Current Outlook

The Recession Is Over!

Oh, really? Ask one of the thousands of unemployed people and I'd bet you'll hear a different answer. Yes, home sales (and prices) have risen a bit and yes, retail sales have risen a bit, BUT we need jobs. (I could digress about wasting time with health care reform vs. our real problems (It's the Economy, Stupid!) but this is not to be a politicized rant today).

This week's unemployment figures didn't truly rise (on a nationalized level, but in GA it actually went UP) but the numbers are higher than a level that indicates the economy is adding jobs. New unemployment claims have fallen around 22% since the Spring, but who is hiring? With people losing jobs and with those people not FINDING jobs, foreclosures could be the next flood to hit. We have been hit with all the adjustable-rate and/or subprime loan foreclosures in prior years but we are seeing many more fixed rate 'plain vanilla' loans going to the courthouse steps of late. To turn the tide, we need to see weekly claims to fall to higher than 400,000 for several weeks! Unemployment benefits were extended, but this lifeline will run out in January unless we see another extension from Congress. Some members of "The Fed" have noted that our recovery will resemble an "L" with a gradual upward tilt from the base (which is better than the L pointing down!). Small businesses typically contribute about a third of net job growth in the last 2 economic recoveries--not this time! Small businesses have accounted for about 45% of net job losses through the end of 2008, so it looks like we are in for a long fight...

On a positive note, the federal tax credit for 1st-time home buyers was extended and 'move up' buyers were given their own credit of $6,500 as well. HOWEVER, I am very disappointed in that credit as it is restricted to people who have lived in their home for 5 of the last 8 years. Let's cut to the chase-I am 44 and I am finally 'stable' (well, at least as it relates to moving!) and I don't plan to move any time soon. I have never lived in a home for over 5 years so if I was looking to move (I'm not) I couldn't get the tax credit. I think a more reasonable figure would have been a 3-year restriction but no one called for my opinion...

If we could loosen credit to credit-worthy borrowers AND get back to common sense underwriting we could get out of this mess faster. As I keep saying, this all started with Housing and Housing will get us out of this mess. We need to repeal the Home Valuation Code of Conduct as well so we can go back to using quality appraisals vs. whomever happens to be cheapest, but again, that's a topic for another day.

Finally, I read that Atlanta's housing inventory began to deplete in the 3rd quarter and housing starts actually ROSE. The quote (from Metrostudy) that really rang true for me was this: "We do not have an oversupply problem, we have a demand problem". This is what I am referencing above-if people could sell their homes they could move into a new home. It's like a 'reverse' domino effect-nothing is falling into place so that the next domino can fall. No credit = no home sale. No home sale = no seller becoming buyer. Hopefully we'll see some positive movement sooner rather than later!