Which Way Will The Economy Head?

(CBS)  The Fed will meet this week to decide what's next with interest rates, but the odds are against an increase with talk of recession starting to crop up and the inventory of unsold homes at a record high. CBS News correspondent Alexis Christoforous looks at which way the market is heading.

For more than two decades, Sharon Zilich has helped homeowners remodel their kitchens. For the last five years, business boomed, but recently, she's seen a slowdown.

"I'm actually having people say, 'I don't think I want the top-of-the-line stove. I don't have to have the best cabinet,'" Zilich said. "People are really starting to kind of pull back."

She blames that pullback on the dip in the housing market.

"Well, when you were counting on the growth of your real estate for part of your retirement, and you see it decreasing, it makes you a little nervous," Zilich said. "It makes you start to think, well we do need to pull back and save more because we're not going to have this real estate thing to lean back on."

Despite the cooling housing market, some top economists predict the nation's economy will keep expanding – although more slowly – through the end of the year. They warn there's a one in four chance that the economy could slip into a recession sometime next year.

Others put that risk much higher.

Liz Ann Sonders, chief investment strategist at Charles Schwab, said, "I think the odds of a recession right now are probably 50-50."

Sonders says she's already seeing signs that, in the past, have led up to a recession – namely the housing slump and higher energy costs.

"The sole thing that has caused housing to come under so much pressure right now is that there's too much inventory – somewhat because there was too much speculation," Sonders said.

Sonders worries the crunch will come when homeowners with adjustable rate mortgages see their new higher payments.

"When their mortgages reset, they're looking at a big, big up-tick in their monthly payments in an environment when they don't have any additional equity to fall back on," Sonders said.

Sharon Zilich hopes business will pick up early next year.

"I have had probably four or five clients say that they're looking to do something after the first of the year," Zilich said. "So if that proves out it could be good."

And it could help guide the economy to the soft landing everyone's hoping for.

[ralphj53]

September 20, 2006

Hello;

I have a strange FEELING that those who have money to burn are burning it through purchasing REAL ESTATE.

After all, UNCLE SAM is usually generous with property owners... regarding their INCOME TAX.

It's called the REAL ESTATE TAX write off. And why not?

And so, these rich folk are buying up property, while they make millions..... and they DON'T pay a cent in FEDERAL TAX... Believe me... it's LEGAL.

Before you know it.. we have a GLUT in REAL ESTATE INVENTORY.... and the working man really doesn't have the MONEY to buy all those silly OVERPRICED homes... to begin with.

Take CALIFORNIA. You can't even buy a run down GARAGE for $25,000.00

$25,000?.. why I can go to the moon with this money!!!

Stop, look and listen!!!

Ralphj53

[mjv2944]

Working in the construction business I can tell you right now that they have killed the housing construction market, with their fears of inflation. As long that money was cheap to borrow, business was good, now we are going into winter and it does not look good. The Fed always seems to over react to fears of inflation, and by the time they realize it we are in a recession that will take at least two years to come out of. We also need to stop exporting our jobs, I think the auto industry is getting a real taste of not having any one who can afford their cars. You cannot buy one working for $10-$12 an hour.

[alphaa10-2009]

Severe budget pressures from Iraq and irresponsible Bush tax cuts which benefit none but the wealthy upper five percent demonstrate a "devil may care" attitude toward the national infrastructure-- the assets, tangible and intangible, which make drive the economy and keep America strong.

Part of maintaining any national asset is to invest seriously in such things are education, health care, science and technology research and crime reduction-- all areas where Bush and congress have been out to lunch. They insist all the economy needs is to put extra tax cut dollars in rich and very private GOP pockets.

The current economy stutters along so uncertainly, Bernanke and friends debate whether we have that ol' debil, stagflation. The Fed has no answers, but depend on Bush boosters to push for more tax cuts. One tax group estimates Bush tax cuts could reverse the deficit if repealed. But the Bush regime goes on borrowing on a credit card issued by the communist dictatorship of The People's Republic of China. And if you hope congress might show some sense, anyway, and repeal the cuts, guess who is in the pocket of rich donors to reelection committees?

But we already know why the wealthy few in America have no complaints-- they do not live in the neighborhoods where the rest of us live. Meanwhile, costs like energy and health care continue to rise, pinching us into an effective net loss of real income.

[newsjeff-2009]

I believe unless democrats win in November elections and illegal immigration laws are enforced(companies hiring illegal immigrants for cheap labor)worker's wages for both skilled and unskilled workers, wages will decline somewhat or if an illegal flow of illegal immigrants continues that will definately drive down wages. Republicans and Democrats both talk about the problems of illegal immigration and illegals coming in through the borders but sometimes offer little solutions. I have to wonder no matter which party wins in November is gas prices going to head back to $3 per gallon and is the illegal immigration and border patrol going to be ignored. I have heard a few republicans talk this year in campaign speaches about enforcing border patrol and illegal immigration laws but I know in some parts of America illegal immigration hiring still occurs everyday at the expense of legal American citizens. I believe there are always American workers who will do "any job" as long as they are offered decent,legal wages and benefits.