Recession Near or Already Here?

[lindismith]

My Mom was at Outback Steakhouse on Thurs for dinner. She said it was very quiet in there. “No one.”

The NY Times has an article today on the coming recession. From the final paragraph:
“There is, of course, no mystery now as to what the problems are for car dealers. They are pinched by the slumping real estate market because people can take less money out of home equity to buy cars. And soaring gasoline prices have made driving much more expensive and new-car payments more burdensome. In July, sales at gasoline stations accounted for 10 percent of all retail sales, the highest figure in decades.”

The whole article is here: http://www.nytimes.com/2006/08/19/business/19charts.html?ref=business

The article references a chart, (but I cannot find it) “The accompanying chart shows the rate of change in sales by new-car dealers, comparing the most recent 12 months with the 12 months before that; it is adjusted for inflation. The rule — unveiled here for the first time — is that if the figure is down 2 percent or more, a recession is either under way or set to begin within a few months. The figure fell to a negative 2.4 percent when June sales figures were released last week by the Census Bureau.”

Also: am wondering what people’s AC bills were like after the heatwaves of July? Mine was 20% higher. That’s got to have an immediate effect on our local economy.

Is anyone noticing anything?

[VCJIM]

My business electric bill went up 100% compared to Winter.

[FormerOwner]

I’ve been noticing that quite a few restuarants have gone under up here in Temecula during the last 6-12 months. Here’s the latest example. The 2 restuarants that went under had great food and were farily busy. The pizza place did seem to rely on discount coupons a lot though; I don’t think I ever bought a pizza without a coupon. I am sad to see them close since I really liked their food. The fact that the owners’ house also went into foreclosure is something that I’ve also seen happening quite a bit up here. People used home equity to help get businesses going – now both the businesses and the R/E values are tanking. This is only the tip of the iceberg IMHO.

Restaurateurs leave trail of debts; Employees return Friday to find empty buildings

[waiting hawk]

MAN I hope they don’t close down to many shops. I need a while before I move down there. My CD doesn’t mature till July 2007. Then i’ll chuck it into my money market until the winter. At that time Temecula watch out. U got a real loser comin to ur town :). I can’t hold the wife on bubble sitting to long into 2008 before she kills me.
20% down and I can easily rent it for the 30 year payment, I’ll buy (2003 price at least).

My website tracking Temecula and South Riverside County

[lindismith]

That’s interesting about using the home equity to get the businesses going. I’m in manufacturing, and had a client that did that last year. He has not re-ordered. I need to follow up with him….

I know that many very small businesses (like pizza places) can go out of biz if they get hit with a huge energy bill. (Saw it happen when Enron was creating “the energy crisis” in Ca a few years ago.) An extra $1000 on a bill can easily shut down a small biz.

Does anyone else know of examples of people who refinanced homes to start businesses? I have read of a few stories of people starting up like this in the past, so this seems like a pretty common thing to do.

[FormerOwner]

One other thing I might add is that during the last few years a lot of retail businesses seem to have opened using either very optimistic cash flow projections/wishful thinking or very naive owners (or both). My wife and I go into some of these new stores and restuarants and leave saying “it was nice but how are they going to stay in business?” Well, it turns out a lot of them are not staying in business. I think it’s another syptom of easy credit and low interest rates. I don’t know how some of these businesses can even cover the rent. I suspect a lot of them stay open until their borrowed money runs out then it’s lights out!

[SD Realtor]

It was a sad day but I sold my Mammoth condo a few years back in order to help my wife put money down for her biz…We ended up taking out a business loan for the rest of it. That was back in 02 and she paid that loan off a few months ago. We thought about a home equity line for about 30 seconds.

[Author]

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