SAN DIEGO - Wayne Best, senior VP of Business Research and Reporting, with Visa, said that the “rise in unemployment rates signal a recession, but we expect it to be of short duration, and end this summer.”
Gas prices are expected to consume a greater percentage of consumer spending, but Best noted that the country is using less gas than in the past and the weak dollar is creating growth in exports.
While the recession may be relatively short lived, the economy cannot fully recover until the housing market is restored, he told the meeting. “Housing prices have not yet hit bottom. We are predicting a 20% decline nationwide due in part to the bloated supply of homes available. The housing surplus is the highest in two decades of record-keeping, and some markets have a 10-month supply of new and existing homes.”
He does not expect house prices to stabilize until the second quarter of 2009.
Meanwhile, Best said despite a media focus on the effect of subprime loans, CUs would be better served by examining credit card balances and 30-day delinquencies for signs of trouble. “Consumers are using their credit cards to stay current on their mortgage payments. Outstanding balances for prime cardholders for 2005/2006 have increased to $4,500. Half of these cardholders are 30 days late on payments, as compared to a 20% rate for subprime cardholders,” he said.
