This is just ugly…..
Let me attempt to explain. Goldman Sachs came out with their economic forecast. Here’s a brief summary of it:
- Mediocre growth until late 2011.
- Unemployment peaking at 10 3/4 in the middle of 2011.
- Extremely low inflation through 2011
- Low interest rates through 2011 (at least the ones the Fed controls.)
So, what does this mean for the housing and mortgage markets? The following list of predictions are made under the assumption that Goldman is right. If they are, I think the housing market is going to see:
- Continued growth in the number of foreclosed homes.
- Continued downward pressure on house prices.
- Continued delinquency problems at Fannie Mae, Freddie Mac and FHA.
- Continued tightening of underwriting guidelines for mortgages.
- Continued situations where the interest rate isn’t the problem, it’s property values and qualifying for the loan that’s the problem.
In addition to that, a couple of other things we could see:
- Growing political unrest and dissatisfaction with the current state of the government and those who run it.
- An opportunity for a massive restructuring of the political landscape, starting in 2010 and continuing to the 2012 election.
- Growing resentment against the financial institutions on Wall St. and elsewhere that have had a big part in this mess.
- Substantial regulatory changes that will either lower the regulatory and tax burden on consumers and businesses and create the type of growth that we need or will stifle all initiative and all opportunities for us to pull out of this any time soon. We’ll either go Reagan or we’ll go Atlas Shrugged. I vote for Reagan.
It’s going to be bumpy and it’s going to be wild, but it’s definitely going to be a ride to remember……
Tom Vanderwell
The key features of our 2011 outlook: (1) a strengthening in growth from 2.1% on average in 2010 to 2.4% in 2011, with real GDP rising at an above-potential 3½% pace in late 2011; (2) a peaking in unemployment in mid-2011 at about 10¾%; (3) extremely low inflation – close to zero on a core basis during Read more
