Housing Doom

Wall Street may not like it, but lower housing starts is good news for the housing market:

Privately-owned housing starts in October were at a seasonally adjusted annual rate of 529,000. This is 10.6 percent (±8.7%) below
the revised September estimate of 592,000 and is 30.7 percent (±8.3%) below the October 2008 rate of 763,000.

Single-family housing starts in October were at a rate of 476,000; this is 6.8 percent (±7.5%)* below the revised September figure of
511,000. The October rate for units in buildings with five units or more was 48,000.

Here’s how one analyst sees the situation: [Thanks L!]

Read the rest of this entry »

Chris Low, chief economist of FTN financial recently said:

[A] stable housing market is essential to a stable banking system, and he believes “everything that can go wrong in the housing market already has.”

I would disagree. One of the things that housing can still suffer from is attrition.  Some problems get worse over time.

One of the factors that can wear over time for housing is employment.  There is no such thing as a "jobless recovery"

With the unemployment rate at 10.2%, the stock market might take some comfort in the thought that we are closer to the peak in the unemployment than the trough.  Unfortunately, we are likely a lot closer to the beginning of a long, jobless recovery than the end.

If 200,000 jobs could be added monthly to nonfarm payrolls starting in November (and that will not happen in November), we would recover all of the jobs lost so far in the Great Recession sometime around April 2013.

Unemployed people don’t buy houses.  Underemployed people don’t buy houses.  People who are worried about their jobs don’t buy houses. [Unless they are downsizing.]

I don’t agree with the politics of John Buell, a political economist, but I have to give him his point here: 

One need only look at a number of widely accepted measures of economic health. While nearly one of six American workers is unemployed or underemployed, almost a third of our productive facilities stand idle. While homelessness continues to grow, nearly one in seven rental properties stands vacant and foreclosure rates rise.

Put aside Economics 101 and ask a simple question. Isn’t there something wrong with an economy that fails to steer unemployed workers into the unused plants? And if some policy achieved this purpose, wouldn’t more workers earn enough to rent those vacant homes and apartments?

Americans often pride themselves on looking at facts on the ground. I find it hard to deny that as an economy we have already produced enough homes and factories that everyone could live comfortably.

Read the rest of this entry »

Aristotle said that nature abhors a vacuum- it apparently doesn’t think much of abandoned neighborhoods either.  Take for example Contra Costa County, northeast from San Francisco:

Just like any residential street in Antioch, Gateway Drive has sidewalks, a paved road, retaining walls separating yards and sewer pipes. What it doesn’t have is residents.

Not human ones, anyway.

Instead, it’s burrowing owls, coyotes, jackrabbits and kestrels that have moved in.

This tract of land on the edge of development in Southeast Antioch has stood primed for new houses for more than two years, since the housing market collapsed and construction halted.

Now, native species have reclaimed the land — a reminder that until recently this part of Contra Costa County, now blanketed with development, was habitat for wildlife.

Read the rest of this entry »

It’s Friday, and while vacancies are supposed to be down from the first quarter, it looks like they are headed up again:

Oct. 29 (Bloomberg) — About 18.8 million homes stood empty in the U.S. during the third quarter as banks seized properties from delinquent borrowers and new home sales fell in September.

The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.4 million a year earlier and 18.7 million in the second quarter, the U.S. Census Bureau said in a report today. The record high was in the first quarter, when 18.95 million homes were vacant. The homeownership rate, meaning households that own their own residence, stood at 67.6 percent.

The reporter must have needed a positive comment- this seems to be the happy thought de jour:

“We are bumping along the bottom of the housing market,” said James Lockhart, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency. “There is the potential for another swing down.”

Somehow that reminds me of Robert Toll’s famous "dancing on the bottom" comment back in 2006- we all know how well that one worked out.

Read the rest of this entry »

Doom Transcripts: Index & Guide

Housing Doom is pleased to present a second selection from our under-construction transcript of the American Enterprise Institute’s October 22, 2009 event "The Deflating Bubble, Part VI: The Lessons of the Bubble and Crisis".¹

The event site has a number of resources, including an audio and video of the proceedings. There is as yet no official transcript.

This is the presentation by UBS fixed income researcher Tom Zimmerman.  Tom’s the most moderate of AEI’s Six Bears but in my opinion the scariest, because he usually brings the hardest data to the table.

Tom Zimmerman: [0:11:43] Thanks a lot, Alex, it’s great to be here again. [slide 0²] What’s amazing about coming down here every 6 months is that I’m usually viewed as one of the more bearish people in my shop, and also when I speak at conferences around the country I’m usually sort of sitting on the bearish side of these discussions. But I come down here, [laughs] and I’m not … it’s a … I feel like I’m a raving bull about what’s going to happen in the world when you listen to some of these people talk. So anyway, that hasn’t changed, in the last 6 sessions, so …

We had lunch together today, and it’s exactly the same.

I see some green shoots here and there, but I think that it’s not something the other panelists see some real major problems down the road.

What I thought I’d do today is just continue some of the things I’ve talked about before in terms of the housing market, mortgage market. And then at the end talk about some of the lessons that we’ve learned from this bubble which isn’t over with yet, but we’ve learned some lessons or at least some take-aways from it.

Read the rest of this entry »

You can watch the news to find out how the new home sale market is "stabilizing" and homebuilder sentiment is "improving", or you can do like I do and take a peek into L’s junk mail for a more realistic view of where builders think the market is headed: [Thanks L- it's great to have you back!]

Read the rest of this entry »

Doomers please welcome Kat Sanders, who has been kind enough to submit the following general commentary on the Home Builders to Housing Doom.  Kat blogs at her Construction Management Degree blog and, within that site, at The Fixer-Upper Blog. She invites your comments and questions either below in the comments or at her email address katsanders25@gmail.com.

Problems in the Construction Industry

by Kat Sanders

It’s not a good time to be connected in any way to the real estate or construction industry. The recent subprime crisis and the disastrous consequences that followed have taken its toll on everyone connected in any way to the real estate and building industries, and as recent statistics portray, there is no sign of a let up any time soon. A look at the figures shows that:

• More than 60,000 workers in the construction industry have lost their jobs
• There is a significant slowdown in the real estate industry with property values falling sharply.
• The severe credit crunch and the sharp fall in the demand for and price of houses has pushed the construction industry to the back foot.
• Builders are being pushed to conform to green building standards and use sustainable material and environmentally friendly designs to construct new buildings
• There is an increasing shortage of skilled workmen and labor
• Contractors are being forced to declare bankruptcy or go out of business
• Construction spending has fallen by as much as 50 percent over the past year
• Contractors who are still in business are trying to hold their heads above water by cutting costs and selling all the assets that they don’t really need but which cost them money to maintain.
• Commercial property prices have plunged leading to reduced salaries and the forcible laying off of staff.

The solutions to these problems may not be easily visible now, especially with the economy still struggling to look up. The only way to tide over this crisis is to cut costs and hope to stay in business till things start to look better. There have been reports that prices in the housing sector have bottomed out and that there are signs of revival in the market. If that is true and if these early trends show promises of continuing, then the problems that the construction industry is facing will solve themselves.

Read the rest of this entry »