BluegrassForeclosure.com

From TheNewAmerican.com:

the Commerce Department reported that new home sales dropped more than 11 percent in November. Home builders have 235,000 homes for sale, the lowest inventory since April of 1971.

Classical economic theory holds the reasonable position that face of uncertainty producers don’t produce, consumers don’t consume, and investors don’t invest. Until confidence in the future is restored, producers, consumers, and investors will continue to hunker down.

Here are some of the uncertainties they are facing:

1.  Banks are not lending: Why should they? With short-term interest rates at zero, and two-year Treasury notes paying almost 1 percent, banks can make 1 percent with zero risk (and by using leveraged derivatives trading, these risk-free gains can be greatly multiplied). This is one of those “unintended consequences” of the Fed holding interest rates so low.

2.  Tax credits expiring: Home buyers who are enticed to move up their timetable in purchasing a new home are merely borrowing from the future. Once the credits expire, the underlying weakness in the housing market will again manifest itself. This was seen following the end of the “Cash for Clunkers” program when new car sales sagged afterwards.

5.  Unemployment concerns: Even though job losses and layoffs appear to be slowing, the total level of employment is lower than it was before the economy entered the last recession in 2001. Put another way, all of the job growth over the past nine years has been virtually wiped out by the current recession. And when that last recession ended in November of 2001, it wasn’t until February of 2005 that all the jobs lost in that recession were finally replaced. According to an MSNBC study, this time it will take more than six years to make up the losses from this recession. It will take years to restore consumers’ confidence to the point where they will willingly add “convincingly to GDP [Gross Domestic Product].”

6.  Jobless benefits in jeopardy: In another study, 25 states have already run out of unemployment money, and an additional 15 will run out in less than two years. This is resulting in some states cutting benefits while raising taxes on small businesses at the worst possible time.  For instance, a Kentucky task force recommended cutting benefits by 9 percent and delaying payments to recipients by a week. And in Indiana, “There’s immense pressure, and it’s got to be faced,” said state Representative David Niezgodski.  “Our system [is] absolutely broke.”

8.  Commercial real estate: This market is still headed down. New construction is not expected to rebound before 2011, according to Global Insight. And a credit crunch looms over the owners of commercial properties as they try to refinance mortgages secured during the bubble. With tenants either leaving at the expiration of their leases or demanding significant reductions in their current lease payments, owners will face increasing difficulties in meeting lenders’ demands.