A vice president of the Atlanta branch of the Federal Reserve Bank and a vice president of RealtyTrac, a firm that tracks foreclosures, didn’t deliver the good news that Todd Strange was looking for Wednesday.
Strange, chairman of the Montgomery County Commission, moderated Auburn Montgomery’s Economic Forum at the Montgomery Renaissance Hotel & Spa at the Convention Center. He was asking for evidence that consumers are on the verge of spending their way out of an undeclared recession.
He didn’t get it from David Altig of the Fed and Rick Sharga of RealtyTrac.
Instead, Strange and the other business leaders attending the forum heard predictions that the economic downturn will eventually be declared a recession and that it will be one of the longest, and perhaps deepest, in history.
Altig listed four major measures of whether the economy is in a recession — personal income, employment, industrial production and sales — and said all four had shown significant downturns during 2008.
“A recession is where they are moving south in a definitive way,” he said.
Although a committee of seven economic professors who are charged with declaring a recession haven’t done so yet, Altig said it is likely they will because all signs point to a recession that began months ago.
“The job picture is every bit as symptomatic of a recession as you are likely to see,” he said.
He said the only real debate will be over when it started and how long it will last. The longest U.S. recession lasted 16 months. It is a record Altig believes won’t stand.
“We may be giving that 16 months a good run,” he said.
The recession will end when two things happen — financial markets stabilize and real estate recovers.
“The broad credit markets are very dislocated,” he said. “The second big question is the housing market, and that won’t end until the market finds its bottom.”
Sharga told the crowd that he doesn’t expect the market to recover soon. He said he is worried that a second wave of foreclosures could be coming.
Traditionally, a sour economy spurs the foreclosure rate, not the other way around. This time, the housing bubble prompted the sour economy.
Now that the economy is at or near a recession, a wave of traditional foreclosures could be in the future, he said.
“This could be the first foreclosure cycle to have an aftershock,” he said.
The bubble itself was caused by over-building, over-lending and runaway prices.
Once builders and other sellers began cutting prices to move excess inventory, it brought other home prices down, and many homeowners found themselves owing more on their home than it was now worth. The system collapsed in many parts of the country.
Some cities have fought back by filing lawsuits against lenders. On Wednesday, Birmingham joined the list of cities doing so.
The city sued several lenders, including Wells Fargo, Regions and Countrywide, to recover lost tax revenues and money the city spent mitigating foreclosed properties.
The Montgomery law firm of Beasley Allen is one of the firms representing the city.