Economic Outlook 2009/2010http://www.choicefinance/blog/

Well everyone wants to know if we are the bottom, close to it or more bad news still to come. My answer is hard to know for sure but there will be some good news with bad bumps in the road for at least another year. Here's why.

Defaults on all types of loans for residential, commerical and credit cards continue to rise.
And for the first time ever prime fixed rate mortgages are outpacing subprime loans as the largest parts of new foreclosures. This is in large part to the continued rise in unemployment.
Unemployment is not supposed to peak until next year and nationally it will soon be over 10% In many states it already is. Michigan is already over 15% for example.
Property values have fallen nationally by over 35% and in some areas such as Florida, California, Nevada and Arizona it has far surpassed that. In South Florida some condo units have fallen from 250k in 2006 to little more than 50k now. Developers went bankrupt and homeowners went under right after them. Locally in MD we aren't as bad but there are large swings even in Montgomery County. Bethesda after all is a very different market from Germantown and the up county in general.
We are seeing higher commercial vacancy, declining rents for both commercial and residential units and credit card defaults are on the rise. Bank of America reported 13.8% for a default rate up from 12.5% over the previous month. Many other companies are close to or over 10% This means very bad things for the good customers including slashed credit lines, increased rate and switching you from fixed rates to variable ones. This will hurt even more as people depend on their credit cards for basics and to sometimes keep their business open because other traditional lines of credit are drying up for all but the very best customers.

It's hard to believe that prime fixed rate mortgages are now in more trouble than the so called sub prime mortgages but that is exactly what they numbers tell us. My theory is that there is much more help for people that got bad loans in the first place but many lenders will do nothing for you until you are late several months in a row. It seems to me that bank are placing more hurdles than ever to getting a loan no matter what the scenario. It's my opinion that banks are more concerned with their bottom line than making loans. They took billions in TARP money and then turn around and refuse to help many of the customers that gave them their funds to stay open in the first place.

Some signs are in place for a price stabilization in certain areas around DC but it may be a false glimmer. Most of this is at the low end of the market, higher end homes are still selling at a much smaller pace. The major reason is that some first time home buyers are buying lower priced units which is usually a good thing. But since the prices are down the people selling them can't reach up for the bigger home which is how the market works. That will depress sales for some time in the overall housing market. Until the foreclosures and short sales are gone prices will remain low.

Look for more of the same as we move into 2010. Feedback is welcomed and appreciated. Please check back more often for housing market updates and general economic news.

Thanks,
Brent