Wednesday, August 26, 2009

Home Prices Increased in June!

The dire predictions that home prices would plunge another 25 percent look increasingly less likely. Home prices, according to the Case-Shiller index (that measures home prices in 20 cities) showed home prices increasing in 18 of the 20 cities that are included in the index. Combined with a National Association of Realtors announcement of a five percent increase in July home sales over the same period in 2008, strongly suggests that the worst is over for the housing market in the US.

This is more confirmation that the economy has hit bottom. If there were any stimulus at all in the so-called "Stimulus Act of 2009," we should be expecting a strong economic recovery this Fall. Don't count on it. Look for further increases in unemployment and secular stagnation as the economy improves sluggishly and fitfully, laboring under the enormous burden of the Obama Administration.

The announcement that the Obama folks grossly underestimated the fiscal impact of their spending program (now admitted to add at least $ 9 trillion more to the national debt by 2019) may be just enough confirmation of reality to block the Obama program in Congress. If that happens, recovery stands a chance. Keep your fingers crossed.

Look for unemployment to go above 10 percent, inflation to begin to show up, and economic growth to be anemic. Even with that background, stocks are still a reasonable bet from here.