This year, our country has just managed to avoid a classic double-dip back into recession, but the recovery we have experienced has been slow, uneven and not very robust.

Although consumer sentiment is generally improving, there are still a lot of people out of work, and the effects of the Great Recession have dramatically altered consumer behavior — perhaps forever.

The improvement in consumer sentiment is largely because of the wealth effect created by the fairly robust year for the U.S. equity markets and in other markets around the world. The year to date performance for U.S. large-cap stocks is 13.44 percent. Mid-cap stocks did even better, with a 24.98 percent return, and small-cap stocks led the way with a 28.92 percent return.

In recent years, one of the best plays for the investor has been stocks that are tied to real estate. Shares of REIT (Real Estate Investment Trusts) as a group have outperformed the overall market for the second year in a row. As measured by the Dow Jones All REIT index, REIT’s were up 27 percent year to date. The attraction to investors was the generous dividend yields offered by the REITs compared with other investments. Currently, the average REIT dividend is 4 percent compared with 3.35 percent for Treasury bonds. Gains in the share prices of the REITs provided the remainder of the 27 percent gains that were experienced this year.

As a result of the robust equity markets, consumers have seen the value of their retirement and investment accounts grow, and they are feeling wealthier. As a result, consumer spending is improving and the economy is slowly picking up.

In real estate, the news isn’t nearly as good. Despite the record-low interest rates, sales remain fairly sluggish and at lower prices. Consumers are not convinced that the fall in real estate values is over, and many buyers are reluctant to step in. To make matters worse, the buyers who are ready to buy have found that lenders are still choosing to adhere to tight underwriting guidelines. This often prevents even well-qualified buyers from getting a loan. And if you are self-employed, you can almost forget about getting a home loan from a traditional lending institution.

The sluggish real estate market will continue to be a headwind for the economy into 2011. Eventually, banks will begin to lend more generously, but this trend will be offset by a gradual rise from the record-low interest rates we saw in November. In just one month, rates on 30-year mortgages have risen from 4.25 percent to 4.75 percent. Historically, these are still low rates, but as the rates edge higher, it will affect the buying power of the newly conservative consumer.

The new homebuyer will be conservative as well — possibly choosing the smaller home over the larger home. And the “move-up” market should be especially dormant as the consumer “right sizes” their lifestyle to the new economic landscape. The home they are living in will be deemed adequate, and the desire to leverage the existing house into a larger one will be largely gone.

This deleveraging of America is probably the biggest event, and an after-effect of the Great Recession of 2007-09. Consumer behavior has changed for 2011 — perhaps for a long time to come.

— Bill Masho is the broker/owner of Masho Associates. He can be reached at 805.895.4362.