Money world

Americans are inking a lot of deals to buy homes.

In October the National Association of Realtors recorded an unprecedented ninth consecutive month of increases in the number of signed contracts.

Although these are not closed sales, and some deals can fall through, signed contracts are a good indicator of where the housing market is headed.

Between September and October NAR’s Pending Home Sales Index rose 3.7% to 114.1 from 110 in October. But the index is 31.8% higher than a year ago, when it was 86.6. That’s the biggest year-over-year gain in the history of the index.

The PHSI is also at its highest level since March 2006, and the rise confounded expert expectations. A panel of industry analysts put together by Briefing.com had forecast a 1% drop in new contracts.

NAR’s chief economist, Lawrence Yun, gives much of the credit for increased sales to the homebuyer’s tax credit, which first-time homebuyers could claim to reduce their taxes by up to $8,000.

"The tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future," Yun said in a prepared statement.

The credit had been due to lapse on Dec. 1, so many October buyers may have acted to get in under the wire.

However, the credit has been extended through the middle of 2010 and expanded to include many move-up buyers. The housing industry hopes that will keep sales perking until the economy picks up and markets return to a more normal condition.

In a related story, the Census Bureau reported that private residential construction spending surged 3.9% during October.

Yun cautioned, however, that housing market indicators, such as pending sales, may weaken over the next few months.

"The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months," he said.

"Given the lag time, we could see a temporary decline in closed existing home sales from December until early spring when we get another surge," he added. "But the weak job market remains a major concern and could slow the recovery process."

The good news is that number of homes on the market has declined, removing some of the bloat that has depressed prices. There is now a seven month supply of homes on the market at the current rate of sale. which is down from 10.2 months a year ago. Yun predicted that housing conditions could return to near normal and home prices firm up by mid-2010.

"That would mean broad wealth stabilization for the vast number of middle-class families," he said. 

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White House economic adviser Lawrence Summers disputed the idea of a “new normal” of slower growth and higher unemployment popularized by Pacific Investment Management Co.

“It will take time, it will take step-by-step a lot of different elements creating jobs,” Summers said at a forum in Washington last night. “But I see no reason why there should be some new normal idea of the potential growth of the country.”

Summers, director of the White House’s National Economic Council, spoke at a conference on innovation and economic growth co-sponsored by Intel Corp. and the Aspen Institute, a non- partisan policy research organization. He was asked about the “new normal” investment analysis in an interview by Judy Woodruff, host of a Bloomberg Television news show and a senior correspondent for PBS’s “The NewsHour with Jim Lehrer.”

Newport Beach, California-based Pimco, which runs the world’s largest bond fund, has forecast what it termed a “new normal” for the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking role for the U.S. economy.

Summers said that while he anticipates it taking some time for the U.S. economy to recover from the recession, he sees no erosion of the growth potential once an expansion matures amid the right mix of government policies.

“It will take assuring that there are adequate flows of finance, that there is adequate work on the infrastructure of the country, making sure that businesses have the right kind of incentives,” said Summers, who turned 55 yesterday. “There are a lot of things that need to be done. So it will take time to have this expansion mature.”

‘Rebalancing’

Summers also called for a “rebalancing” of the world economy in which U.S. consumers play a less significant role.

“There is no way our import-led growth is going to be the driving force for the rest of the world’s export-led growth going forward,” Summers said.

President Barack Obama and the Democratic congressional majorities in Congress currently face conflicting pressures to stimulate jobs growth and reduce the federal budget deficit. Obama is to host a “jobs summit” with economists, business leaders and union officials on Dec. 3 to discuss ideas for spurring employment.

Summers said attacking unemployment is an essential element in reducing the deficit.

“Putting people back to work, bringing employment back to normal levels, that’s also going to be the single largest factor in bringing down the federal budget deficit,” Summers said.

The unemployment rate rose to 10.2 percent in October, the highest level since 1983.

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Faced with shrinking market shares, fragmenting audiences, disappearing brick-and-mortar recorded music retailers and a continued double-digit decline in compact disc sales, Canadian independent record labels that exclusively sold and distributed CDs until a few years ago are acting as agents and booking concert tours for their artists.

They have formed in-house management companies, and bought ticket agencies and digital download retailers.

"The entire music industry is changing, and nobody knows what it’s changing into, so everyone’s trying to create new strategies that work for them," says Lloyd Nishimura, president of Toronto’s Outside Music, whose company has expanded into artist management with a roster that includes sibling songwriters Matthew and Jill Barber and the Hylozoists.

"I don’t think it’s that much of a stretch if you’re a management company to have in-house booking or other music-related businesses. Everybody will be looking at a whole bunch of opportunities in the future."

"It’s a necessity," adds Geoff Kulawick, president of Burlington-based Linus Entertainment, True North Records and The Children’s Group.

Kulawick, who launched a booking agency under the True North banner in 2008 to promote such developing label artists as Lynn Miles, Catherine MacLellan and Madison Violet, says a hands-on approach to careers is essential these days.

"We can’t be operating in the music space and sell only one aspect of it," he says. "We’re moving from being a record company to becoming a music experience company, and anything that’s connected to the music experience that we can monetize, we want to be there."

Kulawick says his company isn’t about to go toe-to-toe with established agents, or infringe on their territory.

"It’s becoming more difficult for developing artists to find booking agents and concert promoters who are willing to take a risk on booking them, so that’s where we’re stepping in and actively performing that booking/management role for our artists," he says.

Nishimura, whose company has expanded to include a stake in digital retailer Zunior.com and handle the business affairs of musicians, says the Internet has fragmented audiences to a point where marketing can be a challenge.

"With the Internet, people have exposure to every single artist around the world all at the same time, so it is just difficult to stand out from the crowd," says Nishimura.

At the same, Nishimura says the potential opportunities through the still-evolving digital market are limitless: "There are so many different ways that digital revenue comes in – you get money from streams and single download sales, album download sales – and even though you don’t have physical distribution around the world, you can still get digital revenue from around the world."

These companies aren’t alone. In July, publicly traded Somerset Entertainment Income Fund, a Toronto-headquartered specialty music label formed on the backbone of the late Dan Gibson’s groundbreaking nature recordings, purchased digital music retailer Puretracks for $3 million.

Earlier this month Toronto’s MapleCore Ltd., home to the e-commerce site MapleMusic.com, the record labels Maple Music and Open Road Recordings and distribution arm Fontana North, announced the purchase of TicketBreak Corp., a full-service ticketing company.

The good news is these strategies seem to be working. Three of the four companies have experienced cumulative double-digit growth since 2005, with MapleCore president and CEO Grant Dexter claiming a "100 per cent revenue increase" for his umbrella of companies.

"We’ve added staff and it’s been a great run over the last three or four years," says Dexter, whose MapleMusic.com website sells merchandise, CDs and digital downloads for more than 800 Canadian artists.

Dexter says his company’s acquisition of TicketBreak allows him to offer touring artists such as Jann Arden "VIP packages for their core fan base, including meet-and-greets, exclusive seats and merchandise.

"Technology has allowed, for the first time, for that one-to-one relationship between fan and artist to be transactional," Dexter explains.

Andy Burgess, CEO of the Somerset Entertainment Income Fund – now in the midst of a supported $30.7 million takeover bid by Fluid Music – says strategic music-related deals like his company’s purchase of Puretracks will continue.

"The traditional business model is so very challenging that we have to be really innovative as business managers and figure out how to draw a profit," says Burgess, whose company employs more than 180 people around the world.

"If you have a relationship with an artist, it makes sense to see if you can then run their touring business. If we’ve got a relationship with a retailer, it makes sense to see if we can run their digital music gift cards, or put together music download promotions for their supplier.

"In a very difficult industry, it makes sense to leverage your core strength in different directions, and the smart guys will be able to do (so) in a way where there are endless possibilities."

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