We’re not in a Recession, Technically
First quarter numbers show the country is not technically in a recession, though parts of the country sure feel like it.
The bruised economy limped through the first quarter, growing at just a 0.6 percent pace as housing and credit problems forced people and businesses alike to hunker down.
The country’s economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday. The statistic did not meet what economists consider the definition of a recession, which is a contraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if slightly.
The Fed just announced its rate decision affecting short term rates and took the key overnight
lending metric down .25% to 2% even. The accompanying statement suggests the Fed is now more concerned with inflation and this rate loosening campaign is facing the end. The FOMC next meets at the end of June.
The cut took the federal funds rate, the key overnight rate at which banks loan money to one another, to 2%. It had been at 5.25% as recently as September, when the Fed started slashing rates in an effort to spur the economy and keep the nation out of recession.
Fixed mortgage rates have actually been increasing over the past two weeks as a surge in stocks has investors pulling out of bonds. The 10 year bond has increased by about 50 basis points in the past three weeks. 30 year fixed rates are averaging over 6%.
Potential home buyers are in a conundrum: wait for prices to drop further while running the risk of higher borrowing costs, or buy now and possible suffer lower home prices. Taking a long term view is probably best right now. Since interest costs completely outweigh any short term decline in prices, consider the cost of financing as the primary factor.