Yesterday, the Federal Reserve announced that The Great Recession, which bulldozed our financial lives 
into a pile of rubble, is probably over. Home sales have risen for three straight months, the stock market has rallied 44 percent since March, and the June economic indicators showed seven of the top ten leading indicators to be up.
It's estimated that the economy is expanding at a 2.5 percent annual rate in the current quarter and Bernake told Congress that economic activity "will increase slightly over the remainder of 2009," By contrast, the economy shrank a staggering 6% during the months of September 2008 and March 2009.
The weak link in the recovery will be consumer spending as 70% of US economic activity is driven by how much consumers spend. Without consumer spending there will be no recovery. In July consumer debt contracted by an astounding 21.6 Billion Dollars, while unemployment continued to rise. The drop in consumer debt was 47% higher than analysts expected and indicates that consumers are in no mood to take on large purchases.
Where does housing play into this equation? Can there be a recovery without Real Estate?
Housing drives jobs and it drives consumer spending. It effects the average American far more than the Dow Jones or NASDAQ and must play a critical role in a long term recovery. Without housing there can be no sustainable recovery.
We have a new wave of foreclosures set to hit the market in 2010, banks are holding REO inventory that at some point must hit the market and mortgage money is still extremely tight. Current market inventory, without foreclosures and REO's hitting the market, indicates a 11 or 12 month absorption. It's likely higher due to the unknown factor of bank owned properties. This means that there is not a lot of room for new construction, which drives jobs, which drives consumer spending.
These factors suggest that mainstreet will not feel any kind of recovery for months if not years to come.
The only positive indicator is that interest rates are likely to stay low and if the stock market continues it rise, credit markets might loosen up and allow the inventory to be absorbed.
I find it odd that it took the Feds nearly a year to admit that we were in a recession, but it's only taking a few months before they announce its demise.
At the end of the day, the job market must be stimulated, the credit markets need to be loosened and housing inventory has to start moving before this 'Great Recession' is truly over.
We as Americans will need to think outside the box, we are going to have to create our own realities and find solutions outside historical paths and existing social norms.
What are your thoughts? Can we have a recovery without housing?
I am Kate Bourland. I help my clients get out of debt, get loan modifications and establish a debt free lifestyle. We Guarantee our Loan Modifications. You can reach me at 530-419-3967.
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