RANCHO CUCAMONGA, Calif. -
“We are in the slowdown and will see it continue next quarter,” she said. “The soft growth will continue for much of the year, and things won’t really pick up until 2009. A lot of that has to do with the housing market.”
But Mendivil noted that there are two scenarios that could trigger a recession: significant job losses or a substantial decline in consumer spending. She said initial reports indicated holiday spending was not as strong as hoped for, which raised some questions regarding the latter.
“We won’t know for a few weeks how things went for certain, but it appears to be mixed. Some sectors of retail sales were strong, others were slow. It probably was an increase over last year’s sales, but nothing official has come out yet.”
Mendivil believes housing prices will continue to decline in 2008. She said in one respect it will be beneficial if the median price of houses declines, because the market needs to see more activity in the lower end. “There will be more adjustments. Some areas of the country are doing well, and whether they go through a correction as is happening in most areas of the country remains to be seen,” she assessed. “In California, we still have a ways to go. I see 2008 as the year when the market bottoms out and, optimistically, I see a recovery in ’09.”
Sudden Savers
Mendivil also cautioned that consumers may shift from spending to saving. “Credit unions have been focusing on lending over the past few years, but should expect to see an increase in savings. Also, there will be more consumer loans, as opposed to mortgages, as members attempt to maintain their lifestyle. Instead of home equity loans, as we have seen used in the past two or three years, they will look to unsecured loans and credit cards.”
In a warning to CUs, Mendivil said she thinks credit unions will experience more loan losses in 2008 due to the softening of the economy and more foreclosures, as many mortgage resets will occur over the coming 12 months, and while she noted most credit unions do not have ARMs on their books, members have gotten them elsewhere.
