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11 things to celebrate about 2009

9:50 AM
11 things to celebrate about 2009

Things weren't all bad. The stock market rebounded, and it was a great time to buy a home. Here's what else there was to be thankful for.
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.

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.

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. 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.

5. Roth IRAs more available

Although income-eligibility restrictions will remain for ongoing Roth IRA contributions, anyone, regardless of income, can convert a traditional IRA to a Roth IRA as of Jan. 1. You'll have to pay taxes at your top income-tax rate on any amount you convert, but all future earnings will be tax-free. So are all withdrawals, once the account has been open at least five years and you are at least 59 1/2 years old. There's an added incentive to convert to a Roth in 2010: You can spread the tax bill over your 2011 and 2012 returns.
A Roth IRA has no mandatory-distribution requirements, and you can leave a Roth to your heirs tax-free. With ballooning federal budget deficits and concerns about future tax hikes to pay for them, tax-free income in retirement will be a valuable asset.

6. More-healthful and safer food

Scientists are unlocking genome secrets that are allowing farmers to grow soybeans and sunflowers whose oils produce no trans fats. Research on the rice genome has produced one strain flush with vitamin A and another with six times the iron content typically found in conventional rice.

Exciting breakthroughs involving corn and cassava (a tropical fruit) will result in quality improvements in both and provide them with greater resistance to pests and diseases. Moreover, tweaking genes of farm animals is expected to improve animal health and bolster livestock production while reducing antibiotic residues in your meat and milk.

7. Bon appétit, for less

The cost of a classic holiday dinner was down 4% in 2009, according to the American Farm Bureau Federation. A feast for 10, including a 16-pound turkey, stuffing, sweet potatoes, rolls with butter, peas, cranberries, a relish tray and pumpkin pie with whipped cream -- are you full yet? -- set Americans back $42.91, on average, down $1.70.

The decline tracked decreases in an array of food items in 2009. Prices for whole milk were down 27% from a year ago, according to an informal third-quarter survey by the farm bureau. Prices for cheddar cheese decreased 23%, potatoes fell 22%, and apples were down 19%.

8. Personal savings rate is up

When U.S. taxpayers started receiving stimulus checks in May 2008, they tucked away that money rather than spending it, as signs of the recession first started to appear. Result: The savings rate skyrocketed to 5.8%.

The most recent figures show that we're still squirreling away 3.3% of our disposable income. That's still far below the 10% that was typical 25 years ago but a lot better than the near-zero savings rate of three or four years ago.

9. Credit card debt is declining

September's Federal Reserve Board survey showed credit card debt dropping by $10 billion, an annualized decrease of 13.3%.
At the same time, the average credit card balance is increasing as cardholders consolidate their debts on fewer cards.

New credit card charges dropped by about 2%, according to market research firm Synovate. Default rates, although still at very high levels, dropped for five of the top six credit card issuers in September.

10. Traffic death rates are dropping

The National Highway Traffic Safety Administration says 37,313 people lost their lives on U.S. roads in 2008, the lowest since 1961. That's 1.28 fatalities per 100 million vehicle miles traveled, the lowest rate ever recorded.

The reasons? A combination of safer cars, safer highway design, higher seat belt use and tougher enforcement of laws against impaired driving. Highway deaths usually drop during recessions, when people drive less, so there's reason to believe the 2009 statistics will bring good news, too.

11. Lodging prices are low

Overbuilding and the recession have hit the lodging industry hard. Room rates fell 9% in 2009, on average, and that trend is expected to continue in 2010, when prices could drop 2% more, says Bjorn Hanson of the Tisch Center for Hospitality, Tourism and Sports Management at New York University.

Travelers who are flexible with their lodging requirements (arriving Thursday, Friday or Saturday, for example) may be able to get deals 20% lower in 2010 than in 2009, depending on occupancy rates. Luxury hotels have been hardest hit in the downturn. Keep your eyes peeled for grand openings in 2010. For example, a Hotel Palomar opening in May in Chicago is offering pre-opening package rates starting at $89.

By Kiplinger's Personal Finance Magazine

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