Did you hear? The recession is officially over? Yes...it was over as of June of 2009 as announced yesterday. This recession started in December 2007 and has been the longest economic downturn since WW II.
Hooray! No more recession, right?
No, this announcement did not come from consulting the magic 8 ball. The "recession" is in fact "over" according to the experts.
Let's examine the definition though: according to the "newspaper definition" as explained here a recession is when we experience more than 2 quarters of negative economic growth. In other words a decline in our GDP.
That may be a little oversimplified as the GDP number is such a jumble of data that can be examined from a number of different angles. Additionally, there are other factors that contribute to a recession that simply wouldn't be a part of GDP.
The National Bureau of Economic Research or NBER has come up with a more comprehensive way to look at things. Naturally, much more complicated than I can seem to get a handle on but the gist is that things like joblessness, expansion, consumer confidence and other factors are taken into account. Because of the complexity of the work put into determining whether or not we are in a "recession", it can take several months to actually know if we are in one. If you remember it was finally announced we were in a recession that "started" in December 2007 in late 2008. It is the Business Cycle Dating Committee that puts this together. (I don't know about you, but I am not sure if I trust any "dating committee" as it relates to government affairs.)
So: YES, according to the NBER we are "out of the recession. But according to many people who are hurting right now, we have a way to travel through this dark valley.
The question is: Now What?
Recessions are in part caused by a general fear of spending money and that fear of major purchases like a new car is no different today after the announcement of the end of the recession than last week in my household.
Recessions are also in part supported by ongoing joblessness...and that is not yet any better either. Consumer Confidence also continues to be low. The general perception is that this is such a complicated mess to figure out (whether we have exited the recession or not) that it is just a "convenient" truth with elections coming up. I really don't know for sure, but a shred of good news was nice to get yesterday.
Rate news:
Still holding in the low 4% range on 30 year money. Has anyone seen the Intermediate ARM loan pricing lately though? We were looking at 7 year arm loans that were in the 3.5% range today. Naturally, an ARM is not a good fit for everyone but what an opportunity.
FNMA 3.5% bond actually was UP over 70 bps today closing out the day at $100.59 which is up over 100 basis points from the end of the session on Friday.
Be well,
Chad
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Chad Schauers
Montana Mortgage Lender, Bozeman, Montana
Personal Cell: 406 799 8613
Personal Email: metchad@gmail.com
