Harish Blog

Apparently, I am noticing the impacts of recession compare to last year in New York city. People are thinking not twice, many times before they spending. Increasing train, bus fares, lot of service lines cut due to cost cutting of transport corporations. Straphangers get more yuck for their buck. As surveyed, reported that most of the people start avoids going hotels and bars.

The economy may have given New Yorkers more reason to drink, but many are imbibing less often at bars and lounges, according to a new Zagat nightlife survey published in amNY recently. (www.zagat.com/about/) amNY and Metro are the free daily’s available in NYC and covering more local news. More than half of the 6,000 New Yorkers surveyed say they go out less often because of the still-sinking economy.

Read few below statements taken from Newyorkers and published in amNY couple of days back.

“I'm drinking more at home and save more money”

“I do think there are more house parties at least before going out to the bars,”

“People are doing a lot more pre-gaming at cheaper places before going to the main event at a more expensive place.”

Even those who still have cash to blow are thriftier when they party by going to less expensive nightspots, paying more attention to drink prices and ordering fewer drinks, according to Zagat, which released its latest nightlife guide today. People still go out often, but not in the pricey nightclubs they used to frequent.

New York nightspots are also trying to adapt to drinkers' changing habits by offering more free or cheap snacks and open bars. The strategy may be working: the Zagat survey noted the number of new nightspots opening up versus those that have closed remained on par with the last survey's tally.

Apart from bottles and beers, Unemployment rates climbed in all U.S. metropolitan areas from last May to this May, the government announced on last week.

Of metro areas with a population of more than a million, Detroit wins the sad prize of highest unemployment, with a rate of 14.9 percent. The Labor Department's Bureau of Labor Statistics reported that El Centro, Calif. had the highest overall rate: 26.8 percent. Fifteen areas reported jobless rates of at least 15 percent: Seven in California, three in Michigan, and two in Indiana.

Oklahoma City and San Antonio, Texas, were the largest metro areas with the lowest rates, with 5.7 and 5.8 percent unemployment, respectively. The lowest rate of all cities was in Bismarck, N.D., at 3.5 percent, with Iowa City right behind at 3.7 and Ames, Iowa at 3.8 percent. Overall, 148 metro areas reported unemployment above the national rate of 9.1 percent, and 215 areas reported lower rates.

All started in US, to understand the reason we need to go back housing sector of America for past many years. In US, a boom in the housing sector was driving the economy to a new level. A combination of low interest rates and large inflows of foreign funds helped to create easy credit conditions where it became quite easy for people to take home loans. As more and more people took home loans, the demands for property increased and fueled the home prices further. As there was enough money to lend to potential borrowers, the loan agencies started to widen their loan disbursement reach and relaxed the loan conditions.

The loan agents were asked to find more potential home buyers in lieu of huge bonus and incentives. Since it was a good time and property prices were soaring, the only aim of most lending institutions and mortgage firms was to give loans to as many potential customers as possible. Since almost everybody was driving by the greed factor during that housing boom period, the common sense practice of checking the customer’s repaying capacity was also ignored in many cases. As a result, many people with low income & bad credit history or those who come under the NINJA (No Income, No Job, No Assets) category were given housing loans in disregard to all principles of financial prudence. These types of loans were known as sub-prime loans as those were are not part of prime loan market (as the repaying capacity of the borrowers was doubtful).

Since the demands for homes were at an all time high, many homeowners used the increased property value to refinance their homes with lower interest rates and take out second mortgages against the added value (of home) to use the funds for consumer spending. The lending companies also lured the borrowers with attractive loan conditions where for an initial period the interest rates were low (known as adjustable rate mortgage (ARM). However, despite knowing that the interest rates would increase after an initial period, many sub-prime borrowers opted for them in the hope that as a result of soaring housing prices they would be able to quickly refinance at more favorable terms.

“No boom lasts forever”, the housing bubble was to burst eventually. In the US, an estimated 8.8 million homeowners - nearly 10.8% of total homeowners - had zero or negative equity as of March 2008, meaning their homes are worth less than their mortgage. This provided an incentive to “walk away” from the home than to pay the mortgage. The chain of reactions happened automatically in bank and invested shares / stocks.

What is Today? When you read again the first paragraph, you can understand the present situation in US. People accustomed the difficult economic conditions and start trying to find their own way to save money somehow. Experts expressing their predictions with their tech jargons (GDP, GDI, Income inequality metrics etc) that the economy will start stable late 2009 to mid of 2010. So Pray for the best, prepare for the worst