The U.S. economy will not suffer from an overall economic depression as a result of the real estate depression, according to a new forecast by Housing Predictor. The majority of the nation’s housing markets are under going deflation as a result of the credit crisis, but analysts now expect the housing depression to begin showing signs of improvement towards the middle of next year.
The Housing Predictor forecast is based on a wide ranging study of the overall U.S. economy and its lingering after affects from the nation’s real estate crisis. Housing Predictor forecast the nation’s foreclosure epidemic and the housing depression. Construction, real estate sales and financials, including mortgage losses have been the most seriously impacted by the financial crisis. But many other sectors of the nation’s economy remain solvent and relatively strong.
The scope of the national economy has broadened substantially since the Great Depression with more industries and production of goods and services. The Federal Reserve and the U.S. Treasury also have broadened powers in order to further control the country’s economic future. There have been six economic depressions since 1847 in the U.S.
However, unemployment and foreclosures are increasing. Bankruptcies are up and small business failures are also increasing, but many areas of the nation’s diverse economy are showing strength. Many employers are still hiring and some industries will thrive during down times. A Careerbuilder.com survey found 32% of employers’ surveyed plan to hire more employees in the coming year.
The buying habits of many consumers remain relatively strong, despite the fact that many consumers have tightened up their spending with higher costs of gasoline and groceries. Some retailers report slower sales as a result of belt-tightening. But the nation’s consumer spending, which composes 70% of the economy remains relatively strong.
The volume of housing sales in a scattering of home markets are also beginning to improve from previous lows, including markets in Florida, California and Michigan, three of the states that have been some of the hardest hit. The increase in sales is attributed to lower home prices and price cuts by lenders selling foreclosed properties.
However, analysts are cautious about forecasting a return of healthy real estate markets until the mortgage lending environment improves, which should take at least another half a year to develop. Worldwide $8-trillion in credit losses have resulted from the real estate depression in the U.S.
Home sales and the overall health of housing markets are greatly determined on emotional factors rather than strong economic fundamentals since most home buying decisions weigh heavily on emotion rather than economic factors. But the credit crisis with the lack of home mortgages, which were readily available during the real estate boom, has had drastic consequences on housing markets throughout the majority of the country.
As the money supply becomes more readily available, markets will begin to recover more substantially as pent up buyer demand for housing begins to strengthen, which should begin to show improvements in the spring of next year. At that point many markets will have already seen their bottoms in relationship to pricing.