SMALLER METROS LEAD RECOVERY

Steve Cochrane of Dismal Scientist has laid out the case that smaller metros are leading the recovery:

“The recovery is spreading to more regions, particularly favoring manufacturing hubs and commodities producers.”

“Nearly half the nation’s metropolitan areas are out of recession, though they account for just over a third of total output.”

“Large metro area will recover only when professional services hiring picks up and the global recovery is more certain.”

“Job growth in California and the Mid-Atlantic states in January offered an encouraging signal.”

“Outside of Florida, recovery seems to be slowest in the West.”

“The housing market is the greatest risk to recovery. The pipeline of delinquent mortgage is full as foreclosures have been put on hold pending modification efforts…On the upside, strength cold be greater than expected, particular for technology centers, if domestic investment rises more strongly than forecast. Similarly, if improved business confidence generates stronger hiring by professional services, larger metro areas would be the main beneficiaries.”

HOUSEHOLD NET WORTH ON THE RISE

According to the quarterly Federal Reserve Flow of Funds report:

For the third consecutive quarter the net worth of households and non-profits has increased. This follows seven straight quarterly declines. While it was an incrementally smaller increase then prior two months, it was an increase nevertheless.

This quarter is also the first year-over-year gain in seven quarters. Between Q4’08 and Q4 ’09 net worth increased by $2.8 trillion or 5.4 percent. The current net worth of households and non-profits is $54.2 trillion.

This improvement is credited to declining liabilities including home mortgages and consumer credit, together with increasing financial assets including corporate equities, mutual fund shares, and pension fund reserves.

At its highest point, the net worth was $66 trillion or nearly 18% higher than the current $54.2 trillion. Net worth is near its long-term average of 5 times disposable personal income.

Real estate held by households has increased by $890 billion over the last three quarters while real estate held by non-profits has continued to decline.