Housing: Markets may bottom in 2010, but it’s a long road back up.
The Economy: Infrastructure spending, down now, will be back by 2011.
Flu Season: Go low-tech soap and water now, vaccinate later.

Housing
It’s no wonder Washington is stepping in with more help for the housing market ... remaking Freddie Mac and Fannie Mae and pumping billions more into loans.
Recent signs of a rebound mask big problems.
Prices have an additional 5%–8% to drop before bottoming at about 40% below the 2006 high. The turn won’t come until sometime next year.
Recovering previous peaks will take years ... a minimum of four, even in states, such as Texas, Okla., Ark., and Wis., that haven’t suffered greatly. In hard-hit Calif., Ariz., and Fla. ... where the plunge in prices will near 45%, all told ... it’ll take 15–20 years. For most of the rest of the country, figure on a range of 7 to 12 years before prices regain lost ground.
Rising joblessness makes matters even worse, spurring additional foreclosures and shrinking the pool of would-be buyers. The supply of unsold new homes remains high as well, at 8.8 months’ worth ... though that’s the lowest level since October 2007.
Plus many sellers remain on the sidelines, holding back till prices rise. When they do, increased supply will quickly cool any heat.
Stepped-up Treasury efforts to block foreclosures won’t do much to help. Officials hope to jawbone lenders into modifying half a million loans by Nov. 1, halting foreclosures on them. But even if they succeed, many loans will go bad again. Of the modifications so far, half only delayed the inevitable ... owners losing homes.
By the end of 2010, a record one in six mortgages will be in foreclosure: 3.2 million by the end of this year. And an equal number of foreclosures next year ... three times the typical annual rate. The heaviest concentrations ... in Calif., Fla., Ariz., and Nev. But bank actions will also accelerate in Ill., S.C., Ore., Utah, Idaho, and Ark. On the plus side, home foreclosures will begin to ease this year in Mich., Ohio, and Ind.
Defaults will rise on option adjustable rate mortgages in 2010 and 2011, as rate resets crest on the wave of 2 million “name your payment” loans. What’s more, about 30% of all mortgage holders ... a record 15 million of them ... remain underwater, owing more on their loans than their homes are worth.
Still, at least the end is in sight. Both home sales and housing starts have turned the corner. By 2011, sales of new and existing homes will hit 6 million or so again ... nothing like the overheated level of 2005, but within the “normal” range. By 2012 or so, single family home starts may climb back to about 1.2 million a year.
And Washington is determined to do what it can, extending the tax credit for first-time buyers and pressing lenders to be as lenient as possible but prudent. And the Federal Reserve will work to keep mortgage rates low, around 5.25%.

The Economy
The decline in job layoffs is slowing, but job seekers still face tough going.
More are giving up the hunt for employment. That’s what caused the jobless rate to decline a bit in July, to 9.4%. When people despair of finding a job and quit looking, they no longer count as unemployed and the jobless rate drops even as payrolls shrink.
Others are being forced into part-time work. The “underemployment rate” ... the share of workers who want full-time work but are unable to find it ... is now 6.9%, up from 3.7% when the recession began.
And the worst is yet to come. Businesses won’t add permanent full-time workers until months after the economy turns the corner in early 2010.
Another drop in infrastructure spending next year, despite the likely end of the recession and continued federal stimulus funds. After a 4.5% decline this year, funding by federal, state, and local governments and others will dip 1.5% or so in 2010, with continued cutbacks early next year more than offsetting increases later on.
Outlays on power generation and transmission will plunge by about 16%. Utilities are putting projects on hold pending new energy and climate change legislation.
For roads, bridges, and highways ... about 5% more spending next year. Light-rail, subway, and other transportation projects ... also up from 2009, by about 2%.
Come 2011 ... a solid boost all around as a more vigorous economic pace allows states and cities to step up their investments and a new federal highway bill authorizes Uncle Sam to fork over about 50% more per year than is now the case.
To fund some of the jump, expect a 5¢ gas tax hike, probably phased in.
Meanwhile, little additional relief on Buy American requirements is likely when the White House issues its final guidelines for federally funded projects ... including state and local undertakings paid for with economic stimulus funds. Although the law allows contracts with firms that use inputs from Canada ... or from any country with a government procurement agreement with the U.S. ... state and local officials won’t cut them any slack. That’s because Canada’s provinces opted out of the relevant provision in the North American Free Trade Agreement.
Used cars are big sellers these days ... a saving grace for car dealerships suffering a drought in new car sales. Even with the “cash for clunkers” program, new vehicle sales won’t top 10 million this year ... a third lower than the recent norm ... while sales of used cars, pickup trucks, and SUVs will climb 2 million to hit 14 million.
As you’d expect, prices are up, too ... topping $10,000, average wholesale. And with the much higher profit margin ... 11% on average vs. 4% for new cars ... the mini-boom is providing some much needed relief to hard-pressed dealerships.
One industry that’s still strong: Video gaming. The market for Web-based and console games ... $14 billion now ... continues to expand at a robust 5% to 6%. What’s more, gamers are becoming a more diverse group ... no longer just teen boys. The average age is 35. Female gamers are 40% of the total ... 44% of all online gamers.
The medium’s a rare bright spot in the advertising world. Game publishers will benefit from a 50% increase in U.S. in-game advertising over the next five years, pushing the market to the billion-dollar mark ... a small but growing piece of the ad pie.

Flu Season
Hoping to ward off an outbreak of swine flu at your business this winter?
You’ll have to rely on low-tech methods ... urging frequent handwashing for all employees and telling them to stay home if they’re under the weather.
A vaccine won’t be generally available till spring. About 40 million doses are expected to be distributed in Oct., with another 40 million by the year’s end. But they’ll be reserved for children, pregnant women and health care workers, as well as individuals who are deemed to be at high risk if they become infected.
Many employers may shy away from offering the vaccine in any case ... worried about potential side effects. The last time a swine flu vaccine was given, in 1976, it resulted in an increase in Guillain-Barré syndrome and some deaths.
Don’t neglect precautions against seasonal flu. Concerns about swine flu are high because it’s an unknown and spreads easily and because young adults seem unusually susceptible. But garden-variety influenza is a more serious risk. It accounts for 250,000 hospitalizations and 36,000 deaths a year in the U.S.