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Source of Title Blog

The First Time Since The Great Depression
by Robert Franco | 2008/01/25 |

Those of us in the title industry certainly know that things have been slow. Well know we now just how bad things are. According to an article on Bloomberg.com, U.S. Economy: Existing Home Sales Fall, Prices Drop, 2007 provided us with "the biggest annual slump in 25 years and the first decline in prices since the Great Depression."

Purchases fell 2.2 percent to an annual rate of 4.89 million, the National Association of Realtors said [on January 24] in Washington. For all of last year, sales of single-family homes declined 13 percent and prices dropped 1.8 percent, the first decrease since records began in 1968 and probably the first since the 1930s, the group said.


Investors are speculating that the Fed will cut interest rates again next week in an effort to prevent the down turn from exacerbating weakness in the broader economy. But, lower interest rates may not spur homebuying as many would suspect.

"Would-be homeowners are not going to jump into the market to buy new homes no matter how much prices have dropped until they get a solid feeling that prices have bottomed," said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.


Not to mention that with the economy at serious risk of falling into a recession many potential homebuyers may wait to see how secure their financial future is before making a major purchase. Several top economists believe that the chances of a recession are better than 50 percent.

Source of Title Blog ::


"There is likely to be little or no increase" in gross domestic product this quarter, Harvard University economist Martin Feldstein told the Senate Finance Committee in Washington today. "The probability of a recession in 2008 now exceeds 50 percent. If it occurs, it could be deeper and longer than the recessions of the recent past."

...

Former U.S. Federal Reserve chairman Alan Greenspan said Thursday the odds of a U.S. recession are 50 percent or "slightly more," as he defended the risky subprime mortgages that accelerated a drop in the American housing market and subsequent economic downturn.

"The probability of recession is probably 50 percent or maybe slightly more, but we're not there yet," Greenspan told a Vancouver audience.

...

What is the probability that the U.S. economy will fall into a recession in 2008? We would answer, 65.5 percent … What we do see for 2008 is an economy teetering on the brink of recession.” Paul Kasriel, director of economic research, at Northern Trust Bank in Chicago.

...

"In sum, the recent employment report strongly suggests that an official recession has arrived.” David Rosenberg, chief North American economist for Merrill Lynch.


Of course, in my opinion, economists are like weathermen: no matter what happens, you can't prove them wrong. If the weatherman tells me that there is a 10 percent chance of precipitation and we get the worst downpour since Noah built his ark, well... he told me that there was a 10 percent chance.

What I can't understand is so many economists would so boldly state the chances are around 50 percent - why don't they just say "we don't know." The housing market, and the broader economy, are in chaos. What will happen tomorrow is any one's guess. But, today, things are bad. Of course, you don't need me to tell you that - that is the like the weatherman that says "right now, it's raining."

Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle



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Categories: Economic Indicators

795 words | 2533 views | 7 comments | log in or register to post a comment


Interestingly...My home has increa...
Interestingly...My home has increased in its appraised value. I must live in one of the pockets of resistance. 
by Kevin W. Ahern | 2008/01/25 | log in or register to post a reply

The reason why so many economist se...
The reason why so many economist seem to make rather glib predictions about a recession is because it is about as meaningful to their day-to-day jobs as determining who will win the Super Bowl this year. Most stick to analyzing particular sectors of the market and those are the only predictions that matter to them. They already have a good idea whether their sector is getting better or worse.

When they talk about the chance of a technical recession, they are talking about the number determined by the Department of Commerce which is a giant aggregate of rough numbers each of which is taken from a huge aggregate of millions of individual transactions in the myriad sectors of the market. Aggregates of aggregates don't tell you anything about your sector of the economy though. No one knows what will happen and no economists really care because only politicians worry about a recession being declared.

Even the Fed, whose job it is to monitor that number, spends most of its time trying to outfox the markets before they hit a recession by inflating the currency when things seem to be going soft. We are coming out of housing bubble now though created by their credit expansion in response to 9/11, so all the lowering of interest rates could do at this point is increase general inflation, not preserve housing prices.
 
by David Jenkins | 2008/01/25 | log in or register to post a reply

How would you react to this economi...
How would you react to this economic down turn if you were a paid member of Congress, with an annual pay that "starts" at $174,000 per year-that's $14,500 each month- I don't think they worry too much about the price of gas, bread or milk- just who they can "fool" next into believing they are sincere about helping-
And- which came first- inflation or the rising prices because the interest rates forced businesses to cover the increased cost of just doing business?
It seems to be a widely held position that the "FED" just was sleeping at the wheel- or should I say- "taking a nap after depositing their pay checks into the banks they control"
I might be all wrong- but my tiny business, that used to be a pretty good source of livelyhood and income is now reduced to "just hanging on" status, and that doesn't do anything to comfort me and my future at all
Like Jim Cramer from CNBC said- the fed"doesn't have a clue" and they are destoying lives, people and businesses with their casual "no big hurry" attitude- maybe they don't know there really is a "fast lane" on the Beltway because they are driven everywhere!!
 
by Steve Meinecke | 2008/01/25 | log in or register to post a reply

My personal opinion is that housing...
My personal opinion is that housing prices in certain areas of the country were overinflated due to the mortgage industry "gold rush" we saw a few years back. Now, we're simply seeing a market correction. It may take a while, but the best thing the government can do right now is to step back and let this ship right itself.

My daddy used to have a saying about these so-called "experts":

"Figures lie and liars figure."

 
by Scott Perry | 2008/01/25 | log in or register to post a reply

Call it what you may, but things ar...
Call it what you may, but things are bad right now. The average American is sinking deeper and deeper which each passing year, and the politicians could care less.

Steve makes a great point. These politicians are making well into the six-figures and have the best benefits money can buy. How can we expect people who are so far removed from the average American to care or help?

The government will not use the words recession or depression until the top 1% starts feeling the pinch.

 
by Shane Kane - TitleSuccess.com | 2008/01/26 | log in or register to post a reply

Congress only cares about being re-...
Congress only cares about being re-elected. If Congress truly had that much control over the economy, they would legislate us into prosperity every session.

Why people continue to subscribe to the myth that Congress or the president somehow have ultimate control over billions of individual spending decisions made during the course of a year continues to baffle me. I guess we always need someone to blame and some strain of hope that if Congress would just pass another law or add another thousand pages to the tax code, the economy will miraculously turn around.

There's a never-ending line of politicians ready to promise you want you want to hear about how their program will magically turn around the economy. And there are a million voters ready to believe them every election cycle. Washington and the rest of the country are filled with millions of employees who work for all of these programs, none of which have ever worked, and none of which will ever be eliminated despite their ineffectiveness.

These artificial booms and busts will go away when the Fed stops manipulating the money supply in an attempt to "create" growth in the economy by increasing the amount of currency in circulation. Increasing the money supply relative to the amount of goods and services in the economy is the cause of inflation. M3 is the name for the measure of money in the economy and the Fed last year stopped measuring it for the first time since it was created because the number is probably so astronomical now that it would set off a panic if it were known.
 
by David Jenkins | 2008/01/26 | log in or register to post a reply

Recession is when there is negative...
Recession is when there is negative Gross Domestic Product for two consecutive quarters. That hasn't happened. The Democrat party, along with their willing accomplices in the drive-by media, seems hell-bent on scaring the public into thinking that it has, so that they can come riding in on their white horse to "save the day". Granted, the current crop of Republicans isn't much better, but I refuse to have my fortunes determined by who wins elections.

From Herbert Hoover to FDR to Richard Nixon, there are numerous historical lessons that government intervention in the economy always creates more problems than it solves. The best thing Congress and the White House can do is...NOTHING!
 
by Scott Perry | 2008/01/26 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

 

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