Current State of the Economy

GDP
Advanced Estimate for 1st quarter 2010   3.7%
Final Estimate 1st QT 2010                      2.7%

Advanced Estimate for 2nd quarter 2010 2.4%
Current Estimate 2 QT 2010                   1.7%

Advanced Estimate for 3rd quarter 2010 2.0%
Second Estimate due 11/23/10                ?        2.5%
Third Estimate due 12/22/10                   ?

3rd Qt Second Estimate higher in part because of 8.95 % increase in federal government spending. However, this is a good sign for the economy --- right?

The following are Fed predictions moving forward:

The Economy
The economy will grow only 2.4% to 2.5% in 2010 which is down from their previous forecast of 3% to 3.5%. If the second 3rd QT estimate was reportedly higher, why would the Fed seem pessimistic in their prediction?

In 2011, the Fed expects the economy will expand by 3 % to 3.6 %.
By 2013, the Fed predicts the economy will grow around 4.0%.

Unemployment
The current unemployment rate is 9.6% and the Fed expects will remain relatively constant the balance of the year.
For 2011 they expect the unemployment rate to hover around 9.0% in 2011. This is much higher than their June projection of around 8.5%.

Inflation
The Fed expects prices will rise about 1.5% in 2011. This is not a serious problem. However, if salaries do not keep pace, the 70% of the economy will be affected. However, in previous posts, I tried to make a statement that inflation will be higher than their prediction due to their actions. Only time will tell.

Housing (not a Fed prediction)
Sales of previously owned homes slipped 2.2% in October and housing is heading into a traditionally slow period – the holiday season.

Mortgage rates are slowing trending up

Home prices continue to decline but the % decrease is much slower and prices are starting to increase in some markets!

In 28 major metro areas during October, the housing supply trending lower. Primarily due to the “papergate” foreclosure problems and the banks delaying the foreclosure process.

Housing is now different ---- mortgage rates ↑ Supply of Homes ↓ Home prices ↔

Fannie Mae’s survey:
69% surveyed thought that it is a good time to buy a home
85% surveyed thought it is a bad time to sell a home.

But what happens when foreclosures are again released by the banks? Spring 2011 will be a key turning point for housing – existing and new construction. After the holiday season, the Super Bowl and the “spending season” are over and we enter spring optimism, what will the housing picture look like?

I try to outline thoughts and published data/information for you to judge for yourself. Prepare for the worst and hope for the best!