katrina may hurt your prediction. lots of new construction may be necessary to house all those displaced people. it may even have the opposite effect on the u.s. housing market that g.b.'s mortgage rate increase had on its housing market. with material and labor shortages emerging over the next two years, new dwellings will cost more to build. this could put price pressure on existing house prices, driving them even higher.
Katrina is likely to keep the construction industry and employment afloat for the reconsturction time, by increasing the demand for construction workers. The consumers of that talent is the deep pocketed insurance cos and Government, not residential consumers and the demand will be in a different area where property prices may be depressed due to the storm and the forced sales by margional owners whose insurance may not be enough or who just want out.
How it affects the hot RE markets in the US is questionable as it is demand in those areas that will drive prices there.
I guess the point is that construction employment may not be a reliable leading indicator in the US of a RE burst.
I agree with realist the demand for housing is already up in Baton Rouge where folks are seeing a 30 percent increase in home values in a week. The cost to build homes in the country will rise due to shortages, the fed will lower rates to stop recession and homes will continue to rise at alarming rates for the next two years.
"Unfortunately the US economy is probably more dependent on housing and the construction industry than the UK."
Given the very large amount of personal indebtedness in the UK added to the fact that in percentage terms UK price rises have easily outstripped those in the US, I would have my doubts about that statement.
"I would agree with Josh - the US economy is less dependent on housing and construction."
Simply because I suggest the UK economy is possibly more dependant does not mean that I don't also believe that the US economy is also very dependant on housing.
With the greatest respect, it seems, to me at any rate, that you are falling into a very old trap: constantly adjusting the facts and the realities simply in order to suit your own expectations.
Joshua, I'm going to look for the stats on housing / construction in the UK to compare to the US. The US recovery has been very dependent on housing ; new investment alone is at the WWII highs as % of GDP, employment gains have been disproportionately in the housing / construction fields over the last few years, etc. But I need to compare that to the UK.
If anyone has the stats for the UK, please let me know.
realist and Vader, I think the recovery from the hurricane will have some impact, but it is probably relatively small (maybe 0.5% of GDP) for the US economy. Yes, it could keep construction employment higher that I expected and definitely puts pressure on some gulf area housing prices. Of course, if the FED lowers rates (as YODA suggests), then the housing boom might continue for awhile.
Facts and Figures might help. I hate to argue without them.
My concern is that granted that the hurricane recovery is small related to the GDP, its effect on a single industry, might be great and in doing so negate the health of that industry as a measurment.
Pre-Katrina, NO was the 'Big Easy', a tourist city with an easy pace. People came to NO for vacation, party, conference and relaxation, not work. NO's share of national GDP was minimal before Katrina. Simultaneously, NO was a transportation gateway for lots of exports and imports into and out of Midwest and South. Surely, the infrastructures will be rebuilt but what about the rest of the city where serious social and economical polarizations were so prominent. So the question is what is the govt's vision of the rebuilt NO? Continue with the 'legacy' or something entirely different! Moreover, in my estimation, most reconstruction jobs will go to the local businesses and residents as part of the rebuilding efforts. NO was a self-sustaining local economy and likely will be the same.
In UK, investment in residential construction reached 3.9% of GDP in 2004. The corresponding figure for the US is 5.7%. As of the second quarter of 2005 the figure had risen to 6% for the US.
There is another factor to consider. Equity extraction and how much that has spurred consumer spending. Both are significantly higher in the US compared to the UK. I dont have the figures right now, but I had done this research earlier.
There is little doubt that Katrina has caused a bit of a boom (boomlet) in the areas surrounding the disaster area.
However, I think the general impact on home construction prices nationally (not locally) is a little exaggerated.
Manhattan had definitely cooled in the summer. I remain skeptical of the notion that it has heated up because of the 'Katrina' effect. Its been only a couple of weeks or so, and the Labor Day Weekend is a slow time in any case.
Very high end properties I can't speak about, they tend to move in strange ways.
I can tell you that Northern/Central NJ has been fairly cool. Inventory has increased and a huge number of open houses last weekend. In my community in Northern NJ, 4 of 40 homes are up for sale, most for at least 2-3 months, many have dropped prices by 10% at least, still not sold.
Re tea's numbers. Surely, CR, the situation is way more complex that. Just to start one would have to weigh up the different levels of personal indebtedness, how far out of line real estate prices are in the US and UK, different methods of funding purchases, and unemployment levels.
I remember well just how devastating the UK property crash was in the early 90s. Yes, the circumstances regarding the ERM and inflation were very different, but, on the other hand, personal indebtedness was lower and house prices were not as extreme as they are today.
Joshua, you make some excellent points. I was just trying to suggest that the UK might be a leading indicator for the US. My comment that the US economy is "probably more" dependent on the housing sector than the UK was just an aside.
From what I've read, it is very possible that housing in the UK is more overvalued than the US. And I believe the UK uses variable rate loans (instead of a mix of ARM and fixed) - so they are more susceptible to interest rate changes.
The real question (for me) is will the US follow the UK's path with a slowing housing market leading to falling retail sales, then falling construction employment. I think the answer is yes.
"In the days to come, hundreds of thousands of Southern pine trees will be hauled to small-town mills to be turned into lumber, plywood and, if badly damaged or small, pulp for making paper. In the days after that, Southern businesses and homeowners will take those products 2-by-4s, plywood sheets and wood for decking and begin to restore the storm-battered gulf.
Timber growers such as Brooke will count their losses. Katrina took about 70% of his timber ready for harvest; trees worth at least $2 million before the storm. "
Basically a lot of timber will be coming on the market as salvage at the same time demand for that timber goes up. How they concel each other is an interesting question.
i do not think that the higher strata of n.o.'s population, that stayed, with guns in hands to guard their homes and business, will allow n.o. to be restored, only to become, once again, the crime-ridden, public housing city it was before katrina hit, without a fight. much of the new construction will have to find a new venue. although, it is my understanding, that the u.s. govt is sending thousands of mobile homes to the city. this is not the most well thought out solution. i have to wonder who was awarded the sweetheart deal.
"Prior to 1993, the sources of household cash flow were split about 55% from income and 45% from new debt. Beginning in 1993, new debt increasingly became the source of cash flow. In 2005, new debt of about 12% of GDP should provide nearly 86% of household cash flow."
This cash flow analysis may have some leading indicator significance.
If the assertion that debt will have to rise to x% finance household cash flow for purchases, any falling below that amount could be trouble.
I can't imagine why the housing debate continues. Perhaps a few of you missed my post on 9/13? Let me sum it up for you:
"It's over, happy landings." :>)
Time to cash in that equity
This is 38,000 jobs out of a ~30 million workforce, compared to ~145 million in the US. That would be the equivalent of 190,000 jobs here.
In one industry in 3 months.
Ouch.
katrina may hurt your prediction. lots of new construction may be necessary to house all those displaced people. it may even have the opposite effect on the u.s. housing market that g.b.'s mortgage rate increase had on its housing market. with material and labor shortages emerging over the next two years, new dwellings will cost more to build. this could put price pressure on existing house prices, driving them even higher.
Katrina is likely to keep the construction industry and employment afloat for the reconsturction time, by increasing the demand for construction workers. The consumers of that talent is the deep pocketed insurance cos and Government, not residential consumers and the demand will be in a different area where property prices may be depressed due to the storm and the forced sales by margional owners whose insurance may not be enough or who just want out.
How it affects the hot RE markets in the US is questionable as it is demand in those areas that will drive prices there.
I guess the point is that construction employment may not be a reliable leading indicator in the US of a RE burst.
I agree with realist the demand for housing is already up in Baton Rouge where folks are seeing a 30 percent increase in home values in a week. The cost to build homes in the country will rise due to shortages, the fed will lower rates to stop recession and homes will continue to rise at alarming rates for the next two years.
Scary
"Unfortunately the US economy is probably more dependent on housing and the construction industry than the UK."
Given the very large amount of personal indebtedness in the UK added to the fact that in percentage terms UK price rises have easily outstripped those in the US, I would have my doubts about that statement.
I would agree with Josh - the US economy is less dependent on housing and construction.
"I would agree with Josh - the US economy is less dependent on housing and construction."
Simply because I suggest the UK economy is possibly more dependant does not mean that I don't also believe that the US economy is also very dependant on housing.
With the greatest respect, it seems, to me at any rate, that you are falling into a very old trap: constantly adjusting the facts and the realities simply in order to suit your own expectations.
I never said that the US economy wasn't very dependent on housing.
I agree with you and then you kick me in the teeth?
Where are the facts and realities you mention?
How do you know what my expectations are and don't give me that respect B.S.
I really give a sh!!! about your respect for me. Just who the heck do you think you are?
I have earned the respect of much more important and successful people than you.
Joshua, I'm going to look for the stats on housing / construction in the UK to compare to the US. The US recovery has been very dependent on housing ; new investment alone is at the WWII highs as % of GDP, employment gains have been disproportionately in the housing / construction fields over the last few years, etc. But I need to compare that to the UK.
If anyone has the stats for the UK, please let me know.
realist and Vader, I think the recovery from the hurricane will have some impact, but it is probably relatively small (maybe 0.5% of GDP) for the US economy. Yes, it could keep construction employment higher that I expected and definitely puts pressure on some gulf area housing prices. Of course, if the FED lowers rates (as YODA suggests), then the housing boom might continue for awhile.
Best Regards to all.
CR
Facts and Figures might help. I hate to argue without them.
My concern is that granted that the hurricane recovery is small related to the GDP, its effect on a single industry, might be great and in doing so negate the health of that industry as a measurment.
"If anyone has the stats for the UK, please let me know."
I'll see what I can do.
"If anyone has the stats for the UK, please let me know."
I'll see what I can do.
Pre-Katrina, NO was the 'Big Easy', a tourist city with an easy pace. People came to NO for vacation, party, conference and relaxation, not work. NO's share of national GDP was minimal before Katrina. Simultaneously, NO was a transportation gateway for lots of exports and imports into and out of Midwest and South. Surely, the infrastructures will be rebuilt but what about the rest of the city where serious social and economical polarizations were so prominent. So the question is what is the govt's vision of the rebuilt NO? Continue with the 'legacy' or something entirely different! Moreover, in my estimation, most reconstruction jobs will go to the local businesses and residents as part of the rebuilding efforts. NO was a self-sustaining local economy and likely will be the same.
In UK, investment in residential construction reached 3.9% of GDP in 2004. The corresponding figure for the US is 5.7%. As of the second quarter of 2005 the figure had risen to 6% for the US.
There is another factor to consider. Equity extraction and how much that has spurred consumer spending. Both are significantly higher in the US compared to the UK. I dont have the figures right now, but I had done this research earlier.
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tea, Great numbers. Thank you.
Best Regards!
Slowdown? Real estate still going strong - Sep. 14, 2005
There is little doubt that Katrina has caused a bit of a boom (boomlet) in the areas surrounding the disaster area.
However, I think the general impact on home construction prices nationally (not locally) is a little exaggerated.
Manhattan had definitely cooled in the summer. I remain skeptical of the notion that it has heated up because of the 'Katrina' effect. Its been only a couple of weeks or so, and the Labor Day Weekend is a slow time in any case.
Very high end properties I can't speak about, they tend to move in strange ways.
I can tell you that Northern/Central NJ has been fairly cool. Inventory has increased and a huge number of open houses last weekend. In my community in Northern NJ, 4 of 40 homes are up for sale, most for at least 2-3 months, many have dropped prices by 10% at least, still not sold.
Article from the NY Post on the housing market.
PageNotFound
Re tea's numbers. Surely, CR, the situation is way more complex that. Just to start one would have to weigh up the different levels of personal indebtedness, how far out of line real estate prices are in the US and UK, different methods of funding purchases, and unemployment levels.
I remember well just how devastating the UK property crash was in the early 90s. Yes, the circumstances regarding the ERM and inflation were very different, but, on the other hand, personal indebtedness was lower and house prices were not as extreme as they are today.
Of course, if the FED lowers rates (as YODA suggests), then the housing boom might continue for awhile.
If the Fed holds down rates (more stimulation?), further propping up speculation in RE, wouldn't the inevitable crash be that more painful?
Joshua, you make some excellent points. I was just trying to suggest that the UK might be a leading indicator for the US. My comment that the US economy is "probably more" dependent on the housing sector than the UK was just an aside.
From what I've read, it is very possible that housing in the UK is more overvalued than the US. And I believe the UK uses variable rate loans (instead of a mix of ARM and fixed) - so they are more susceptible to interest rate changes.
The real question (for me) is will the US follow the UK's path with a slowing housing market leading to falling retail sales, then falling construction employment. I think the answer is yes.
Best Regards.
One example of the complexity of figuring how Kintrina will affect.
USATODAY.com - Katrina turned lush forests into wastelands
"In the days to come, hundreds of thousands of Southern pine trees will be hauled to small-town mills to be turned into lumber, plywood and, if badly damaged or small, pulp for making paper. In the days after that, Southern businesses and homeowners will take those products 2-by-4s, plywood sheets and wood for decking and begin to restore the storm-battered gulf.
Timber growers such as Brooke will count their losses. Katrina took about 70% of his timber ready for harvest; trees worth at least $2 million before the storm. "
Basically a lot of timber will be coming on the market as salvage at the same time demand for that timber goes up. How they concel each other is an interesting question.
i do not think that the higher strata of n.o.'s population, that stayed, with guns in hands to guard their homes and business, will allow n.o. to be restored, only to become, once again, the crime-ridden, public housing city it was before katrina hit, without a fight. much of the new construction will have to find a new venue. although, it is my understanding, that the u.s. govt is sending thousands of mobile homes to the city. this is not the most well thought out solution. i have to wonder who was awarded the sweetheart deal.
Here is a Consumer cash flow analysis from the pru bear site.
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"Prior to 1993, the sources of household cash flow were split about 55% from income and 45% from new debt. Beginning in 1993, new debt increasingly became the source of cash flow. In 2005, new debt of about 12% of GDP should provide nearly 86% of household cash flow."
This cash flow analysis may have some leading indicator significance.
If the assertion that debt will have to rise to x% finance household cash flow for purchases, any falling below that amount could be trouble.
"I was just trying to suggest that the UK might be a leading indicator for the US."
I always did find obiter dicta more fascinating than ratio decidendi.
Many thanks for your very full answer.
Joshua
I can't imagine why the housing debate continues. Perhaps a few of you missed my post on 9/13? Let me sum it up for you:
"It's over, happy landings." :>)