Happy New Year HP readers... time to get on record with your thoughts for 2006.
On December 31, 2006:
1) What will be the Dow close?
2) What will the Fed Funds rate be?
3) What will be the year over year decline or increase in Median US Home Sale Price?
4) Forget Clinton and McCain - who will be the #2 leading Dem and Rep presidential candidates set to challenge them for the nominations?
Here's my answers:
1) 8800
2) 5.25%
3) -12%
4) Evan Bayh & George Allen
Any other soothsayer musings welcome
January 01, 2006
Get on the record for 12/31/06
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15 comments:
For dems it's former VA Gov Warner.
1) 9700 ~ The Dow will likely have more problems due to imbalances in the economy.
2) 4.75 ~ By the end of summer it'll likely be over 5.00%, but due to the collapse of the housing bubble, the reactionary FED will start dropping rates again by year end.
3) -8% ~ Though bubble communities will likely see more extreme declines.
4) ~ I’ll leave this answer for the political junkies.
Keith,
All this hoopla and only -12% correction ?
I am confused...
skytrekker says
"National Health care 9or something close to it by 2010"
Oh, you think this is a good thing for America? Let me guess, most of progressive Europe has it, therefore we should too.
National Health Care would certainly hurt this economy … I can see it already, 6 month waits for a simple out patient operation, taxes go way up, and productivity way down. I don’t want an economy like the French, Germans, or British.
Wait and see -- if this happens the next argument will be whether we should share our [new] medical entitlement with illegal aliens -- wait and see, the left will ask for it.
i bought my house two years ago for 325k, and now my next door neighbor has sold their house (smaller and older) for 600k.........
keith - i don't live in a bubble area (AZ, CA, FL, etc), and you are saying my house is set for a 12% downturn? big whoop........now my place is only worth 528k........i'll take it
For the people who care less about -12% in RE, this is only the beginning. 4:06:44 PM, if your house comes down to $400K in 2008 (with no apparent recovery in sight), are you going to sell?
The people who think through the scenario know that true panic doesn't start until 2007. My prediction is also moderate. -7% national, and -20% in bubble markets. 2006 will be the first year that national YoY declines will go on record in US.
here's the 12% math
buy a home in June 2005 for $500,000. Put 5% or $25,000 down.
It drops 12% in the first year - or $60,000. You're in the hole $35k
That's nationwide - the 12%. In Phoenix, Miami, San Diego, LA and more, you'll see much more than 12%. I do believe real estate is local in most regards. But a 12% decline nationwide would cause a depression, massive bankruptcies, the collapse of the housing industy, plunging retail sales, a collapsed stock market and economy, etc etc etc.
Because of leverage, 12% would wipe many folks out.
Predictions for 2006? Well, I think the Dow will not see much change from 2005. The over all change will be flat so I guess if you take inflation into the equation there will be a slight decline of maybe 3%. That being said, like in all investments (and Real Estate) there wll be gainers and losers. Interest rates will stabalize and in 2007 decline. Home interest rates will stay below 7% for 2006. The median price of a home nationally will rise 3% and local markets will flatten and some drop depending on factors such as employment and natural disasters. Many areas will see home prices drop to about 6% above what homes sold for in 2003. Bubble markets will see 20-30% declines and non-bubble areas will see up to 12% rises as money flowsw from overpriced markets to underpriced markets. Oil will drop to below $50 a barrel. The dollar will remain strong and US exports will rise.
The sky will not fall for the prudent and market forces will drive any corrections in local conditions. The US still remains productive and the largest GDP in the world and remains one of the most stable countries in the world. China will invest more of their dollar reserves in the US keeping interest rates low and buy major U.S companies. Instability in China will remind the world that China is still an emerging market and that the US, Japan and Europe still is where the money is to be made.
New Oreleans will see a strong resurgence in their local market though the city will never regain its former population, but with a smaller, more energetic, better educated and wealtheir population it will have a renaisance and regain some of its former glory.
Texas will rise to the top of the states for economic growth and a healthy home market. California will suffer a major earthquake and continued out-migration of population due to high housing costs and regulatory control.
I'll bet we see gold hit $750 this year.
(Double-or-nothing that gold goes up $75 in a single day when Israel (or "explosions of an undetermined nature") takes out Iran's nuclear program.)
(Quadruple-or-nothing that Iran is out of the nuclear bomb business by June 30.)
"That's nationwide - the 12%. In Phoenix, Miami, San Diego, LA and more, you'll see much more than 12%. I do believe real estate is local in most regards. But a 12% decline nationwide would cause a depression, massive bankruptcies, the collapse of the housing industy, plunging retail sales, a collapsed stock market and economy, etc etc etc."
Keith - although I too want to see an end to this stupid speculative manner of the housing market, I think you're a little negative in believing the entire economy will collapse.
Certainly the housing sector will prove to be a huge drag and likely push us into a recession by mid-2007, yet it seems that so many people expect a housing bubble that the damage might be contained. If speculative money shifts back into the stock market where it belongs it could actually help the economy.
The high level of activity in real estate today is a DRAG on the economy because that money could be much more productive elsewhere.
I too want to see this speculative fervor over and wouldn't mind seeing the more ostentatious betters lose their ass, yet I know that the economy coming unglued wouldn't be good for my own financial situation and certainly don't wish for that to happen.
moman - for the record I don't want to see any of this happen - I love making money, I love peace and prosperity
But I see what will happen. And I choose not to ignore it.
But damn, I want the old days back - stock market going up, housing doing great, world peace
It's just not in our cards for 2006
But once the system gets flushed out, then we can get on with the good stuff again
Something to think about>
Middle-Class Job Losses Batter Workforce
Sunday January 1, 8:53 pm ET
By Kathy Barks Hoffman, Associated Press Writer
Middle-Class Job Losses Batter Workforce As Companies Slash Payrolls, Send Jobs Overseas
LANSING, Mich. (AP) -- Thirty years ago, Dan Fairbanks looked at the jobs he could get with his college degree and what he could make working the line at General Motors Corp., and decided the GM job looked better.
He still thinks he made the right choice. But with GM planning to end production of the Chevrolet SSR and shut down the Lansing Craft Centre where he works sometime in mid-2006, Fairbanks faces an uncertain future.
"Back when I hired in at General Motors 30 years ago, it seemed like a good, secure job," said Fairbanks, president since June of UAW Local 1618. Since then, "I've seen good times and I've seen bad times. This qualifies as a bad time, in more ways than one."
Many of the country's manufacturing workers are caught in a worldwide economic shift that is forcing companies to slash payrolls or send jobs elsewhere, leaving workers to wonder if their way of life is disappearing.
The trend in the manufacturing sector toward lower pay, fewer benefits and fewer jobs is alarming many of them.
"They end up paying more of their health care and they end up with lousier pensions -- if they keep one at all," says Michigan AFL-CIO President Mark Gaffney. As wages and benefits drop, "it's the working class that's paying the price."
West Virginia steelworkers are all too familiar with the problem. The former Weirton Steel Corp., which 20 years ago had some 13,000 employees, today has just 1,300 union workers left on the job.
The steel mill has changed hands twice in two years, and just last month, Mittal Steel Co. told the Independent Steelworkers Union it would permanently cut the jobs of 800 people who'd been laid off since summer.
Larry Keister, 50, of Weirton, W.Va., has 31 years in the mill that his father and brothers all joined. His son tried, but got laid off quickly.
"I'm too old to go back to school. I've worked there all my life," says Keister, who drives a buggy in the tin mill. "I went there straight out of high school. It's all I know."
Though Keister is safe for now from layoffs, he wonders what will happen to the hundreds of friends and co-workers who will be jobless by the end of January.
Gary Colflesh, 56, of Bloomingdale, Ohio, said there are few jobs in nearby Ohio or Pennsylvania for workers to move to.
"They're destroying the working class. Why can't people see this?" asked the 38-year veteran. "Anybody who works in manufacturing has no future in this country, unless you want to work for wages they get in China."
Abby Abdo, 52, of Weirton, said workers once believed that if they accepted pay cuts and shunned strikes, they would keep their jobs. Not anymore.
"Once they get what they want, they kick us to the curb," he said. "There's no guarantee anymore. No pensions. No health care. No job security. We have none of those things anymore."
Fairbanks of the Lansing GM plant said the changes are going to force a lot of people to retrench to deal with the new economic reality. For some, it will make it harder to send their children to college or be able to retire when they want. For others, it will mean giving up some of the trappings a comfortable income can bring.
"You're going to see lake property, you're going to see boats, you're going to see motorcycles hit the market," he said. "People get rid of the toys."
Economists agree the outlook is changing for workers who moved from high school to good-paying factory jobs two and three decades ago, or for those seeking that lifestyle now.
"It was possible for people with a high school education to get a job that paid $75,000 to $100,000 and six weeks of paid vacation. Those jobs are disappearing," says Patrick Anderson of Anderson Economic Group in East Lansing, Mich. "The ... low-skill, upper-middle-class way of life is in danger."
General Motors Corp. has announced that it plans to cut 30,000 hourly jobs by 2008. Ford Motor Co. is scheduled to announce plant closings and layoffs in January that could affect at least 15,000 workers in the United States and Mexico, analysts say, and is cutting thousands from its white-collar work force.
GM and Ford have won concessions from the United Auto Workers that will require active and retired workers to pick up more of their health care costs, and DaimlerChrysler AG is seeking similar concessions.
Thomas Klier, senior economist with the Federal Reserve Bank of Chicago, says the transition for manufacturers toward leaner, lower-cost operations has been going on for some time. But the bankruptcy of the nation's largest auto supplier, Delphi Corp., pushed the issue into the headlines.
Its 34,000 hourly U.S. workers could see their pay cut from $27 an hour to less than half of that, although the company is still trying to work out a compromise unions will support. Workers also could have to pay health care deductibles for the first time and lose their dental and vision care coverage.
Delphi worker Michael Balls of Saginaw, Mich., hears the argument that U.S. companies' costs are too high to compete with plants that pay workers less overseas, but he doesn't buy it.
"I think if Delphi wins, they lose," he says. "If I'm making $9 an hour, I'm not making enough to buy vehicles."
Unfortunately for workers like Balls, the old rules no longer apply in the new global economy, says John Austin, a senior fellow with the Washington-based Brookings Institute.
"We're in a different ball game now," Austin says. "We're going to be shedding a lot of the low-education manufacturing jobs."
Some of those workers are likely to try to move into the growing service sector, Austin says. But he says the transition can be tough, even if the jobs pay as well as the ones they had -- and many don't.
"Pointing out a medical technician job is available if they go back and get a certificate doesn't solve the issue today for those 45-year-olds who are losing their jobs at Delphi," he said.
Dick Posthumus, a partner in an office furniture system manufacturing company in Grand Rapids, Mich., says that "basic, unskilled manufacturing is going to be done in China, India, places like that because we are in a global world, and there's nothing anyone can do about that."
His company, Compatico Inc., buys much of its basic parts from South Korea, Taiwan, Canada and China, where Posthumus has toured plants he says rival modern manufacturing plants in the U.S. But the company still saves its sophisticated parts-making and assembly for its Michigan plant.
"The manufacturing of tomorrow is going to look somewhat different from the manufacturing of yesterday," Posthumus says. "It doesn't mean that we no longer manufacture ... (But) it's going to be a painful adjustment."
Associated Press Writer Vicki Smith in Morgantown, W.Va., contributed to this story.
2006 will be a wild year for the US economy..The first half of the Year will be consumed by the Real Estate meltdown.I see a very hard landing scenerio for Florida/CA where many homes/condos have incresed 100 percent or more since 2002. Many so called bubble areas will see prices deflate even faster than they rose. I wouldnt be surpised to see prices adjusting by 40 percent. Many newbie real estate agents and mortgage brokers will be forced to go back and work for a living. Fed funds rate between 5-5.25. Gold back to record levels of $800 plus an ounce. The stock market will be a mess in the first half of the year, but when investors finally realize the streets paved with gold is not in real estate but in the Larger better run companies in America the money will flow back into the stock market.Dow ends the year finally hitting 11000.
Just blogging for a while, my site is also about florida condotel mortgages, so just saying what's up.
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