What's important for our nation's economic recovery? Two things dominate--unemployment and the housing market (yes, government spending is a huge issue but many expenditures relate heavily to the two issues above). The tax credit originally did its job as people rushed to purchase homes last fall. There was a pretty solid push this Spring (prior to the April 30 cut-off date) but it was not as 'robust' as the fall of 2009. In fact, new home sales in May 2010 dropped to the lowest pace in the 47 years records have been kept! Right now, housing starts are down but home completions are actually up as it appears builders are focused more on finishing homes already started versus breaking ground, which is in-line with the tax credit and the June 30 close date deadline (which has been extended to September). If housing starts remain this slow, new home inventories will continue to decline which will in turn help clear the way for more recovery.
As a side note, the NAHB (National Association of Home Builders) says each new home built in the US creates the equivalent of 3 new jobs for a year and generates around $90,000 in taxes paid (local and federal) and impacts many industries (such as raw materials, goods like appliances and faucets, etc.). When I say that the housing recovery is key to our nation's recovery, you can see what I mean now! In ATL, we were overbuilt prior to the crash; that's why we were really hurt by the downturn. Even now there are over 89K homes for sale in ATL, which is a 14 month supply. 150K vacant lots = enough to supply builders for the next 4 years per a report by Wells Fargo Securities. More foreclosures = even more inventory!
Bright notes? Our unemployment rate has declined 3 months in a row (still around 10%) and our fundamental growth models remain intact. Factor in all the Fortune 500 companies here, the world's busiest airport, and our strong ports in Savannah, we are still a very attractive area for job creation. With that being said, we may not be back to 'normal' for another few years. The Fed agrees; they noted that the recovery is weakening in many parts of the country.
Final thoughts? Stocks are up this week due to upbeat earnings reports from many different companies/industries and there was a small drop in unemployment claims last week. Likewise, uncertainty in Europe is calming due to bank ratings remaining acceptable across the board after regulators crunched numbers on 91 banks (only 7 failed their tests per an AP report) and determined that most would survive further economic slowdown. The Euro rose and most European markets rose slightly on these reports as well. See? It's not all bad! Keep plugging away, and have I mentioned that rates are at their lowest levels EVER? Buy or refi NOW ; )