Time for a Recession?

“Detroit, Cleveland and some smaller Rust Belt cities are experiencing a traditional bust, in which economic woes spread to housing. In San Diego, the housing decline seems to be a self-generated phenomenon, the product of too-high prices and too-crazy lending practices.”
Basically, there are a lot of reasons that the housing industry is struggling. Economic woes obviously go hand in hand with housing woes. People without jobs are going to struggle to make their payments. No shocking revelations here….
The big question is “Will housing woes result in an economic recession?”
Housing prices have dropped 3.2% nationally during the past 12 months. Over 36,000 in the mortgage industry have dissipated over the course of the past year. “46% of new jobs between 2001 and 2006 in the US were credited to real estate, residential construction and other housing related Labor Department jobs.”
Managing director of the Economic Cycle Research Institute, Lakshman Achuthan, says, “Having a jobs report come in negative does not mean that a recession has started.” The risk, however, is there.
Time for some personal insight… I don’t believe a full blown recession is at hand. Inflation looks to be stable which could me a rate cut in the very near future. The federal government is becoming actively involved as government backed programs are loosening up a bit and providing relief for some distressed homeowners.
Bottom line: There are a lot of bad loans out there that are going to keep a large inventory on the market BUT builders are pulling out, government backed programs are expanding and Wall Street seems to be settling down a little bit. Not all subprime loans are destined for foreclosure. Most subprime borrowers do pay their mortgage and do know the terms of this mortgage. I’m proud to be one of them.
**Statistics and other information drawn from Time Magazine 9/24/07.
http://www.time.com/time/magazine/article/0,9171,1661682,00.html