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Maximum pessimism is key to growth
It has been said that the best time for investing is when pessimism is at its maximum, perhaps because there’s no place to go but up from that point.
If investing spurs economic growth, as seems to be the case, then we need to reach our maximum point of pessimism in order to have an economy that is growing fast enough to notice.
The recession ended two years ago, according to the National Bureau of Economic Research, but growth has been so slow since then that it’s hard to see.
Consumer confidence fell in May and June, so pessimism seems to be on the increase.
Of course, those are indications of the national economy’s status and nationwide consumer sentiment, and they may not match conditions in South Kitsap.
Locally, there are some indicators which may tell us whether the optimists are holding us back.
As a public service, let’s review them and see if we can drive some of the remaining optimists over to the pessimists’ side.
The Assessor’s web page has a useful graph showing the relationship between actual sales prices for residential property and assessed values.
According to the graph, actual sales prices were relatively lower in May of this year than at the same time last year in South Kitsap.
They are still higher than assessed values, but not by as much; and the trend appears to be downward.
The same sort of downward trend shows up in the Northwest Multiple Listing Service data for median sales prices in all of Kitsap County.
At some point, sales prices will drop enough to make the purchase of a home affordable to more people.
Somewhere in the future is a silver lining for those who want to buy, but no one can know when it will appear.
In the meantime, many buyers wait and sellers cling to their hopes. Optimists may focus on the silver lining of greater affordability and avoid pessimism, but what does that get us other than more slow economic growth while we await maximum pessimism?
They ought to move over to the pessimistic side and focus on the sellers’ lost wealth — sometimes only a loss compared to what might have been, but often a real loss when the property sells for less than the price previously paid.
Even though prices and assessed values are falling, they still have quite a way to go before getting down to where they would have been without the “housing bubble” that burst in 2007.
There is more than enough reason for pessimism about the housing market when one compares current prices to what they would have been if prices had risen at roughly the rate of inflation.
Residential property prices could keep declining, if they are to get back to where they would have been without the bubble.
Another gloomy indicator is the sales tax revenue distributed to the county and cities.
Port Orchard received more sales tax revenue in the first half of this year than last year, but not to a large degree.
Now that June’s figures have been posted by the Department of Revenue, it appears that the rate of increase slowed during the second quarter of the year.
And, of great importance in our effort to hit maximum pessimism, revenue for the month of June was less this year than last year.
What had looked like a sign of better economic growth when sales tax revenues had been higher in the first quarter now looks like a sign of much slower growth.
Our local economy may be acting pretty much like the national and statewide economy — limping along and teetering on the brink of another recession.
If we are to avoid another recession in the immediate future, we have to get down to the point of maximum pessimism soon.
Find all the optimists you can, and persuade them of the error of their ways.
They have been holding us back for too long already.
Bob Meadows is a Port Orchard resident.