| On a Fed Note Speaking to the Massachusetts Mortgage Bankers Association recently, Boston Federal Reserve President Eric Rosengren acknowledged that the economy is in a deeper recession than previously thought. He said that there are signs that conditions will improve in the second half of 2009. He believes the stage will be set for recovery with improvements in energy prices, improvements in short-term credit markets and fiscal and monetary policy actions, which he referred to as "sowing the seeds of a recovery." |
| Rosengren said that in 4Q08 the economy contracted "quite significantly" and likely reached the point of maximum weakness. He expects the contraction will continue through 3Q09, making it the longest recession since WWII. Speaking collectively, he said "we" expect the economy to perform below its long-term potential until 2Q10. |
| In reference to the Fed's purchasing of long-term Treasuries and expanded lending, Rosengren said the expansion of the Fed's balance sheet will not necessarily lead to inflation. |
| Signs of Rebounding Using data from RealtyTrac, Forbes just concluded a study of U.S. towns of less than 100,000 population that were ravaged by the subprime boom and now show signs of bouncing back with buyers searching for deals. |
| According to the Bureau of Labor Statistics, markets with low unemployment rates, including metro D.C., are seeing prices fall in line with incomes for the first time in over 15 years. Other markets have a long way to go before they are viewed as a good buy. |
| Tighter underwriting and credit standards together with high down payments and employment histories should help trim the tide of foreclosures moving forward. |
| Another Good Note Consumer Credit fell by a record $8.0B in November '08, compared with market expectations for a $0.5B increase. This decline crossed all forms of consumer credit. This is the second consecutive decline and the third in the past 4 months. This is a good sign for the economy as consumers move toward liquidity. |
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