Are We Heading into a Recession?

Written in early January 2008

Everybody is talking about it…are we going towards a recession in 2008? A recession would certainly not be good and it would hit investor portfolios very hard…those same portfolios that were hit hard in 2007! I just read an article in BusinessWeek that speaks directly about the recession risk that we are facing in the United States. The article is very interesting and breaks down the issues into four main sections; The Credit Crunch, The Housing Slump, The Federal Reserve, and The Global Economy.

BusinessWeek surveyed 54 forecasters for their annual outlook their views on the subject and then analyzed the results. According to BW, only 2 of the forecasters expect a recession! Overall, the forecasters expect the economy to grow 2.1% this year. It is noted that the economists’ predictions are based on further rate cuts by the Fed.

Here is a brief summary of the four topics discussed in the article:

“The Credit Crunch“

• The economists do not seem to worried about credit worries but feel stongly that the Fed must help out. The Fed must cut rates aggresively this year to help businesses “expand their outlays and payrolls.”

“The Housing Slump“

• Economists state that housing starts must fall low enough in relation to sales. What this would accomplish would be a balancing of supply and demand, which, of course, would signify the bottom!
• This process will probably take all of 2008 and once inventories of existing homes fall a bit, downward pressure on prices will ease.

“The Federal Reserve“

• The inflation worry is now taking a back seat to recession worries.
• Since the Fed will not worry too much about inflation, they should be able to cut rates, thereby relieving “the liquidity and credit squeezes and restoring the economy’s pep.”

“The Global Economy“

• The economists expect a second year running of the U.S. trade deficit narrowing.
• Less reliance on consumer spending and more reliance on exports.
• They expect the dollar to decline more but not at the pace as it did last year.

Overall, I thought that this was a very helpful article. It gives me much confidence that we will not be facing a recession. It also gives me much more confidence in the housing market. Why? Everyone wants to buy property at the bottom of the market….we may be there soon…and I will be encouraging all of my clients to buy!

Please do not hesitate to contact me with all of your New Orleans Real Estate needs.

You may also be interested in: New Orleans Real Estate – The Definitive Blog

Darryl Glade ~ New Orleans Property ~ 504.451.8960