2009 was a rough year, yes, and the gloom gathers still.
The October jobless rate, at 10.2%, was the highest it had been in almost 27 years. Foreclosure rates are headed to record levels. And with Uncle Sam spending stimulus money like there is no tomorrow, the federal debt has soared to somewhere near Pluto. Fears of a double-dip downturn hang in the air.
But take heart: We at Kiplinger believe the longest and steepest recession since World War II is over. And though the recovery likely will be long and difficult, we note 11 significant developments and trends to be thankful for as 2010 begins.
1. How about that stock market?
From March 9, the low point of the bear market, through Dec. 28, the Dow Jones industrials ($INDU) climbed 61%, the S&P 500 Index ($INX) rose 67%, and the Nasdaq Composite Index ($COMPX) was up 81%. For the year, through Dec. 28, the Dow had yielded a 20% return; the S&P 500, 25%; and the Nasdaq, 46%.There are plenty of bull market lessons here for investors, who saw more than half of the market's value wiped out in the October 2008-March 2009 collapse. But with price-earnings ratios now back in line with the historical average of 15, we don't think the bear will reappear soon, and investors can expect gains of around 8% for 2010, near the historical average.
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2. Best time in decades to buy a home
First-time homebuyers, take note: Home prices will continue to edge downward through mid-2010. Fiserv Lending Solutions forecasts that the median home price nationally will fall 9.2% in 2010, following a 7.5% decline in 2009. But more pain for existing homeowners also means the ratio of median family income to median home price has dropped to 2.8, just under the long-term historical average of 2.9, according to Fiserv.Affordability combined with historically low mortgage rates (still around 5% for most 30-year fixed-rate mortgages, including jumbos) presents opportunities for buyers who have good credit and secure jobs, and plan to live in their homes for a long time. (Check out mortgages under 5%.)
To sweeten the opportunity, Congress extended the $8,000 tax credit for first-time homebuyers who sign a purchase contact by April 30 and close by June 30. Even higher-income buyers can take advantage of the tax break, and move-up buyers qualify for a credit of $6,500. (See details on the new homebuyer's credit.) The credit should help sustain a recent uptick in sales -- and set a floor under falling home values.
3. Your heating bill will be lower this winter
The U.S. Energy Information Administration forecasts that the average U.S. energy bill will fall by 8% compared with last winter, to $960, a decrease of $84.Milder winter weather is forecast for many areas. The price of natural gas is expected to run 11% lower than a year ago; propane, 14% lower. Heating-oil prices probably will remain the same. And fuel inventories are higher than they were last year, which will help keep price hikes at bay should the winter be colder than expected.
You can still get tax credits in 2010 for energy-efficient home improvements. States have also begun to release federal stimulus funds designated for rebates on energy-efficient appliances.
4. Innovation for everyone
The recession and aggressive competition globally are driving down prices on consumer electronics, making dazzling new technology affordable to more people.Just look at high-definition, flat-screen televisions. A few years ago, a 32-inch unit started at $1,000. Last month, Best Buy started offering all entry-level 32-inch Dynex LCD HDTVs for $299.99 and 40-inch Dynex 1080p televisions for $499.99. Smart-phone service providers are trotting out a host of new phones and service plans to give Apple's iPhone a run for its money. And prices for lightweight computer laptops, netbooks, video games, Blu-ray players and digital book readers are all falling fast as well. The trend is likely to continue in 2010.
Continued: Roth IRAs more available
