Dr. Housing Bubble 12/12/09

[Crewleader]

2010 Economic Forecast for California:
What 10 Reasons Will Keep a lid on the Housing and Economic Recovery for California?

Every December I like to do a synopsis of the California economy and the impact on housing. 2009 has been a tough year for housing. If we had to sum up what occurred in California it is that housing sales jumped because of massive cuts in prices. Without the giant crutch of FHA insured loans and the Federal Reserve artificially keeping mortgage rates lower housing would be in a different position. And the other position isn’t necessarily bad. Lower prices would lower the housing burden on many. Keep in mind that the bailout of crony Wall Street with backstops of $14 trillion would have been enough to pay off every single prime, near prime, and subprime mortgage in the entire country. What the bailouts accomplished was to repair the failed bets placed by the crony bankers. The proof should be that 2009 saw the largest number of foreclosure filings and many Wall Street banks are dishing out record bonuses.

So here we are, nearing a close to the 2009 year and California is still in a difficult position economically. The unemployment rate is the highest on record and the government is bleeding money since revenues have evaporated. The access to easy loans is now gone but people can still get lenient terms with FHA insured loans.

My prognosis for California in 2010 is a continuation of a weak employment environment, continuing fiscal deficits, and a popular election that will focus on the economy. The housing market will continue to remain weak but we will see more price cuts appearing in mid to upper priced neighborhoods. Let us go through the 10 reasons why the California economy and housing market will face another challenging year in 2010.

http://www.doctorhousingbubble.com/2010-economic-forecast-for-california-what-10-reasons-will-keep-a-lid-on-the-housing-and-economic-recovery-for-california/

[Goldstein1984]

1. Recession or adjustment?

The California economy is huge. I doubt the national economy can recover if California isn't.

Can housing recover? I wonder. When the world economy recovers, the price of energy is going to increase again. The cost of heating a lot of big homes may be greater in certain locations than mortgage payments. Thus, a lot of the large houses built during the housing bubble are going to be less desirable.

I'm no economist, but my gut tells me we're not experiencing a recession, we're experiencing an adjustment, and a different reality is waiting at the end.

[DeSwiss]

2. +1