Forecast for 2008 = Recession
The US economy has headed downhill since early summer with the mortgage meltdown and the affects will be felt through 2008, if not longer. Crude oil prices are poised to cross the $100-a-barrel mark, soaring gasoline and energy prices. Wages stagnant, record level consumer debts, price increases, and declining housing prices, consumer spending will most likely decline even further.
Let’s first mention the 450,000 subprime mortgages that are expected to increase every quarter this coming year. Let’s face it most of the people that see an increase in their mortgage will not have the money and will continue to add to the foreclosure rates. We will go into more of how the real estate market effects numerous other markets in a minute, but first.
Ben Bernanke the Federal Reserve Chairman predicted an economic rebound by mid-2008. Let me tell you this is complete bullshit! (I wish it weren’t) Ben is trying to boost confidence in an economy that is sinking faster than Rosie O’Donnell trying to swim.
Anyone reading remember what Newton’s Third Law is??? “Every action has an equal and opposite reaction” well old Newton might of been referring to particles but it holds true to the real estate mess. Homes aren’t selling so this brings down a huge sector of the US economy. Realtors, agents, brokers, construction workers, asphalt companies, pool builders, security & alarms companies, lumber yards, roofers, A/C and heating companies, landscape companies and many more are directly affected by the market. We have already seen tons of these types of companies go under and many more are forced to lay off employees.
New car sales are starting to take a hit with some dealership reporting double digit sales decreases last month alone. And don’t get me started on travel because I just booked a 4 star room in a major US city for $70.00 per night. That same room was $135.00 two weeks ago and since I take this same trip every year I can tell you the price last year was $200.00 per night.
In 2008 we will see a record number of small business going under. Many small business owners rely on equity in their homes when times get tough or when they need new equipment. Guess what? There is no equity to get out of most homes and if there is it’s too little to qualify under the current lending conditions. When George the owner of the local auto shop has equipment that breaks or Ron the photographer that tries to get money out for camera equipment, won’t be able to, and their business will suffer.
I paid $3.45/per gallon for gas today, I have neighbors around me in foreclosure, some of which have already been laid off and one who owned a small business that went under. In my area of the country 1 in 43 homes is now a foreclosure and did I mention consumer spending is down. Put your seatbelts on America because 2008 will be one of the toughest years in many of our lives.