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The 2007 Economic Outlook

2006 was a mixed year. We had records set in the stock markets and the housing markets. As I’m writing this the Dow has closed at a record high of 12,445.52 and looks like it will rise even higher before the year closes. At the same time, our housing market is setting records on the other end of the spectrum. This year we saw more homes available on the market than at any other time in history. Some people have done really well this year, other’s have lost nearly everything in the housing market bust. 2006 was a mixed year.

Enter 2007.

The Housing Market Will Normalize – Some areas will see growth, some will see prices come back down to where they should be. According to the article “Best and Worst Real Estate Markets” there will some spots that are hot and some that are not.

If you happen to live in the northeast, your market looks to be fairly steady with a few hot spots and a few cool spots, ranging from a projected 4.8% growth in Syracuse, N.Y. to a -3.6% drop in Poughkeepsie, N.Y.

If you reside in the south, congratulations, you are home 12 of the 20 hot spots for 2007. The big winner is the area around McAllen, TX with a predicted growth rate of 8.5%. However, if you happen to be in Florida, watch out. You could see housing prices fall by as much as 5%.

How about the midwest? Well, it’s about as exciting there as it was in the boom market last year. It doesn’t really have any losers, just a pretty steady growth rate around 2.5%-3%.

And finally, the big boys, the west coast. You’ve had your fun over the last few years seeing enormous growth and over inflation of housing prices. Now, it’s time to pay the piper. You could see housing prices deflate by as much as 6%. In short, if it was hot last year, it won’t be this year.

The Equity Markets Will See Steady Growth – BusinessWeek believes that Optimism Reigns in 2007. Companies have shown tremendous growth over the last several quarters. We’ve seen double digit growth out of some giant blue chip companies. We’ve seen nearly 13% growth out of the S&P 500 in 2006.

Is this growth sustainable? Well, in the short term, we may see the markets decline as earnings normalize and the slumping housing market starts to take effect on the economy. However, by mid-year 2007 I see a very normal growth rate returning to the market. Consumers are optimistic, incomes have been growing while inflation has been relatively low. This leads to more disposable income. Some of which will be pumped back into the economy.

Don’t look for recored setting growth, but do expect to earn a respectable return on your investments.

2007, I believe, will be a brighter year. Markets will begin to normalize and the economy will continue to level off. Crime rates will drop, crooks will repent, the rain forest will re-grow and the ozone layer will improve…alright, maybe that’s a little too optimistic. But seriously, 2007 will be a better year.

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25 Responses to “The 2007 Economic Outlook”

  1. Brad Shorr says:

    Sure hope you’re right! Do you with so much political uncertainty and unrest around the world, it will be possible for Americans to sustain the optimism necessary for a really solid economy?

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  2. Ashish Mohta says:

    Great Predictions.

    Stock is one of the business which always have the major updowns.Indian stock market was down for line 6 yrs.It has recovered now but it was ahell few yrs back

    I also got entry in darrens project.
    http://technospot.net/blogs/index.php/2006/12/19/predicting-the-evolution-of-techspot-insideout/

    And i am feeding your blog.There wont be another chance to meet so many bloggers

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  3. Looks like I’m in the ‘fairly steady’ niche, phew. It’s funny you should mention Syracuse, NY, as booming. I’ve known quite a few people who’ve moved over there the past two months.

    *loves NY but would love experiencing the south for a wee bit too* :)

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  4. Mama Duck says:

    Ick, our area is still falling. Thankfully we aren’t planning to move for a year or so. We also participated in this project, stop on by if you get a chance!

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  5. Brad: I think that Americans want to be optimistic. Since 2001 everything has been sour and people are tired of it. I think that the end of this year shows that people are starting to put their faith back into the market. I believe that the market will continue to improve, although the slumping housing market will have some effect that is yet to be seen.

    Ashish: Thanks for the comment, I’ll come over and check out your submission

    Jennifer: I feel that same way. New York is a great place to visit, but I probably would nevel live there :)

    Mama: I’m hoping that market will begin to even out by the end of next year so that home owners won’t be stuck upside down in their homes

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  6. TMT says:

    Nice post. I live in Atlanta, GA (the DEEP south), and things have held up pretty well here, although the booming real estate market is starting to soften.

    Like others above, I found you through ProBlogger’s Group Writing Project. I submitted an article, too.

    Cheers.

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  7. mark says:

    “2007, I believe, will be a brighter year.” we can only hope. Best of luck to you in 07.

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  8. Nick says:

    Nice post. From the Title at Problogger, I was hoping for some oil predictions to back up my airfare predictions in my post.

    [Reply]

  9. [...] The 2007 Economic Outlook by Jeremy [...]

  10. Randy says:

    I wish I could agree with your outlook, but I think optimism is the cousin of reality, and reality is coming home for the American dollar.

    I predict not only sour times, but rotting values as the Iran situation explodes, and China/Russia move to open their own oil bourses, bleeding the US Dollar.

    Euros and Rubles look to be the safer bet. I explain why at LawnstoGardens.com, and invite you to explore my reasoning. I wish the outlook was better, but unless you are thoroughly schooled in the energy market, you are pinning hopes on economic theories of the past, not the present and future.

    Smart investments:

    Bicycles, garden tools, insulation & food dehydrators

    [Reply]

  11. [...] The 2007 Economic Outlook by Jeremy [...]

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