Yes, this is a Recession

"Are we in a recession?" We have been asking this question for more than six months and we have been in a denial. The Fed, the government, economists and wall street gurus have been endlessly debating this. Some say our growth is stunted and technically we have not had negative growth for a couple of quarters - so it is not a recession. Others argue that the sub prime mortgage crisis has sparked a liquidity crunch in the credit markets, retail sales are weak, the economy is losing jobs and the dollar is losing value - so we are in one. Some say it is a mild one and others say it is the worst one after Great depression.

No matter what these Gurus think and the unemployment numbers and market indicators project, it looks like the ominous signs of a recession are written all over the Fed's frenzy - in an emergency meeting on Sunday, Ben Bernanke, the Fed chairman hurriedly slashed the discount rate by 0.25% to help the market. And economists expect bigger rate cuts on Tuesday.

Irrespective of whether we literally meet the standards for a recession, the economic condition of our nation is affecting the common man as if we are in one. Myself and my husband have advanced degrees and jobs in the tech sector. We would classify ourselves as a middle class family. Still we are feeling the pressure of the economic crisis.

We moved to King of Prussia, PA from MD in 2007. We rent in PA but own a condo in a suburb in Montgomery county, MD. Unfortunately we bought it in 2005 with 20% down - most of our savings. Prices in our neighborhood have dropped by about 15-20% since the peak in 2005. We tried selling ours - we were even willing to take a huge loss but could not find qualified buyers. Two families that showed interest in our condo did not get approved for a loan. So our condo which is our first home has become a liability that we would love to get rid off for peace of mind.

In our locality in MD, the foreclosure rate in 2007 increased by 80% over 2006. Many 2-3 year old houses and condos that were purchased by people with white collar jobs are in the foreclosure market at highly discounted prices. At least 20% of the single family homes along the approach to our condo are for sale. And many have been on the market for more than 6 months. We have friends who bought single family homes in new developments in our area for $600,000 during the peak. Now they cannot sell for even $480,000.

The media has been warning that soon many will have no equity in their homes and will owe more than what their homes are worth. But this is already a thing of the present for many of us in MD. This is recession for me! We have good credit history and have never been behind on our mortgage payments. Yet we are being forced bear an economic burden of monstrous size.

Now I see a new trend developing in my locality - many families are renting out their basements or rooms in their homes and even condos to supplement their incomes. It is neither a seller's market nor a buyer's market but a tenant's market.

In addition to the mortgage crisis, we have been feeling the pinch of a declining stock market. As simple investors, we do not monitor our portfolio on a daily basis. We lost about 10% of investment in 2008 before we moved our assets into fixed income. Our company contributions into our 401(k)s in the form of company stock have lost about 15% in value.

The declining dollar has added to our woes. Travel has become expensive - particularly international travel. So we have cut back our travel plans this year. Increasing gas prices and medical insurance costs have also forced us to spend more carefully. We used to eat out during the weekends in the past. Now we eat only once a month outside. Now we plan all our expenses - we never did that before. We try hard to save as much as we can. Although the economic problems are not yet threatening the jobs in our industry, we are bracing for layoffs because no sector is really immune to today's problems.

And if an average middle class family has so much to worry about, what to talk of millions of lower-income families? With financial firms like Bear & Sterns buckling under the sub prime crisis and downsizing in companies, it is very hard for the average family to cope. We are certainly in a recession and hope the government can help us quickly.