A new survey suggests that a growing number of Americans believe that the economy won’t return to pre-recession levels for years to come:

Fifty-nine percent of Americans feel “not good” or “bad” about the direction the economy is headed, up from 49% in May.  And 76% don’t expect their quality of life, including their spending levels, to return to pre-recession levels until 2012 at the earliest, up from 63% who said that in May.  That’s according to the findings of a survey released today by AlixPartners LLP, the global business-advisory firm.

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Unemployment’s influence on the struggling housing market is one connection that’s easily equated. Homebuyers need to feel absolutely confident that their income stream isn’t going to alter or falter before they make what’s likely to be the biggest transaction of their lives.

Today’s existing-home sales numbers were absolutely dismal. According to the National Association of Realtors (NAR), existing-home sales fell 27.2 percent in July from the month prior: Read the rest of this entry »

I’m up to my eyeballs everyday in the latest financial and economic news because it’s my job. That said, I wasn’t surprised at all when I read (and I have read it many times before) that many economists feel that the economy would be better off if policy makers stepped aside and let the natural functions of the market work themselves out:

Economists are getting more pessimistic about the strength of the U.S. recovery, but they don’t think policy makers should do anything more to support it, according to the latest Wall Street Journal forecasting survey.

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We knew it would happen. We can safely say that most of those who have followed the markets closely over the last few decades or so knew it would happen as well.

What are talking about? Lending to below-prime borrowers. Many market observers will tell you that the financial markets rarely learn from their mistakes. We knew that the credit crisis which spawned from the recession couldn’t last forever. Lenders of all stripes (mortgages, credit cards, automobiles) would have to eventually begin seeking out less-qualified borrowers to lend to. Frankly, there aren’t enough pristine borrowers to keep them in business.

Apparently, this trend (of extending credit to less-qualified borrowers) is already gathering quite a bit of steam: Read the rest of this entry »

While we wrote last Monday that “Mortgage Rate Stability May Not Last,” it appeared as though it did. Mortgage rates held steady last week as the stock market’s woes “did produce somewhat lower Treasury yields,” which could help mortgage rates trend downward this week.

Mortgage Rates

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That’s the view of the president of the Federal Reserve Bank of NY:

The U.S. economy will likely see moderate growth in the second half of 2009, but the recovery will be considerably slower than usual, the president of the Federal Reserve Bank of New York said on Wednesday.

A modest recovery in housing activity and car sales, the impact of the fiscal stimulus and a sharp swing in the pace of inventory investment should give the economy a boost, William Dudley said in remarks prepared for delivery to the Association for a Better New York.

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The Federal Reserve said this week that the central bank may consider holding regular press conferences to inform the American people of their latest discussions and possible strategies to combat the ongoing crisis:

“I think it is important for the public to understand what is going on and to know that the government is trying to solve the problem,” Mr. Bernanke said in an interview. “They should know we have a plan and a strategy.”

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Maybe, just maybe, it’s a sign of better times ahead (emphasis added):

The cost of borrowing in dollars in London fell for a sixth day as signs the worst of the global financial turmoil may be over made banks less wary of lending.

The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans dropped half a basis point to 1.16 percent today, the British Bankers’ Association said, bringing its decline in the past three weeks to 16 basis points. …

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While most economists forecast a 5.4% decline in the nation’s gross domestic product (GDP), a measurement of the country’s total output of goods and services, the growth indicator contracted less than market observers feared.

The 3.8% decline, despite beating predictions, is still the worst drop in 27 years — the most since the first quarter of 1982.

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Subprime borrowers will eventually return to the marketplace as a demographic of great interest to lenders. Looking back on the trends of years past, it’s nearly impossible to predict when, but it’s certainly plausible to predict why such a statement may be true.

Looking back to the causes and effects of the surge in subprime borrowers when the refi boom dried up in 2004, it certainly stands to reason that due to current economic conditions and credit restrictions, a newly developed and under-served audience of “below prime” borrowers will emerge — and lenders will take notice.

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