Updated Predictions

My prior predictions are all more or less coming to fruition. QE2 has inflated asset prices over the past few months, but inflation appears to be on the rise so further easing may be impossible. The Fed won't raise rates until inflation forces them to, and I don't anticipate that happening for another year or so. Real GDP growth will run around 3% on average for the foreseeable future, which shouldn't do much for unemployment. I see unemployment staying at 9 and change for 2011 and around 8.5-9% for 2012. Exits from the labor force will primarily drive this drop in unemployment rate.

House prices have continued their descent and are nearing a new low on a national level. I expect them to bottom out approximately 10-15% below their prior low as expectations about house price appreciation continue to drop and the household formation rate continues to be low. The shadow inventory is still there and foreclosure sales are picking up (20% increase over 2010 according to RealtyTrac). Far too many people are still looking at houses as investments, and I expect this sentiment to recede over the next half-decade, as house prices sputter.