5 Possible Problems Delaying Recovery

As all of the media touts the recovery is happening, all be it slowly, here are 5 major concerns that will cause more problems down the road.

1 Unemployment continues to decline. As the reports come out about declines in unemployment numbers we must remember that those figures are grossly under reported. They do not include those who are either unemployed beyond benefits period and those who are under employed. The National Federation of Independent Business' offers little support to the reports of declining unemployment. Their recent polls showed only 10% were hiring, whereas 22% reported the need for more layoffs. Either way the employment situation will continue to deteriorate.

2 Residential Real Estate Values are Increasing. One of the main reasons that there is an increase in some markets in real estate values is the deliberate holding back of inventories by the large financial institutions. These are refered to as shadow inventories and they are being held to try to stabilize real estate markets. This is creating an artificial belief that there is a recovery going on. Also the amount of foreclosures is expected to rise significantly this year adding to the pressure to release inventories. Once these inventories are released then values will most likely drop again, up to 10% declines projected in distressed markets.

3 Commercial Real Estate Foreclosures are on the rise - As the loses mount for the commercial real estate markets the loses will carry over to the banks, some of which can go out of business, causing more problems in the financial sector. Last year the Fed of Atlanta projected that 43% of all commercial loans were either going to go into foreclosure or need to be modified.

4 US sales tax revenues continue to decline - Revenues to the US via sales tax have declined and with a struggling economy, revenue forecasts for 2010 don't look much better. All of this leads to less money coming into the Treasury at a time when spending is at it's highest levels ever.

5 China's Real Estate Bubble Pops - Currently China's Real Estate Market is rising at an alarming rate, up to 58% increase in values in certain markets over the last 12 months. Now the Chinese Government is now tightening the loose controls which caused these escalations there is speculation that these gains could go south and fast. If that happens China would no longer have the resources to purchase foreign debt, mainly US debt.

All these factors are real and offer a clearer picture of the year ahead, unfortunately not good news yet.