The Bottom Line

Real Estate and Java

Volume III Issue IV – Thursday April 19, 2007

A monthly newsletter of financial commentary for our friends

 If you watch TV long enough, you’re bound to think the sky is falling when it comes to residential real estate. We’ve talked before about the uniqueness of the West Tennessee market. We’ve made the case in the past that, in some ways, we are insulated from nationwide trends. That doesn’t mean that we don’t feel them or that they don’t affect us. It just means that nationwide trends, once they reach this part of the country are somewhat muted. So if there is a boom going on in LA, once it reaches us we might feel a bit of a rise. Likewise, a bust in Manhattan may lead to a few aftershocks here. I’m not a real estate expert, and I don’t know what lies ahead for real estate in West Tennessee. What I can do, is pass along some statistics for Jackson/Madison County that might give us a clue as to what is to come: The number of City building permits as of the end of March was 64. The number of permits last year at the same time was 105. The county building permits tell the same story, with 38 YTD compared to 95 this time last year. We’re only three months into the year, so we can’t for sure say that we see a trend. But based on the first quarter numbers, new construction is slowing. On the existing home front, the realtors with whom we have relationships are reporting sales in line with where they were last year at this time. However, there are a greater number of new and existing homes on the market as compared to last year. This would indicate to us that even though home sales have remained strong thus far this year, the supply of homes on the market is increasing. The stock market has been very fickle thus far this year. We find ourselves very near where we began the year in most of the indices. We had a major sell off in February, and we have found ourselves inching forward ever since. Headlines have been one of the causes. One day we hear evidence that the economy is strong and poised to deliver some nice slow growth over the next few years. The next day we hear 10 reasons why a recession is just around the bend. Historically speaking, this has led to a sideways, volatile market that is waiting on a catalyst to move forward. There are many catalysts that could move the market forward. One of the most significant of those might be the Fed lowering rates sometime this year. We are hopeful they will do so, but as long as inflation remains anywhere close to a threat, we can forget about it. The Fed is more concerned about fighting inflation than stimulating growth. In looking for a common thread across generational lines, I’ve found one: coffee. On any given morning you could drive to a number of places in your town and find a group of senior adults gathered round a table full of coffee and newspapers, solving the problems of the world. Likewise, on any given evening, you could drive by a Starbucks in any college town and find a group of young people gathered round a table full of coffee and textbooks trying to also solve the problems of the world. I’ve heard it said that the coffeehouse is the modern day synagogue – the place where philosophy/religion and life meet – the social square – the new “Front Porch.” This means that there will be a host of new contenders stepping into the ring against Starbucks and McDonalds to grab a piece of that business. Ladies and gentlemen, let the Java wars begin.

Chad P. Wilson, CFP Foundation Bank – a division of McKenzie Banking Company - 731-554-2423

The above is strictly informational commentary and does not constitute any sort of recommendation. Consult the services of a confident professional for specific loan, investment, tax, or other financial advice