Borrowing Money, Buying Houses and Credit Debt Are All Changing

The 2009 recessionary year in review

Photo from Picasa

Photo from Picasa

The year 2009 was filled with budget shortfalls, difficulties with borrowing money, and problems with real estate. The recession was difficult on everyone, including both businesses and consumers. Now that the recession has been deemed officially “over” by experts, it is a time for financial cleanup. Though there were a lot of problems with the economy throughout the year, there are still some positive results to keep in mind.

Buying a house in 2010

One of the best results that the 2009 recession brought about was an advantage to potential first-time home buyers. Experts are confirming that home prices will continue to move down throughout the coming year. Fiserv Lending Solutions projected that the median home price throughout the nation will fall by 9.2% in 2010. Couple the fall in price with historically low mortgage rates, and you have a recipe for affordable housing. Add to the mix Congress’ extension of the $8,000 tax credit for first-time home buyers, and even more savings can come from buying property.

Heating costs on the way down

According to the US Energy Information Administration the average US energy bill will fall by about 8% throughout the year. Most areas are going to have milder weather in winter months and the price of natural gas is lower than it has been in former years. Natural gas is expected to run about 11% lower than last year and propane is 14% lower in cost. Plus fuel inventories are still high and that should help to keep price spikes down if the winter does turn out to be colder than anticipated.

Discounts abound to spur consumers into buying

Retailers are seeing a slight rise in spending, but it is still down from previous quarters of years past. Because of this, competition is aggressive to bring buyers in. That means that most stores are making their big-ticket items as affordable as possible. For example, a 32” high-definition, flat-screen TV was priced at about $1,000 a year ago. Recently Best Buy advertised the Dynex 40” LCD HDTVs for just $499.99. With deals abounding consumers are not dipping into savings or borrowing money to buy large items anymore. Now they can afford big-ticket items but still maintain their budgets. Economists are predicting that the deals will last well into 2010 as retailers are trying to make up for lost revenues due to the recession.

Savings rates are increasing and credit card debt is decreasing

New research is showing that consumers are back to saving their money. Since the economic downturn, people are saving on average 3.3% of their disposable income. Though that is below the 10% rate it was at 25 years ago, it is still well above the near-zero savings rate of a few years ago. Banks are paying better returns for savings also. The current savings rate is about 5.8%.

In addition to savings being up, credit card debt is going down. The Federal Reserve Board surveyed consumers and showed that credit card debt has already dropped by $10 billion. People are wary of racking up big credit card bills because they have a new understanding of how credit works. When consumers needed credit at the height of the recession, lenders were too busy hiking interest rates and cutting limits. Most consumers learned the hard way that credit card companies are not the saviors that they once were.

The best of the 2009 recession

The recession is now over and though it was difficult to get through, there were still quite a few positive results. Borrowing money is harder, but interest rates are lower than ever. Buying a home is still difficult, but there are enough tax breaks and price savings to make it worthwhile for thousands of Americans. Savings and credit card activities are changing to reflect hard lessons learned. Overall, now is the time to regroup and learn from past mistakes. Americans are showing signs that that’s just what they are doing.

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