FDM - June 2009

FDM
ECONOMIC WATCH

fdmonline.com

Kim Kennedy

Economics editor

Early signs
point to recovery

Although this year’s economy is likely to remain depressed, small signs are beginning to emerge that suggest the recovery, while not yet blooming, has begun to take root. These signs are appearing in the housing market, in the credit markets as well as on Main Street. At the same time, continued declines in employment and rock-bottom levels of consumer confidence are likely to remain a dark reminder of the severity of the current downturn.

purchase homes between Jan. 1, 2009, and Dec. 1, 2009.

In addition, the Obama administration’s housing rescue plan should help to reduce the number of foreclosures through its loan modification program. Under this program, loan servicers will reduce interest rates (and principal if necessary) so a family’s monthly mortgage obligation is no more than 31 percent of its pre-tax income. Although single family housing starts will continue to fall in 2009, these and other programs designed to solidify the housing market should ensure that this year is the bottom of the cycle.

●

The steps taken

early in 2009

should have an

effect by later this

year.

Housing comes first

According to the National Association of Home Builders, the housing market, which was the trigger for the current economic crisis, must see a turnaround before the overall economy begins to improve. Fortunately, several efforts to encourage homeownership and stem foreclosures should help single family housing reach bottom late in 2009. The federal stimulus bill includes an $8,000 tax credit for first-time homebuyers who

Looser credit will help

Another factor that has brought the economy to a standstill is the credit crisis. Lending standards stiffened significantly in early 2008 when 80 percent of bank lending officers indicated that they had tightened standards on commercial real estate loans. That’s a marked jump from earlier quar-