Subscribe Feed (RSS)Here’s an unpleasant thought: as the nation gradually pulls away from the worst recession in more than a generation, consumer confidence begins to wane and job creation evaporates. That scenario is entirely possible given the current state of the housing market which remains a huge drain on the economy.
Housing Starts
According to published reports including yesterday’s headline article in The Wall Street Journal, new home housing starts plunged by 10.6% in October. Bad weather across most of the nation has been blamed as has worries that the $8000 federal tax credit for new home buyers would not be extended. Subsequently, the weather has improved and the tax credit has been extended and the program expanded to include other buyers.
The US economy probably pulled out of its most recent recession sometime in the third quarter of this year. As we close in to the end of the fourth quarter and end of 2009, there are nagging fears among many that unemployment has yet to hit its peak rate, most recently touching 10.2% in October. Moreover, though consumer spending is up and the Gross Domestic Product (GDP) is on the positive side, many people are sensing that the economy has yet to find solid footing.
Shadow Inventory
The overall housing market has an immense, somewhat hidden drag working against it. Namely, concerns persist that foreclosures will once again become a huge issue in the coming months and years as the number of homes being foreclosed on rise.
This past September, analysts with Amherst Securities Group LP said that they expect that once favorable seasonal housing market disappears until next spring, a “shadow inventory” of seven million homes to be foreclosed will emerge. Right now, 1.9 million homeowners are at least 120 days or more overdue on their mortgage payments, a point where lenders usually have begun foreclosure proceedings.
Side Effects
As the most recent recession proved, too many foreclosures mean that overall housing prices are suppressed. When people aren’t buying homes, then foreclosed property is abandoned or sold for rock bottom prices. Property tax revenues drop as new owners petition and win rate reductions; with less money in coffers towns need to slash services and lay off workers. Moreover, with fewer new home buyers in the market, home improvement stores and related businesses have fewer customers coming in their stores, resulting in more of their employees losing jobs.
A vicious circle, right? Yes, and not one that can be easily broken. And, with Congress considering adding about one trillion dollars more to the national debt via a costly health car reform package, additional debt will do nothing to help strengthen the economy.
No wonder why President Obama fears a double digit recession.
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Tags: economy, foreclosure, housing, market, President Obama, recession
Third quarter gross domestic product (GDP) details – which will be released later this month – are likely to show an increase, a number indicating that the recession has technically come to an end. However, the higher unemployment rate, lack of job creation and continued problems in the real estate sector will make that recovery weak at best.
Recession? Not In These States!
July 6th, 2009 by Matthew C. Keegan | 3 Comments | Filed in CommentaryUnemployment continues to rise even as President Obama promised that it would stay below 8% if his multi-billion dollar spending package was passed as it was last winter. Through May 2009, the last month when figures were available, the national unemployment rate stood at 9.4% with many forecasters predicting that it would eventually top ten percent before the year ends.
Not Every State Is Being Hit Hard
Nebraska (4.4%) – Like the Dakotas and Wyoming, Nebraska’s employment has stayed relatively low thanks to farm work. The Cornhusker State also has a small, but important industrial and business base which includes the world’s largest train yard in North Platte as well as the Omaha headquarters of Berkshire Hathaway
North Dakota (4.4%) – Agriculture dominates the economy of the Peace Garden State but North Dakota also has a growing food processing and petroleum industry. Coal mining is huge, providing most of the energy for the state. Wind farms are being set up all across North Dakota, 21st century energy solutions that the state has embraced.
South Dakota (5.0%) – The Mount Rushmore State’s economy is certainly agriculturally based, but the state also boasts of a large service industry including health care, retail and financial firms. Tourism continues to be an important draw to South Dakota as the Black Hills region remains busy.
Wyoming (5.0%) – The least populace state in the union is also one of the best for finding work thanks to its strong agriculture base, minerals, travel and tourism, the latter because of Yellowstone National Park, Grand Teton, Devils Tower, etc. Coal, natural gas, uranium and petroleum are found in abundance in the Equality State.
When Will The Recession End?
Analysts who are trying to determine when the recession might end are not in agreement as to when that might occur. Most see improvement by early next year, with some people expecting the recession to continue until 2011 with even a modest recovery at that. Regardless, some states are bucking the trend which is good news, perhaps enough of a reason get some people to look elsewhere for employment.
Adv. – Are you prepared to weather out this economic storm? Even if your job is spared, a slowdown in economic activity can mean a future salary reduction or reduced time worked. Visit SayRecession.com for tips on how you can cope with the worst what this economy sends your way including food storage ideas.
Tags: economy, Nebraska, North Dakota, recession, South Dakota, Wyoming