Economist Sees Bottom, Lenders Like Market

DALLAS-The good news is job losses are slowing, the unsold home inventory is contracting and LIBOR spreads are decreasing. The bad news is the slow down in these and other indicators is actually good news from an economic perspective.

Furthermore, according to Comerica Bank’s chief economist Dana Johnson, the bad news really isn’t bad news. For example, “once job losses start slowing, they start slowing fast,” Johnson explained at the Appraisal Institute, North Texas Chapter’s first North Texas Realty Symposium on May 12. “Housing starts, savings; they’re all stabilizing. The recession isn’t over, but it likely won’t be as fierce.”

Johnson pointed out to symposium participants that economists like to see various components stabilize because of indications there is a bottom in sight. For many, the bottom means that the recovery can begin. The recovery won’t be painless, “but it will be better than people think,” he commented.

What especially cheered Johnson was that LIBOR spreads decreased from the more than 400 basis points seen right after the bank meltdown last fall to a more reasonable 150 to 250 points above Treasury. Johnson noted that the shrinking spreads, combined with a favorable outcome of the banks’ stress test process are showing that banks are solid and ready to lend to one another once again.