Economic recovery based on consumer sentiment and stronger banks

By
Mortgage and Lending with Sierra Pacific Mortgage Loan Officer, NMLS 184479

An apparent gap exists among different economic indicators as to the state of the recovery.  Surveys of Economic recovery without jobsconsumer sentiment and home builders both indicated significant improvement in recent weeks. Economists and markets quickly pointed to these surveys as evidence that the economy is nearing the bottom.

Consumer confidence and GDP

These reports though were followed by hard data that were contrary to the surveys. For Consumer Confidence the better-than-expected improvement was countered by a worse than expected drop in Gross Domestic Product and lower Retail Sales figures. These in addition to continuing high unemployment figures.

Builder sentiment and housing starts

This Monday we were encouraged by reports of increased enthusiasm from home builders. The Federal Reserve responded to this and other positive reports to offer cautious optimism that the economy is mending - really an affirmation of the administrations stimulus program.

Today though, we are met with hard data again running counter, with the report that housing starts were down. Part of that data does include improvement in single family housing starts, which could very well be indicative of a turn around.

Sentiment and actual data

It seems as sentiment and confidence surveys are reflecting hopes that the economy is turning, but do those hopes match economic reality?  With unemployment still growing and with many of the lost jobs seemingly permanent losses, can the economic recovery be sustained on improving sentiment? Can sentiment continue to improve if the hard economic numbers do not show some consistent improvement?

Recovery plan focused on financial markets

The focus of the stimulus package seems to be to ensure stability in the financial markets, providing massive bailouts with few requirements to large banks. Unemployment is rising. Thirty three smaller banks have closed, with more coming. The major automotive manufacturers are closing plants and dealerships. Even the financial industry is suffering job losses, with American Express announcing cutbacks today.

Today the Federal Reserve announced that money will be available in July to encourage commercial lending. Additional emphasis on finance.

Hope for a recovery is based on encouraging lending, by strengthening banks. We are moving towards big government and big banks. So far efforts to stem foreclosure, to save jobs, to hold on to automotive manufacturing have either not been successful or have been primary. We seem to be conceding that employment loss will continue.

Will the big banks and big government be able to rescue the economy? Is this the right course?

Posted by

Thank you for visiting. This is the professional blog for

Richard Smith
NMLS# 184479 TN# 104002 GA# 28928 

Conventional, FHA, FHA 203k, HUD $100 down purchases, VA,

Rural Development ( USDA), and Jumbo Loans


Lending in Chattanooga, Tennessee and Georgia for over 20 years.

Sierra Pacific Mortgage

Cell phone: 423-280-0345 Email: Richard.Smith@SPM1.com

Visit my website to inquiry about a home loan.

Read my most recent articles in Scotsman Guide.

This blog represents the opinions of Richard Smith. The posts and comments written on the blog do not represent the opinions or positions of Sierra Pacific Mortgage. 

close

Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. R K 05/20/2009 09:00 AM
Topic:
Mortgage / Finance
Location:
Tennessee Hamilton County
Groups:
Georgia Real Estate
Tennessee Realtors - Join Hands
Internet Empowered Consumer
Tags:
employment
bailout
economic recovery

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Ambassador
2,700,948
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Enthusiasm?? 

Confidence???

Since when did "feelings" become a measurement of economic strength???

This is "feel good politics" at the lowest level.  Tell the public what they want to hear and the ignorant masses will stay quiet.

In the mean time, give the money to the banks that send money to our PACs and keep us in office.

May 20, 2009 12:16 AM #7
Ambassador
1,202,570
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Do you remember how a mime uses his hand to go up and down his mouth and changes expression everytime he moves over it? Happy and sad, happy and sad, etc. I feel that way every morning I turn on CNBC to see economic reports. At least it is good exercise for facial expression practice.

May 20, 2009 12:50 AM #8
Ambassador
595,082
Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

Richard: Good post and very true. What that means is we're still a ways away from recovery. The consumer is still cautious and banks are in bad shape. Only time will heal what has become a financial nightmare for many Americans! Thanks!

May 20, 2009 02:59 AM #9
Rainmaker
455,086
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Thanks for the post Richard.  It appears that the government is trying to do a bit of "misdirection" with these positive reports, and they frequently cloud bad news with the phrase, "better than expected."  The cold, hard facts seem to give us the truth, but few really understand how to make sense of it all, and can only "hope" that the govt's efforts will work.

May 20, 2009 03:42 AM #10
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

Andrew,

Thank you for your generous comment.

Richard

May 20, 2009 08:19 AM #11
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

Sash and Gita,

It is getting hard to know what to look at. Are we coming out or not. Hard to judge.

Richard

May 20, 2009 08:21 AM #12
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

Jim,

I know that there are many things occupying the President's agenda. But with the economy I just am concerned that our approach is focusing on the top. That is where the problem started, but I think the solution needs to start at the bottom.

Housing and jobs.

My thoughts.

Richard

May 20, 2009 08:28 AM #13
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

Gabe,

The recovery package is the stimulus package. It is slowly being implemented. The push has always been to rush money to the banks, and to trickle the stimulus money.

I think when the recovery takes place there will be plenty of credit taken, but I think none deserved.

Richard

May 20, 2009 08:31 AM #14
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

Linda,

Agree. I do not understand the retention pay is needed for the same people who drove us to this point.

I would fire them, not retain them.

Richard

May 20, 2009 08:32 AM #15
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

Lenn,

I think your post makes the point so much better than mine.

Thanks,

Richard

May 20, 2009 08:34 AM #16
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

Joe

The reports are hard to track. But the economists are looking hard and close for positive data.

Richard

May 20, 2009 08:35 AM #17
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

Paul,

I agree. We seem to be a ways from recovery.I cannot but help to think of all the lost jobs. 600k new clsims each week.

New announcements almost daily. How can the economy recover? How can housing recover? With lost jobs, lost buyers, worsening credit profiles.

We are spending trilliions of dollars to rescue the banks.

Man.

Richard

May 20, 2009 08:40 AM #18
Rainmaker
224,997
Richard Smith
Sierra Pacific Mortgage - Chattanooga, TN
FHA VA Rural Development in TN GA

John,

Don't know if it is planned misdirection with the reports, but it is looking at the cup as half full - regardless of the level in it.

Richard

May 20, 2009 08:42 AM #19
Rainer
179,089
Mark MacKenzie
Phoenix, AZ

Richard,

I think a lot of this consumer confidence has to do with the fact that the stock market has rallied of off its lows.  Unfortunately the stock market is no longer an economic indicator and as such I don't subscribe to it or the fact that confidence is coming back.  This is in my opinion a sucker's rally.  The fundamentals are no better today than they were six or nine months ago.

May 20, 2009 03:05 PM #20
Rainer
179,089
Mark MacKenzie
Phoenix, AZ

On another note, I tend to agree with John Mulkey about his opinion.  A good example is the monthly job loss report.  For the past several months the government has consistently been underestimating the number of monthly job losses only to "revise" the number higher a month later:

Initial / Revised

Oct 2008:  240K / 380K

Nov 2008:  533K / 597K

Dec 2008:  524K / 681K

Jan 2009:  598K / 741K

Feb 2009:  651K / 681K

Mar 2009:  663K / 699K

May 20, 2009 03:08 PM #21
Rainmaker
135,450
Paul Francis
Francis Group Real Estate - Las Vegas, NV
Las Vegas Real Estate Agent - Summerlin Homes

If I go out and Max out my Credit Card tomorrow... I might feel pretty good with all of the cool stuff I bought with the money I got to spend... but reality will set in when the bill comes in...

Sorry... I just have to shake my head when people think that the money being spent is money the Government has. It's just debt with some freshly printed money thrown in...

Tax Revenues are WAY down and going even lower as Spending has Skyrocketed... Personal Finance 101 with what eventually happens.

Just ask California...

 

May 20, 2009 09:12 PM #22
Rainer
12,148
Kent Davis
Options Realty - Albuquerque, NM

I like to read your posts Richard and agree consumer sentiment may be up on the last couple of months on Wall Street and economists looking for improvement wherever they can find it.

To boost our economy we need to start at the bottom as you say with improvement in employment which in turn will lift the housing market.

Kent Davis

May 21, 2009 03:48 AM #23
Rainmaker
1,427,902
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Only the American People can save this economy and country.  To do that the American People need the freedom to act.  In this I mean we need to cut taxes, lower barriers to small business, cut government, let big banks and big business take their lumps along with the rest of Americans.  It was not regulation or lack of regulation that caused this problem so much as manipulation of the regulation for politics and insider deals. 

May 21, 2009 07:37 AM #24
Rainer
6,665
allan bataiff
CoBa REMS - Montebello, CA

A thoughtful post Richard. Big government has never been the answer to revive a moribund economy. FDR attempted it in the 1930s. The current administration is making the same mistake. Washington now manages Detroit's auto manufacturers as seen by the increasing number of profitable dealerships being forced out of business. I keep telling myself, "This too shall pass." 

May 21, 2009 08:09 AM #25
Rainer
187,215
Dana Wilkinson
Connect Realty, The Woodlands, TX - The Woodlands, TX
Broker-Your TX agent for The Woodlands-Spring-Conr

I think Lenn and Jim hit the nail on the head...they just don't get it!

May 21, 2009 11:56 AM #26
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
224,997

Richard Smith

FHA VA Rural Development in TN GA
Ask me a question
*
*
*
*
Spam prevention