I heard Ted Jones, Senior V.P. and Chief Economist for Stewart Title Co. present his outlook for the economy for 2009 a couple of days ago.  I have heard Ted speak before during better times and he always seemed a little more optimistic than I was at the time.  Well, not this time.  A lot of what Ted talked about was the deepening deficit and the "stimulus" plan.  One of his slides was about the tax rebate checks ranging from $300 to $1200 that went out last year:

what the 2008 tax rebate check were used for

According to this slide, this would "stimulate" the economy from $16.80 to $67.20 per person or couple.  That's pretty pathetic.  Does Ted think the same thing will happen to the billions being spent now?  He sure does.

Another thing Ted talked about was the loan modifications the government wants to do.  Here is that slide:

loan modifications do not work

Ted said that this information was presented to people working on the loan modification plan and they didn't want the data because it wasn't what they were interested in learning.  The study was repeated with very similar results.

Another slide I found interesting had to do with Ted's prediction for interest rates for 12-18 months out.  Basically, he said that the people who have buying the 10 year treasury bonds, which have been paying at a rate of less than 3%, are tired of the low yields.  They are not likely to continue buying unless the U.S. will pay more.  Ted feels that interest rates will go up 1% to 2% over the next one to 18 months.  That, he said, will lead to higher mortgage interest rates.  His slide on the effect from that:

mortgage interest rates and dropping home prices

So where Ted was going with this is that buyers who are waiting for a home price bottom may price themselves out of a purchase.  If prices drop less than 10% or 20%, depending on where rates go, people may not qualify for mortgages at the higher interest rates.  If the price of a home drops 10% and rates rise 1%, the effective monthly payment is around the same.  If prices drop 20% and rates rise 2%, same thing.  So my thinking is that if people can buy at the low rates, do it rather than trying to time a bottom.  Having said that, nobody can accurately predict just when prices will bottom and what at price point that will be.

Was Ted's presentation all doom and gloom?  No, but most of the news was not good.  The best news was simply that we are lucky to be in Austin, TX.

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