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It is a bit surreal to Google “recession signs” and see all the material that emerges pointing to a definite recession as long ago as 7 or 8 years. This current market has been a long-time coming and you do not have to be Nostradamus to know that good things cannot last forever. We have experienced a surge in our home values, an abundance of spending and even more borrowing, we were on a roll…downhill.

If you ask the average American about an impending recession, 7 out of 10 would agree that we are either in one or headed towards one. Unless you have a 30-year fixed mortgage and a steady two income household, you probably think we are already in one; which lets you know how many of us are sweating mortgage rate adjustments and are sitting on zero equity. So, aside from all the economic mumbojumbo and the dronings of Wall Street honchos, how do you now when we are truly in a recession?

#1 The unemployment rate increases

In December the unemployment rate rose to 5%, the highest in nearly two years. If you are/were in the mortgage/lending business or construction you might feel the rate has to be higher, because everyone you know has been laid off. Those industries have been very hard hit by the subprime crisis and will regain strength once the housing market stabilizes.

#2. The housing market takes a hit

This is obvious for most of us. With housing prices down by 40% in some places, homeowners with adjustable mortgage rates are running out of options. Equity is non-existent and home equity loans have left homeowners with no breathing room. Foreclosures are on the rise and most people are just praying for it to level-off. Homeowners have more options opening up with possible rate “freezes” depending on which lender you have. With interest rates dropping, refinance, or ask for a rate adjustment if you are bound by a pre-payment penalty. Some lenders will wave the fee if you refinance with them. Just ask about your options. As we have said before, your lender does not want to own your house if they can prevent it.

#3 Job market is soft.

This means that there are fewer jobs being created. Two months in a row of negative growth means job losses and this typically means that a recession is around the corner.

#4 Rising gas prices

Ouch! Wish you had a hybrid or lived in a city with reliable public transportation? We are all feeling it, unless you ride your 10-speed to work. While prices are down slightly this week, paying over $3 a gallon is not encouraging. Analysts say we should not look to oil companies to pull us out of our current economic trend; the government probably will.

#5 Spending is down

Retailers felt the financial drought this holiday season as it was one of the lowest-spending Decembers in years. While I am sure we all did our best to spend, spend, spend, many found the pressure to pay the mortgage more than buy a Wii. Spending is the key to a stable economy; when people are squeezed for money, they do not spend casually on unnecessary things and the economy begins to dry up. The general public has a lack of purchasing power, except for the lady in front of me at the store the other day who had five shopping carts full of deeply-discounted Christmas decorations she was trying to stuff into her Mercedes - that is a dilemma I would not mind.

Now the question remains, “Are we actually in a recession?” Most experts say it is hard to tell yet, as a “recession” is typically defined as a period of 6-12 months when the formentioned factors are in effect. Many would agree though that if we are, then it began in November or December of 2007. So how long will we have to sweat it out? If we do in fact enter a recession, a typical one (unlike the ones in the 70’s and 80’s lasting unusually long) we should begin to get our head above water by the end of the summer. Housing prices should then begin to make their way back up. Although the recession may end, it will take a few months to feel the relief, which will make this election year interesting (if that’s possible). Voters are going to have the recession impressing hard on them and will be looking for relief from the candidates.

How do we get out of a recession? You play a large part in that. We need to be spending on our necessities now and set aside the frill for later. As we pay our credit cards, mortgages etc., it puts us in a position to buy the car, boat, RV later. Buy what you need now, and what you want later. Congress has eased recessions in the past by sending $200-$300 checks to every American, who in turn spend the money and kick start the economy. This time, we are going to need more, perhaps $500 per person or $1000 per family. Bring it on!

The recent Fed cuts are also a move in the right direction. Lowering the interest rate will affect our adjustable mortgage rates, credit card payments, auto payments and home equity lines - this time in a good way. The average American will be saving monthly as a result, thus enabling you to get out and spend. It is all connected. As certain as a recessions appears as this time, getting out of it is just as likely. Hold on, pay your bills and spend responsibly.

If you remain virtually untouched by the economy, this year is a great time to begin buying real estate for personal or investment purposes. While loan qualification are becoming more stringent, this is a great opportunity for first time buyers to jump in the game and become homeowners. If you credit score has taken a hit or you need to raise it to become a home owner, consider purchasing a tradeline or a seasoned primary account. By piggybacking someone’s long-standing excellent credit, you can boost your score and refinance to avoid foreclosure, purchase a home at a low fixed rate or even purchase a car.

Ted Stearns, owner of TradeLine Solutions, a San Diego based credit aide company, is not a newcomer to the world of finance. His experience began as an options and futures broker with Currency Trading International about 12 years ago. Since then he has been a financial advisor who hosted a live radio show on AM 1000 KCEO for four years, educating callers and listeners on stocks, bonds and various investments. Over the last five years he has delved into the nationwide mortgage business informing both clients and lenders alike in the arena of purchasing and refinancing.

With all former experience as his guide, he has come into the world of trade lines to help clients better their financial situation. Able to glean from the perspective of both lender and client, he has the unique ability to see the need of the purchaser and meet it head on.

Article Author :Ted_J_Stearns

Tags: trad, investments, Currency Trading, cards, stocks

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