Wells Fargo economists see recession's end in late 2009

Wells Fargo economists see recession's end in late 2009

Charlotte Business Journal

The deepest and longest recession since the 1930s will end in the second half of 2009, Wells Fargo & Co. economists say in their annual forecast.

The third quarter of next year will be “better than expected” by many, says Jim Paulsen, chief investment strategist. “It’s like you’re at a cookout and you’re trying and trying to get your charcoal going and you keep squirting on lighter fluid, and all of a sudden it goes ‘poof!’ ”

Paulsen says “fear mongering” by government officials who were trying to sell the $700 billion Troubled Asset Relief Program in the fall made the situation much worse, freezing everyone in their tracks and bringing on “economic paralysis.”

Senior economist Scott Anderson predicts that housing will lead the way back. “One bright note is that the sector that led the economy into this morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out.”

The job market is now one of the worst in decades, with 3.7 million more jobs expected to be lost next year, Anderson says. That means 5.5 million jobs will be lost in this recession, twice as many as were lost in the 1981-82 recession, the second-worst since World War II.

Eugenio Aleman, senior economist at San Francisco-based Wells Fargo (NYSE:WFC), says he is concerned that injecting of hundreds of billions of dollars into the economy through the financial sector is not helping those who need it most.

“Current monetary policy will help only those households that do not need help — those that have plenty of money and have a stable job,” he says. “They will refinance, buy homes and consume. It will not help those who are struggling to make ends meet, or have lost their jobs or may soon lose them, because no financial institution is going to lend them money to buy a home, no matter what the interest rate is.”

He says the new administration will need to help those households through fiscal policy, with government spending that will create jobs.

Article provided courtesy of Charlotte Business Journal

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Are Home Buyers Missing An Opportunity?
Foreclosures: Are Home Buyers Missing An Opportunity?
Posted By: Diana Olick CNBC Real Estate Reporter
cnbc.com
16 Dec 2008 01:38 PM ET

You'd think now would be a great time to buy a foreclosed property, but a majority of Americans don't think so. A new survey from real estate search site Trulia.com and foreclosure sale site RealtyTrac.com finds that only 47 percent of those surveyed would consider buying a foreclosed property, that's down from 54 percent last spring.

It seems that negative sentiment surrounding foreclosures is turning buyers off of what should be some of the best real estate investment opportunities in decades. The survey says 80 percent of adults are concerned with negative aspects, such as hidden costs, a potentially risky purchase process, home price depreciation and personal connection with foreclosure (not sure exactly what that last one means, just maybe that there is a social stigma attached to a foreclosed home I guess).

Now I have to take this report with a grain of salt because I'm a stat gal, and I happen to know that foreclosure sales are not only abundant, but they're on the rise. In Las Vegas, which boasts 30,000 foreclosures in 2008, two out of three home sales are foreclosed properties. In California, foreclosure sales are pushing up total existing home sales like never before. I've also been to several foreclosure auctions and there are plenty of bidders on hand.

You then have to pose the question: Who's buying foreclosed properties? Is it the average American that would have been included in this survey or is it largely investors and investment companies?

The survey also says that 75 percent of respondents expect a discount "of at least 25 percent on a foreclosure purchase," while 30 percent expect "a major discount of at least 50 percent" compared to a comparable home not in foreclosure. Housing Starts, Permits Plummet to Record Low

I'm a bit surprised that so many folks only expect a 25 percent discount. The bulk of foreclosed properties are in states with the largest price declines. If I were buying a foreclosed property, I'd be in at least the 50 percent discount window.
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