The Recession Thread

[DanS.]

For the people denying that a recession is eminant or already underway. Here is a thread for you since you insisted on talking about it in another. If you don't trust the Wall-Street Journal, Businessweek, Greenspans or a host of others, maybe you will trust The Economist.


Heading in the wrong direction
Mar 8th 2008 | WASHINGTON, DC
From Economist.com

More signs that America’s economy is in poor fettle

Reuters
IF ANY more evidence is needed that America’s economy is perilously close to recession, it was delivered this week. On Friday March 7th the Bureau of Labour Statistics announced that the economy lost 63,000 non-farm jobs in February, following a smaller decline in employment in January. Even with all the bearish talk recently, these results were unexpectedly bad; forecasters had projected a small increase, not the largest drop in five years. The unemployment rate edged down from 4.9% to 4.8%, but only because there were fewer unemployed people actively searching for work.

On the same day the Federal Reserve announced that it would make additional loans of up to $100 billion available to prevent renewed strains in money markets from hurting the economy. The question for many is now turning from whether a recession is on the way to how long and how deep it will be.

The worst jobs news is still in the house-building sector, which is reeling from the effects of plummeting home prices. Since an industry high point in 2006 some 209,000 trade jobs (such as plumbers and electricians) and 137,000 construction jobs have melted away. The Mortgage Bankers Association reported on Thursday that foreclosures are up by 71% from a year ago.

Mortgage-delinquency rates hit the highest point since 1985. And rates of delinquency among prime borrowers also increased as the crisis shifts further beyond sub-prime borrowing to affect safer loans. Many Americans are seeing their home value sink below the size of their mortgages, giving them an incentive to ditch their property and stack up higher losses for banks. That would push prices down even further and rattle already teetering financial markets.

Collapsing housing markets are partly the result of struggling American manufacturing. Firms shed 52,000 jobs last month, mostly in durable goods such as cars. And domestic consumer spending is too weak to keep the sector from contracting. The outlook looks negative; the Federal Reserve’s latest “Beige Book” survey indicates that some manufacturers are cutting back on plans for capital spending and hiring. The survey also found that weakness in housing and manufacturing is spreading to other industries such as retailing and commercial construction, both of which lost jobs last month.

But the news is not all bad. Given the weak dollar and high demand from Asia, exports of everything—from telecommunications equipment to tractors—are up, helping to mitigate the pain. The weak dollar is also giving a boost to overseas tourism—up by some 7% in 2007. All of which kept the economy growing in the fourth quarter—but only barely. And a $150 billion fiscal-stimulus package will take full effect in May, leading some forecasters to predict a short and mild recession.

Aggressive monetary easing from the Fed could also help and markets are anticipating big cuts, perhaps of half or even three-quarters of a percentage point from the current rate of 3%. The central bankers are set to meet to ponder their next move on March 18th. Still, the Fed might not have much more room for manoeuvre. Inflation in January was uncomfortably high, at 4.3%. The Fed expects inflation to abate in coming months, and sluggish consumer spending suggests it will, but talk of stagflation already abounds.

Even if the recession is brief and shallow, the recovery could take a lot longer. Housing prices still have room to fall. States such as California, Florida and Nevada have been battered by their speculative housing bubbles and still have to deal with large surplus stocks of homes. The industrial mid-west is in the midst of a long-term economic decline, and if global demand recedes, currently robust exports will tumble, too. The weak property market will also discourage Americans from moving around the country to pursue opportunities elsewhere, exacerbating the pain for some of the worst-off.

Most politicians still studiously avoid using the r-word. But with the outlook worsening, expect to hear it more often in Washington, DC. And expect policymakers to compete to come up with the most ambitious new plans to end the swoon.


America's economy | Heading in the wrong direction | Economist.com

[Heretic]

Shit! Once housing hits bottom [whenever that'll be] I could snatch up a real small home for cheap. Just have to mark time 'til then.

[DanS.]

Originally Posted by The_Heretic

Shit! Once housing hits bottom [whenever that'll be] I could snatch up a real small home for cheap. Just have to mark time 'til then.

That's the goal....just hope that interest rates are still low by then.

[Heretic]

Originally Posted by DRS112

That's the goal....just hope that interest rates are still low by then.

Too true. Though, I'd think first about a starter home, something one floor, one bedroom and ALL mine, paid off as soon as possible.

[BillCosby]

speculators gone wild

Good luck in finding something............ You area is already way cheap compared to many other places.....
Here we have had speculators doing bus tours.. Going on guided tours, vacant house to vacant house..............

[DanS.]

Originally Posted by The_Heretic

Too true. Though, I'd think first about a starter home, something one floor, one bedroom and ALL mine, paid off as soon as possible.

I'd suggest two bedrooms. One bedrooms are really hard to resell...plus the extra room gives you an area for whatever....like a computer room, junk room, room mate etc.etc.

I'm also a big fan of houses with basements....it makes maintenance so much easier, plus it gives you the opportunity to finish it later if need be and double your square footage.

[Heretic]

Originally Posted by DRS112

I'd suggest two bedrooms. One bedrooms are really hard to resell...plus the extra room gives you an area for whatever....like a computer room, junk room, room mate etc.etc.

I'm also a big fan of houses with basements....it makes maintenance so much easier, plus it gives you the opportunity to finish it later if need be and double your square footage.

Money is my number one constraint. All the rest of that is dangerously close to a pipedream for me.

[DanS.]

Originally Posted by The_Heretic

Money is my number one constraint. All the rest of that is dangerously close to a pipedream for me.

You can find both in the same price range....There are also private and public programs that will assist you in finding affordable financing...especially for a first time buyer...

As fun as looking for houses is...it's funny when you compare the pic you see online to what the house looks like when you actually pull up, the internet makes houses look WAY nicer than they really are....

that's how I did it anyways...don't rely on a realtor to show you the available houses...find ones you might like, drive by and then narrow down the list and contact your realtor to let you do an inside tour.

[BillCosby]

Originally Posted by The_Heretic

Money is my number one constraint. All the rest of that is dangerously close to a pipedream for me.

If you have not already do so you prob should look into your loan options........ Now that things are starting to tighten up it will be a bit more difficult but I think many ppl are surprised that they can actually afford it......

If nothing else you will @ least know your price range, options etc so when things approach it you can act quickly.....

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