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Banned
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Originally Posted by The_Jazz
Host, I find this very interesting from a professional perspective since residential construction currently accounts for about 45% of my income. While it's certainly true that the housing bubble has burst in certain places, what's true about politics - that it's all local - is true about real estate. There are current housing booms in 5 major cities that I deal with on a daily basis that aren't showing any signs of slowing down appreciably. Las Vegas is the most obvious one, especially for condos on the Strip.
That said, I think that you've drawn too narrow a window for a look at the fiscal health of the country. While I agree that the economy could be heading for a downturn, I disagree that the lending standards and housing boom are the cause.....
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The_Jazz, the downturn, both in average selling price and numbers of new building permits issued and new homes sold, is reported to be a nationwide phenomena. The statistics of the decline are supportive of my argument, both in trend and in severity. New data comes with the consideration that most of the country experienced much milder weather than ususal, throughout the Dec. thru Jan. period.
The Las Vegas strip proximity is unique because it is a "one of a kind" locale with a unique economic base that receives more international financial investment, interest, and tourist/gambling revenue than it's closest US competitor, New York City, does.
http://www.lvcva.com/getfile/Histori....pdf?fileID=80
Las Vegas 2006 visitors: 38,914,889 Visitor dollar contribution: $39.4 billion
Tourist spending rose nearly 25 percent in Las Vegas since 2001, from $31.9 billion.
The population of Las Vegas "proper", is still under 600,000, yet revenue from tourism is more than 50 percent above the revenue received by New York, a city with 12 times the Las Vegas population.
Even with all that money flowing in, the Businessweek forecast for the Las Vegas real estate market as a whole, is dismal for 2007:
Even if the price increases in the few areas of the country mentioned here, continue, is the population in those unaffected areas, large enough to offset the job losses and business and lender failures, everywhere else?
Quote:
http://www.forbes.com/2007/01/25/str...strongest.html
America's Best & Worst Housing Markets
Matt Woolsey, 01.25.07, 3:00 PM ET
Talk about being in the right place at the right time.
While speculators and flippers in places such as Boston and San Diego are running for cover, in other parts of the country they are basking in robust residential sales. Third-quarter median home prices last year climbed 14.6% in Seattle, Wash.; 14.3% in El Paso, Texas; and 12.3% in Portland, Ore.
They also increased by roughly 5% in Houston, Texas; Los Angeles, Calif.; Austin, Texas; Jacksonville, Fla.; and Charlotte, N.C., over the year before, according to the National Association of Realtors....
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You said that real estate acivity is "local", but as Elphaba pointed out, the market for the loans that are made and "packaged" into MBS for Freddie and Fannie to buy and attempt to resell to investors, is a narrow, national pair of two giant GSE's with increasingly questionable portfolios of the MBS's to sell to increasingly wary investors.
New Century Financial and the other large subprime lending firms were national in their business niche, and as they fail, they won't be replaced. It doesn't matter much if the buying and selling is all local, if the financing of mortgages and the lending guidelines are from a narrow, uniform, national source and structure. More failures and foreclosures in the more numerous declining local markets will restrict lending, and even appraisal activity in the as yet unaffected locales....
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http://www.wilmingtonstar.com/apps/p...703010355/1002
March 01. 2007 3:30AM
Sales of new homes fall 16.6 percent
Sales of newly constructed homes plummeted 16.6 percent in January from the preceding month. That was the largest decline since January 1994, when sales slid by 23.8 percent, the U.S. Department of Commerce reported Wednesday.
The decline in January - much steeper than analysts were anticipating - left sales at a seasonally adjusted annual rate of 937,000, the lowest level since February 2003. Sales fell sharply in all parts of the country, including the South, which saw a drop 9.7 percent.
The national pace of new-home sales was 20.1 percent lower than January 2006. And the supply of new single-family homes on the market rose to 6.8 months' worth from 5.3 months' in January 2006.
Prices also were down from a year earlier. The median sales price of a new home - where half sell for more and half for less - was $239,800 in January, a 2.1 percent decline from a year earlier.
In contrast, existing-home sales in January rose 3 percent from December 2006, by the biggest amount in two years, the National Association of Realtors reported Tuesday. But the median price of an existing single-family home fell from a year earlier, to $210,600, the sixth straight monthly decline from year-earlier levels, the trade group said.
New-home sales figures are based upon contracts signed, while existing-home sales reflect actual closings.
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Quote:
http://money.cnn.com/2007/02/16/news...arts/index.htm
Housing starts plunge
Housing starts fall much more than forecast, lowest level since '97; permits also fall as single-family permits hit 6-year low.
By Chris Isidore, CNNMoney.com senior writer
February 16 2007: 11:52 AM EST
NEW YORK (CNNMoney.com) -- Housing starts plunged in January to the slowest pace in more than nine years
.....New homes started in January fell 14.3 percent to an annual rate of 1.41 million from the 1.64 million pace in December, the Census Bureau reported Friday. Economists surveyed by Briefing.com had forecast a 1.6 million rate for January.
Housing starts fell to the lowest pace since August 1997 in January.
The last time starts fell to a pace this slow was August 1997.
The number is not only well below the December pace, but it is 22 percent below the average for all of 2006, when housing was already slowing down, and about 32 percent below the record building pace through all of 2005.
Latest prices in your hometown
The slump was widespread. Only the Northeast, the smallest region in terms of new home construction, posted a rise in starts compared to December. But starts were down 15.2 percent in the Midwest, 11.2 percent in the South and 28.5 percent in the West.
Applications for new home permits, which is generally viewed as a measure of builders' confidence in the market, fell 2.8 percent to an annual 1.57 million rate from 1.61 million a month earlier, which was a bit below economists' forecast of a 1.59 million pace.
The housing permit reading was helped by a second, straight month of strong permit application for buildings with five or more units. The permits for single-family homes fell 4 percent to a six-year low.....
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This gentleman sums up my argument better than I could:
Quote:
http://www.safehaven.com/article-6603.htm
December 29, 2006
............Real Estate and the Post-Crash Economy
By Barry Ritholtz
The Housing boom and bust have been page-one news for what seems like years now. Is there anyone left in the country who doesn't know about the huge run up in home prices during 2002-06, and the subsequent "correction?"
My guess is no one. What most people may not be aware of, however, is just how unusual residential real estate has been in the current cycle. The housing boom has played an enormous role, with few truly appreciating the outsized contributions the "Real Estate industrial complex" has played in the recovery and expansion. It can politely be described as "atypical."
Since the recession ended in 2001, Real Estate has been crucial in enabling enormous consumer spending, and helping to create many new jobs. These two factors have been the primary drivers of the post-crash economy. With this economic expansion now entering its 4th year, the cooling real estate market is increasingly presenting new risks. With the peak of the boom long since past, the current inventory build up, sales slow down, and price decreases are starting to take their toll on economic activity. Given how extraordinary the boom was, we may not be in for a run-of-the-mill downturn.
Few investors seem to have fully considered the impact the boom and subsequent bust will have - for the real estate market, to equities, and to the overall economy. Today's commentary aims to correct that. We want to put Housing's surge into the broader context of this business cycle, and examine what the slowdown will mean to various economically sensitive sectors. To do that, we will look at:
- How this expansionary cycle got started;
- Why this post-recession cycle has been so unusual;
- How this housing market has been "backwards"
- Where these factors are impacting consumption, the economy, and equities.
The Background......
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