Clearly 2011 was a challenging year, but there is a lot to be positive about looking ahead to the rest of 2012. Housing statistics are starting to look good and the length of the housing down turn itself points to turning the corner, maybe this summer. Washington's fiscal policy remains indecisive, but most major economic indicators are showing stability and positive, though admittedly weak trends. The pace of growth is slow, but that's to be expected in an economic recovery from a financial crisis.
Some good trends:
- Households are paying off their consumer debt even though credit is becoming easier to obtain, including home equity lines of credit which grew for the first time in years in the 3rd quarter of 2011.
- Consumer sentiment picked up sharply in the last half of 2011, to a 6 month high in December. Still low, but maybe consumers believe the economy will pick up in 2012. Increasing confidence can become self fulfilling.
- The labor market is slowly coming back--December jobless claims were at their lowest level since 2008, but unemployment remains persistently high and gains are often due to declines in the number of people in the workforce. It's going to take years until we get unemployment down to where it should be, 2 or 3 percent, and until we do, those folks can't buy houses and will have trouble keeping the ones they have, both downward pressure on the housing market.
- Housing prices continue to decline, a trend that will continue until we work off the backlog of foreclosures, short sales and the shadow inventory (homes that folks want to sell which they took off the market, waiting for higher prices). Until all of these houses are sold, prices will remain under pressure. Housing recessions are always long and this one is no different. But the good news is, affordability is rising dramatically due to lower prices and rock bottom mortgage rates.
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