to learn to buy real estate as an asset that builds wealth over time. They will need to hold their properties for at least five to seven years going forward. Lenders and REALTORS® will need to match the buyer to the loan product rather than simply focusing on the interest rate.

For another informative Main Meeting, check sacrealtor.org for news of our next dynamic speaker on April 5.