By any measure, 2008 was the toughest year in decades for the U.S. economy, and industries related to housing, including flooring, were hit especially hard. Rising unemployment, falling house prices and a frozen credit market have produced a dire situation for consumers and manufacturers alike. In response to the spiraling economic crisis, the government has lowered interest rates to an all-time low and pumped billions of dollars into the ailing credit market, to little avail. As a new administration prepares to take office, there seems to be a glimmer of hope on the horizon, hope that a new vision for the future can bring about the economic recovery we all so desperately need. Already plans are underway for a massive consumer stimulus package, significant tax cuts and public works projects, among other proposals. However well intentioned these measures are, it remains to be seen whether these measures will have the desired effect of stimulating spending, or will merely slow the nation’s descent into a prolonged depression.
all the gloomy predictions from pundits and prognosticators, if you look beyond
the obvious statistics, there are reasons to be optimistic about the chances of
a recovery. Housing prices, which plummeted throughout last year, have hit rock
bottom in many markets, and potential homebuyers have taken notice. Although this has wiped out more than two
trillion dollars in home values, rising demand combined with low interest rates
could help to reduce excess inventory, which would help to stabilize prices in
the long term. A good example of that can be seen here in California, a state that has been hit harder
than any other by the housing bust. Sales are starting to inch upward,
particularly repossessed properties, despite the fact that prices are predicted
to keep dropping throughout the year. This is a clear indication that the
American dream of home ownership is still going strong.
question is, when will credit markets begin to thaw? Consumers still wish to
borrow, but at the moment lenders are still acting cautiously out of fear.
Clearly, much more needs to be done in order to get the banks lending again.
New incentives for consumer lending could get the ball rolling, but there is
still the issue of consumer confidence, which recently hit an all-time low. As
long as consumers are driven by fear and not hope, this will continue to be a
New Year, New Hope
January 21, 2009