/sigh

[Narrock]

AP
Growth Outlook Worst in 5 Years
Monday September 10, 1:05 pm ET
By Jeannine Aversa, AP Economics Writer
Ailing Housing Market and Credit Woes Could Mean Sluggish Economy


WASHINGTON (AP) -- Strained by an ailing housing market and credit woes, the economy in 2007 is expected to log its worst growth in five years and should be somewhat sluggish next year.
The No. 1 risk, though, is that the economy will lose its footing altogether and fall into a recession, forecasters say.

A forecast released Monday by the National Association for Business Economics puts the growth of gross domestic product at 2 percent for this year. The pace was 2.2 percent in the group's previous survey, in May.

If the latest prediction proves correct, growth would be the weakest since 2002. Back then the fragile economy was emerging from a recession and grew by just 1.6 percent.

Economic growth for next year also was downgraded slightly. The economy is now projected to grow by 2.8 percent in 2008, versus 2.9 percent in the previous survey.

GDP is the value of all goods and services produced within the United States. It is considered the best barometer of the country's economic fitness.

With the weaker outlook, the forecasters are concerned about the risk of recession. More than 60 percent of those responding cited recession "as the major risk facing the economy over the next year, while only a third cited inflation as the greatest problem," the group said.

Those most concerned about the threat of recession tended to cite problems in the higher-risk "subprime" mortgage market and potential declines in home values as the most likely forces that could short-circuit the 6-year-old economic expansion, the group said.

Mortgages entering foreclosure hit a new record in the spring. Higher interest rates and weaker home values have made it difficult for a growing number of people to pay their mortgages. As defaults have soared, lenders have been forced out of business. A spreading credit crisis has roiled Wall Street.

To help the economy, the forecasters predicted the Federal Reserve will lower its key interest rate, now at 5.25 percent. Cuts this year and next would drop this rate to 4.75 percent, the forecasters said.

The survey of 46 forecasters was taken from Aug. 2 through Aug. 23, the period that the credit markets really seized up. That forced the Fed to pump billions of dollars into the financial system and to cut its interest rate to banks for loans.

Forecasters' projections, however, were gathered before Friday's release of a Labor Department report that showed that for the first time in four years, employers actually cut jobs. The economy lost 4,000 positions over the month.

That weak employment report prompted some economists to predict the Fed might slice its key rate by as much as half a percentage point on Sept. 18, its next regularly scheduled meeting. Others, however, think the Fed will lower by one-quarter percentage point at that time.

Just a month ago, at the Fed's last meeting on Aug. 7, Fed policymakers still believed the threat of inflation posed the biggest risk to the economy. Ten days later, however, it offered a more grim assessment of economic conditions as a credit crisis gripped Wall Street. In that assessment, the Fed made no mention of inflation.

National Association for Business Economics: http://www.nabe.com

[Zanchief]

Four more years.

[Harrison]

That made no sense at all. You're just stirring the pot for the sake of doing so.

[Arlos]

The whole thing is being caused largely by the implosion of the mortgage market, which only got to where it was because the rules were relaxed and all meaningful oversight ceased. This allowed the snake-oil salesmen to run riot, massively over-inflate the housing bubble based on loans that people never had any hope of repaying, and now it's going to collapse and drag the rest of the economy with it. (Not that the economy was ever that strong to begin with. Profit margins were huge, real job growth was never that strong, etc.) In any case, you can lay the relaxing of rules and oversight right at the feet of the GOP, since they were the ones who did it.

-Arlos

[Narrock]

The whole thing is being caused largely by the implosion of the mortgage market, which only got to where it was because the rules were relaxed and all meaningful oversight ceased. This allowed the snake-oil salesmen to run riot, massively over-inflate the housing bubble based on loans that people never had any hope of repaying, and now it's going to collapse and drag the rest of the economy with it. (Not that the economy was ever that strong to begin with. Profit margins were huge, real job growth was never that strong, etc.) In any case, you can lay the relaxing of rules and oversight right at the feet of the GOP, since they were the ones who did it.

-Arlos

The GOP is actually the party who is strengthening the rules again in regards to the mortgage business. It's now much harder to obtain a home loan than it was just a few months ago. You have to have a higher FICO score now to even get financing. If you don't have the minimum FICO score needed for the prime rates then you're going to need at least 20% down. To blame the economy and housing market on the GOP is ignorant.

[Arlos]

The GOP has nothing whatsoever to do with it now being harder to get a loan. That's entirely the actions of the loan COMPANIES, as the collapsing situation has them so risk-averse, they aren't giving out money at all, basically. Hell, it's still unsure if Countrywide, which controls 20% of the entire mortgage market, will survive this crash. If Countrywide goes, then things really will go to hell in a handbasket.

So far, to their detriment, Congress hasn't done dick-all about the situation, and yes, I blame not working on a solution directly on those responsible (because they're controlling things): the Democrats. They should be doing more to stabilize the situation, and keep doomsday scenarios from occurring (like Countrywide going under), but they haven't done crap. The SOURCE of the problem, however, is multifold, including a large helping of simple greed and venality, but it was the GOP-controlled congress that relaxed the rules and oversight in the first place.

Basically, loan companies were allowed to sell off their interest in the loans, and bundles of mortgage-backed securities were traded and snapped up as part of hedge funds, etc. Effectively, bad mortgages were allowed to become this decade's version of Junk Bonds that we had in the 80s. The bills started coming due to those who had thee loans but couldn't in a million years afford them (in many cases because they were sold something they didn't understand, and were promised they could always re-fi out of it), and when those folks couldn't pay, foreclosures started happening, and the whole financial market based on those mortgages collapsed like the house of cards that it was.

So, in any case: yes, I blame the GOP for helping create the problem, and the Democrats for not getting their shit together to help fix it.

-Arlos

[Narrock]

The GOP has nothing whatsoever to do with it now being harder to get a loan. That's entirely the actions of the loan COMPANIES, as the collapsing situation has them so risk-averse, they aren't giving out money at all, basically. Hell, it's still unsure if Countrywide, which controls 20% of the entire mortgage market, will survive this crash. If Countrywide goes, then things really will go to hell in a handbasket.

So far, to their detriment, Congress hasn't done dick-all about the situation, and yes, I blame not working on a solution directly on those responsible (because they're controlling things): the Democrats. They should be doing more to stabilize the situation, and keep doomsday scenarios from occurring (like Countrywide going under), but they haven't done crap. The SOURCE of the problem, however, is multifold, including a large helping of simple greed and venality, but it was the GOP-controlled congress that relaxed the rules and oversight in the first place.

Basically, loan companies were allowed to sell off their interest in the loans, and bundles of mortgage-backed securities were traded and snapped up as part of hedge funds, etc. Effectively, bad mortgages were allowed to become this decade's version of Junk Bonds that we had in the 80s. The bills started coming due to those who had thee loans but couldn't in a million years afford them (in many cases because they were sold something they didn't understand, and were promised they could always re-fi out of it), and when those folks couldn't pay, foreclosures started happening, and the whole financial market based on those mortgages collapsed like the house of cards that it was.

So, in any case: yes, I blame the GOP for helping create the problem, and the Democrats for not getting their shit together to help fix it.

-Arlos

Countrywide isn't going anywhere. B of A just loaned them a couple billion, and return, Countrywide has to relinquish 17% of the business to B of A. CW is the largest mortgage company in America, and B of A wouldn't have bailed them out if they didn't think CW was going to turn it around. Actually, Bush just signed some legislature to let people walk away from their loans who got suckered into bad loans. I don't agree with that though, because people knew that an interest-only loan and ARMS were a bad idea to begin with, and they took that gamble. But, yes, the GOP is putting pressure on the loan companies to only write good loans... or else. And they are also going after the fly-by-nights who made the bad deals and screwed up the economy even further, and the housing market in particular. I watch Neil Cavuto a lot. heh

[Arlos]

I've been listening to a ton of stuff on NPR about the whole situation. I hadn't heard about BofA's bailout of Countrywide as of yesterday. Indeed, CW announced 12,000 layoffs as part of a desperate attempt to keep their business afloat. Just looked it up, and did see that BofA had spent 2 bil on CW, but that was before the layoff announcement, so nothing is guaranteed as yet, unfortunately.

I know Bush proposed several things, some of which were actually good ideas, especially a change to the IRS rules, because some lenders were arranging amicable forclosures, to guarantee getting the property back in good shape, and in return were clearing the debts of those people. The problem was, the IRS viewed that elimination of debt as a profit, and those folks were getting 30k tax bills, and Bush at least has proposed doing away with that.

At this point though, Congress hasn't acted at all, as they have only JUST gotten back from recess, so no, neither the GOP nor the Democrats have acted to resolve the issues. Realistically, there's heaping helpings of blame all around on this one.

-Arlos

[Narrock]

The underlying problem is that salaries are not commensurate to the cost of living in California. The whole housing market is out of control with greed. Manufactured home prices went thru the roof... raw buildable land parcels skyrocketed, apartment complexes looked at the market and said, "hmm... with people not being able to buy homes, we might as well jack up rent a few hundred dollars so we can get our fingers in the pie too." I swear California is such a corrupted mess. I went to Realtor.com and looked at houses in the mid-west. You can still get a huge house on 5 acres for around 200k out there, and salaries aren't that bad.

[Arlos]

Yeah, but then you're forced to live IN the midwest.

I've lived in Kansas. Trust me, it sucks.

-Arlos

[Tikker]

choosing to live in high population, highly desirable areas negates any reason to whine about high demand/low supply housing prices

[Narrock]

Hey Arlos, check this out... lol this doesn't look like too bad of a deal:


http://sacramento.craigslist.org/apa/417991399.html

[Arlos]

Isn't Rocklin the boonies for Sacramento, kinda like being in Vacaville for Silicon Valley? About all I know about the place for sure is that it is where the 49ers used to have training camp, and it gets furnace-level hot in the summer.

Not surprising to see them so desperate to sell, though. Sacramento is one of the areas in the country most impacted by the housing bubble bursting, home values are starting to drop, sometimes precipitously, as they way overbuilt compared to current demand.

-Arlos

[Narrock]

choosing to live in high population, highly desirable areas negates any reason to whine about high demand/low supply housing prices

Tikker, I was born and raised in California. My family and most of my friends live here. It's hard to just up and move somewhere else and leave people you care about behind. Moving to Nevada was not too big a deal because it's only about 2.5 hours from where my family all live in the sierra foothills. Reno just sucks ballz and has been turning into a pseudo-ghetto. Crime is at an all-time high there. I'm glad I moved out of there 4 years ago. Jobs pay better in California too.

[Tikker]

Tikker, I was born and raised in California. My family and most of my friends live here. It's hard to just up and move somewhere else and leave people you care about behind.

I'm not debating that, but a pretty big portion of folks don't live and die in the same town/city they were born in

[Lionking]

I blame TV shows like Flip this House.

[Narrock]

Isn't Rocklin the boonies for Sacramento, kinda like being in Vacaville for Silicon Valley? About all I know about the place for sure is that it is where the 49ers used to have training camp, and it gets furnace-level hot in the summer.

Not surprising to see them so desperate to sell, though. Sacramento is one of the areas in the country most impacted by the housing bubble bursting, home values are starting to drop, sometimes precipitously, as they way overbuilt compared to current demand.

-Arlos

Well, Rocklin is actually an "uppity" place to live. It's about 25-35 minutes from Sacramento, depending on traffic, and about 10 minutes from Folsom Lake. It's at the base of the sierra foothills, and there's a lot of retail shopping centers and strip malls out there, so it's not considered the "boonies" by any stretch.

[Narrock]

Tikker, I was born and raised in California. My family and most of my friends live here. It's hard to just up and move somewhere else and leave people you care about behind.

I'm not debating that, but a pretty big portion of folks don't live and die in the same town/city they were born in

True.

[Arlos]

Well, there's a lot of strip malls and such in Vacaville too. The point is that it's a longass way outside of the main city area, and as such counts as the boonies, regardless of if there are amenities there or not. Of course, due to being in the boonies, the costs for rent & buying a house are much cheaper, you just have to deal with much longer car drives and crappier weather. (read: on average 20 degrees hotter)

If you want to go for the rocklin house thing though, feel free. Just check it out first, cause who knows just how far in the fringes of rocklin it is, or what your commute to work would be like. It's not a place I would likely live, but that's me. I don't do well living in boonies or small towns. Being in Walla Walla (25k people) when I was in college the first time around drove me stir crazy.

-Arlos

[Lyion]

There's also that wonderful Maximum Security Prison with the worst murderers in California housed in Vacaville, ensuring wonderful property values.

[Narrock]

There's also that wonderful Maximum Security Prison with the worst murderers in California housed in Vacaville, ensuring wonderful property values.

The prisons don't affect the housing markets in Folsom, Vacaville, or anywhere in the bay area or Sacramento.

[Narrock]

http://www.ci.rocklin.ca.us

[Tacks]

There's also that wonderful Maximum Security Prison with the worst murderers in California housed in Vacaville, ensuring wonderful property values.

The prisons don't affect the housing markets in Folsom, Vacaville, or anywhere in the bay area or Sacramento.

[Narrock]

There's also that wonderful Maximum Security Prison with the worst murderers in California housed in Vacaville, ensuring wonderful property values.

The prisons don't affect the housing markets in Folsom, Vacaville, or anywhere in the bay area or Sacramento.

http://homes.realtor.com/search/searchr ... ml=3&typ=1

http://homes.realtor.com/search/searchr ... ml=3&typ=1

[Tacks]

You've yet to prove your point.