Is The Economy Finally Improving?

July 17, 2009
Is The Economy Finally Improving?
Economic News and Information for Consumers

There was finally some decent news today regarding the outlook for the economy.  Earnings reports came in from numerous industry heavyweights including Mattel and Goldman Sachs, both showing strong earnings. More importantly though is data that came from the housing industry.

Housing starts have begun to increase for the first time in many months.  This is a great sign because it shows that builders are confident enough to invest and break ground in new areas.  They would only do so if they believe that the economy was on its way to turning around.

Some factors that could be affecting this new turnaround could be interest rates and tax incentives.

Interest rates continue to hover around 5%, which is extremely low though some would rather see rates at 4.5%.  The threat of inflation is on every one’s mind so buyers probably want to take advantage of low rates while they can.  It’s very possible that we could see rates like we had in the ’70s in coming years.

Tax incentives come from state and federal sources.  The federal tax incentive is an $8000 tax credit for first time homebuyers, this is a refundable credit that expires at the end of the year.  Many states are also offering incentives.  For example, California offers a $10000 tax break for those that buy a new home.  There is one caveat though, this money is due to run out very soon.

The economy will improve eventually but not until housing takes off again.  We expect employment to follow last.