California is a state that draws a lot of attention, both good and bad. It’s massive economy and expensive real estate make it both a notable, though sometimes, outlying factor in national issues. On Saturday, Herb Greenberg wrote his own notable piece in the MarketWatch Weekend Investor section of the Wall Street Journal. The title of this column is
Don’t Own a Pricey California Home? You Had Best Still Watch That Market.
The article focuses on the comments of Stephen Levy, Senior Economist at the Center for Continuing Study of the California Economy. Levy asserts something that has been worrying me for some time: “There’s a limit to what people can afford.” On the surface, that seems so obvious that it’s not worth stating but for some reason the housing market, the California one in particular, seems to have ignored that fact. However, Levy (and Greenberg) expand on how this translates to the economy as a whole and I think this is well worth reading.
Unless you have a paid membership to WSJ.com, you won’t be able to read the column but I found a reposting of it at the blog “
The Future of Real Estate”.
Before this goes sounding like doom and gloom, I spoke with a money manager recently who laid out several important positive factors in our economy:
• Inflation is still low
• Corporate profits are still strong
• Corporations have a lot of cash and clean balance sheets
• Corporations and executive insiders have seen the current situation as an opportunity to purchase their own stock.
It seems obvious that we have shifting and competing forces in our economy and it’s not clear to me which force or forces will become dominant. It’s worth watching, both for our own financial health and also as the 2008 election moves closer.