I was talking to a North American this week. Some of the updates are all over my Twitter feed. While there’s generally optimism in my blog posts, I’m trying a persona of gloom on Twitter.
The average price of a house sale in Detroit in Jan/Feb? Well, according to her, $8000. That’s a pretty interesting number because it shows the depth of the sub-prime woes and just how much oversupply there is for housing in places that are dependent on industries that are in trouble. The motor manufacturing sector hasn’t yet died, but it’s getting a discounting from the local population!
While Sir Martin Sorrell famously suggested the dot.com bust recovery graph would track the shape of a bath, Canadians talk about a canoe shape. My friend reckons it’ll be a canoe!
My previous discussions have pondered whether the graph shape will actually an ‘L’ with a long horizontal or a ‘W’ with a fake bounce in the middle or a ‘wonky W’ that bounces a bit but doesn’t end ahead or a ‘lightning strike’ with plateaux areas of comfort that are followed by slides.
The important thing to note, oh graph watchers, is the issue of microscope views. When you look through a microscope, even a straight line has jagged edges. So, as we ponder the recessionary descent, the graph is certainly not going to be a smooth freefall.
If there is general agreement that it’s still a fall… does it matter if there are plateaux? Yes, if you get fooled into thinking that a plateau is the bottom and you are in a hurry to buy back in to take the bounce – and it turns into a further slide.
My sense, with unemployment on the rise, with the banks still locked, with companies feeling further pinches, is that property prices are still on the slide. That they will continue to slide as the lag effect of unemployment euphoria makes way for reality to bite – that it’s a long old slog for many to get back into a job that will pay the same as a pre-crunch set-up.
Recalibration of the whole economy is still going on. The quantitative easing of the UK government may soften some of the effects, but we’re still coming back to earth on the slide. And, whether it’s a plateau or a floor… the bounce isn’t going to be strong or sustained or rapid.
The waiting game continues on a broad sweep of business activity. The vultures are not hungry enough to fly. And, the phoenix can sleep for a good few years in his egg that’s resting on the ashes… but the phoenix is taking strength from the heat to rise again.