But there's some good news. Ms. Bangalore notes that while housing's contribution to job growth has declined in recent months, "other sectors are picking up the slack."
Note they don't give details there as to what thos other sectors are... at least not in that article. I'd like to know what they are and how well they will hold up to the stress of falling consumer spending in the wake of a bust.
Probably 'medical care' or 'government jobs'... after all they're 'free'.
November 16 American Banker (Jody Shenn): After months of warnings from federal regulators about loosening home-loan underwriting standards, many observers and industry executives say most lenders have not significantly changed their practices. By most accounts, fierce competition, coupled with banks general comfort with the practices, has kept the industry from changing its product offerings or lending criteria much Observers say regulators may be moving slowly for several reasons. One is a fear of pushing bankers too far in the opposite direction and causing a credit crunch like the one in the early 1990s or even simply curtailing access to equity, which has been a boom to the economy in recent years Anther possible reason for regulatory restraint is that reining in lending practices could put banks at a severe disadvantage against unregulated lenders Another issue is that as long as banks are selling most of their riskiest loans, safety-and-soundness worries are muted.
vader it is an interesting site but appears to be dated... Q32003.
But FWIW if you go to the site and randomly check locations for the number of new hires per industry (not percentage change)... it looks like food service is near the top everywhere.
I saw somewhere on prubear where money was being treated as a commody used to fund all kinds of questionable projects.
The prubear link is pretty good this week vader... one of my favorites:
The only U.S.-produced items that I can think of that exist in large quantities in China are dollar bills, said Matthew Crabbe, the managing director of Access Asia Ltd., a market research firm.
Asha is one of my favorite writers along with Kasriel at NT, dryfly. (I have no idea what she is talking about by other sectors taking up the slack --I'll check the site right after this.) There is a wealth of material in the archives on housing and some interesting graphs in his latest issue here:
nov 15 The Econtrarian
Much is made of the house market related jobs starting to respond to 'cooler' condtions. And by 'related' one imagines not only the construction jobs and suppliers of those products that are physically part of the package but also the infrastructure (roads, services) and financing. But given how the house has served as a bank, the entire economy has benefitted from the consumer who has just discovered he can take that trip to Timbuktoo (previously not related to housing) or take up that life long ambition to play the sitar (previously not related to housing).
It's not that housing is physically more a part of our economy than it has ever been before ( It is: more building/GDP than even after WWII when the soldiers came home and were keen to have families.) but also that it has never had this function before: financing (in some measure) the rest of the economy.
In a way, vader's expression fits: the hollowing out of America has been done using the house. We have not waited and saved for those sitar lessons. He who hesitates is lost, but he who waits and saves is a loser (Ok, maybe a tad heavy --atleast not well regarded by the marketing gurus who are at the helm).
Now that housing is cooling, 'other sectors seem to be picking up the slack' again what sectors? A very vague and incomplete answer IMO. The economist is trying to have it both ways. I think Ms. Bangalore is talking out of both sides of her mouth. This economy has been housing- to really think that a new engine of growth has suddenly appeared, 'to rescue us' seems like wishful thinking.
Quickly perusing the entries Nov 14-18 on the daily commentary here: Daily Global Commentary
I could find no such sentiment from Asha B, Peter, so unless the NYT writer had a private email from her, I think this is very misleading.
Those btw were short commentaries and (to plug my favorite source again) juicy. Do I need to say I think NT is on top of the housing picture again?
Ok, Kasriel did think that 3.5% might have been the ceiling on interest rates and here we (Futures anyway) are talking about 4.5% by the end of Mar. And maybe that will be only wishful thinking.
The NYT has put an unusually bright, optimistic face on NorthernTrust's hard nosed view of housing and the economy.
The NYT has put an unusually bright, optimistic face on NorthernTrust's hard nosed view of housing and the economy.
Could be part of the 'NEW' New York Times...
There has been a not-to-subtle effort over the last few years to 'up-beat their message'... and not be so depressingly 'main stream liberal'... almost 'faith based' if you will.
Evidence: the addition of David Brookes to the Op Ed & the free reign Judy 'Prison Kneepads' Miller had from the Sr Editorial Board...
This could be more on the same theme. What next? possibly real estate tips from Paul Krugman.
Dryfly,
Bernanke is in both the there is no bubble camp and in the Fed should not interfere with bubbles camp. He has however, said that IF there is a housing bubble the appropriate response is regulatory. He has also affirmed the government put, and said it has to be carefully employed so as to penalize those who should have known better but not allow their disruptions to undermine financial stability (good luck on that one lol.) I think Bernanke may be of the clean up the mess later variety. Noland at Prudent Bear was criticizing Bernanke for holding that point of view this week.
The only U.S.-produced items that I can think of that exist in large quantities in China are dollar bills, said Matthew Crabbe, the managing director of Access Asia Ltd., a market research firm.
I read that piece in the NYTimes as well. At least it mentioned Chinese currency manipulation, import stipulations and rampant patent violation. If thats being printed in the NYTimes, the Chinese might as well send a representative to the Senate and formally ask for tariffs. Or they could just wait for US populist leaders to surface and foment nationalism and protectionism again, it worked out so well for the world last time
This is from a couple months ago and is for California only (you see the same thing to a lesser degree when looking at the national data) - the charts tell the story: California Jobs California Dreamin'
Excerpt:
Last month, these sectors accounted for all of the net new jobs (i.e., gains and losses in other sectors offset each other - these sectors accounted for 17,600 new jobs while the total number of new jobs was 17,200, on a seasonally adjusted basis):
--- 1. Trade, transportation, and utilities
--- 2. Leisure and hospitality
--- 3. Construction
Last month, as well as for the last few years, the dominant category within each of these sectors has been:
--- 1. Retail trade
--- 2. Food service
--- 3. Home building
Which roughly translates to the creation of a whole lot of jobs for:
--- 1. Wealth effect-enabled purchases of imported goods
--- 2. Wealth effect-enabled dining out
--- 3. Construction of new homes to create more wealth
It does seem that most of the job growth in the curent economic enviornment has been in regions with a booming housing market. Those areas with out this kind of growth have had subpar employment gains. Here in Connecticut, which has a mature economy, employment growth has been slow, despite in the past 4 years, rapidly appreciating housing prices. It does seem to me that this kind of arrangement (which is fixed by the Chinese) is doomed eventually. At what time? Who knows, but NOTHING lasts forever. The US economy is dependent on this kind of arrangement-when it ends-look out depression city. In my state of Connecticut, there will be a decline, but far less the compared to the real estate dependent geographic areas of the southwest, California and Florida.
This seems reasonable: that those states that have seen the most dramatic increases in housing prices are the most vulnerable to an economic slowdown. And those cities in those states that have seen the biggest gains in housing prices are the most likely to see the economic correction. But we have already seen how the (modest)foreclosure increases have come from the bedroom communities that service these hot spots. Those states that are relying on current real estate valuations of their residents may also be exposed to a downturn. Some states are more frugal than others, no? Not to mention the banks, should this be a large turndown.
I read the average number of sales per agent per year in CA is just over 1. Some agents do a ton. Some rarely make a deal. Maybe this cooling off will just shake out the weak hands.
Half a year? ago I saw the stat 1.4 sales/agent and the numbers that went with that showing that this was still a good (above median) income. This is where the productivity stat (maybe the GDP one too) really gets me excited. Really. [I am typing the rest of this with mitts on and close supervision so that the neighbors don't rush in and think I've been attacked by terrorists.] Nothing like a good muzzle.
I read the average number of sales per agent per year in CA is just over 1. Some agents do a ton. Some rarely make a deal. Maybe this cooling off will just shake out the weak hands.
Not just the weak hands. Strong agents employ assistants such as other licenses to show property (buyers agents), transaction coordinators, and telemarketers so as transactions diminish their operations will be cut back. Most agents are somewhere in the middle which means if they were doing 2-4 deals per month mabye this goes to 0-1 deal. The sales per agent stats are also misleading because of the many part timers that joined the fray looking for one or two big commission payouts and often never make a dime.
Thanks dchog. Would you know if there is any 'give' in those FE commissions esp in a softening market? Or is that just taken up by a rising market in litigation as the lawyers wade smelling blood or partially cooked meat?
Your view that the larger nationally franchised RE companies will not go upside down but thin, seems reasonable. And then I consider GM that has lost $4B so far this year and wonder if size just gives you more time to get thin or whether large companies could just go upside down without much notice (Fannie). I'm hoping you are right.
Commissions were already under pressure and that will only grow. Discount brokers that survive will be in a good position to pick up market share as some sellers begin to get squeezed, also traditional brokers are much more likely to take less just to get the listing as transaction volume dries up. Another hit to commissions will come from foreclosures and short sales which typically do not pay 6%. Since most RE offices are franchisees, look for the most experienced broker/owners in managing their overhead to survive the shake out because revenues are already shrinking here in CA.
So if some large RE company was improperly hedged say, (having taken a bet that there would be no yield curve inversion), the fact that this risk was mismanaged affects only the shareholders and the employees would get to live another day, albeit at reduced salary. The lone gun RE agent, a dying breed to be sure, still has his arsenal intact. He is as flexible as ever, --no reduction for him on his rice and beans.
6% --how does that compare with an architect's fees? And how is it that the architect's professional association is incapable of learning from the real estate association?
I'm not sure how 6% compares with other professional service fees but the amazing thing about a real estate commission is its link to the sales price and not the service rendered. I worked for a c-21 broker in 91 that had a rule of not accepting listing contracts from sales people if the commission was below 6%. As the bust deepened she was the first to break her own rule. Commissions are negotiable however realtors and the NAR use fear (sevice level and lack of exposure myths) to keep consumers paying.
Hi there you have a great blog. I will be sure to come back again. I have a website that deals with buy property. When you have a chance please check it out. Please visit buy property
Thanks,
But there's some good news. Ms. Bangalore notes that while housing's contribution to job growth has declined in recent months, "other sectors are picking up the slack."
Note they don't give details there as to what thos other sectors are... at least not in that article. I'd like to know what they are and how well they will hold up to the stress of falling consumer spending in the wake of a bust.
Probably 'medical care' or 'government jobs'... after all they're 'free'.
Nice link CR.
Enquiring minds want to know.
http://lehd.dsd.census.gov/cgi-bin/broker?_SERVICE=about_jobs&_PROGRAM=empprogs.wib_setup_2.sas&_state=0&_wib=NULL&_age=14-99&_sex=0&_top=10&_question=0
will list hiring date gathered by the census folks.
November 16 American Banker (Jody Shenn): After months of warnings from federal regulators about loosening home-loan underwriting standards, many observers and industry executives say most lenders have not significantly changed their practices. By most accounts, fierce competition, coupled with banks general comfort with the practices, has kept the industry from changing its product offerings or lending criteria much Observers say regulators may be moving slowly for several reasons. One is a fear of pushing bankers too far in the opposite direction and causing a credit crunch like the one in the early 1990s or even simply curtailing access to equity, which has been a boom to the economy in recent years Anther possible reason for regulatory restraint is that reining in lending practices could put banks at a severe disadvantage against unregulated lenders Another issue is that as long as banks are selling most of their riskiest loans, safety-and-soundness worries are muted.
404 Not Found
Looks like money is going to continue to be available for housing.
vader it is an interesting site but appears to be dated... Q32003.
But FWIW if you go to the site and randomly check locations for the number of new hires per industry (not percentage change)... it looks like food service is near the top everywhere.
Fast Food Nation.
Looks like money is going to continue to be available for housing.
That is the key factor... until moral hazard is returned to the market... this thing could go on a lot longer.
Has Bernanke said anything on this other than there is no bubble?
Prob takes 2 years to crunch the data.
But it gives the idea of the hollowing out of America some figures to look at.
Moral hazard is for the poor: It is a moral hazard to be poor.
I saw somewhere on prubear where money was being treated as a commody used to fund all kinds of questionable projects.
I saw somewhere on prubear where money was being treated as a commody used to fund all kinds of questionable projects.
The prubear link is pretty good this week vader... one of my favorites:
The only U.S.-produced items that I can think of that exist in large quantities in China are dollar bills, said Matthew Crabbe, the managing director of Access Asia Ltd., a market research firm.
Ouch.
Rumor has it that Ameriquest could be looking at 20% of recent loans failing.
Asha is one of my favorite writers along with Kasriel at NT, dryfly. (I have no idea what she is talking about by other sectors taking up the slack --I'll check the site right after this.) There is a wealth of material in the archives on housing and some interesting graphs in his latest issue here:
nov 15
The Econtrarian
Much is made of the house market related jobs starting to respond to 'cooler' condtions. And by 'related' one imagines not only the construction jobs and suppliers of those products that are physically part of the package but also the infrastructure (roads, services) and financing. But given how the house has served as a bank, the entire economy has benefitted from the consumer who has just discovered he can take that trip to Timbuktoo (previously not related to housing) or take up that life long ambition to play the sitar (previously not related to housing).
It's not that housing is physically more a part of our economy than it has ever been before ( It is: more building/GDP than even after WWII when the soldiers came home and were keen to have families.) but also that it has never had this function before: financing (in some measure) the rest of the economy.
In a way, vader's expression fits: the hollowing out of America has been done using the house. We have not waited and saved for those sitar lessons. He who hesitates is lost, but he who waits and saves is a loser (Ok, maybe a tad heavy --atleast not well regarded by the marketing gurus who are at the helm).
Now that housing is cooling, 'other sectors seem to be picking up the slack' again what sectors? A very vague and incomplete answer IMO. The economist is trying to have it both ways. I think Ms. Bangalore is talking out of both sides of her mouth. This economy has been housing- to really think that a new engine of growth has suddenly appeared, 'to rescue us' seems like wishful thinking.
Quickly perusing the entries Nov 14-18 on the daily commentary here:
Daily Global Commentary
I could find no such sentiment from Asha B, Peter, so unless the NYT writer had a private email from her, I think this is very misleading.
Those btw were short commentaries and (to plug my favorite source again) juicy. Do I need to say I think NT is on top of the housing picture again?
Ok, Kasriel did think that 3.5% might have been the ceiling on interest rates and here we (Futures anyway) are talking about 4.5% by the end of Mar. And maybe that will be only wishful thinking.
The NYT has put an unusually bright, optimistic face on NorthernTrust's hard nosed view of housing and the economy.
The NYT has put an unusually bright, optimistic face on NorthernTrust's hard nosed view of housing and the economy.
Could be part of the 'NEW' New York Times...
There has been a not-to-subtle effort over the last few years to 'up-beat their message'... and not be so depressingly 'main stream liberal'... almost 'faith based' if you will.
Evidence: the addition of David Brookes to the Op Ed & the free reign Judy 'Prison Kneepads' Miller had from the Sr Editorial Board...
This could be more on the same theme. What next? possibly real estate tips from Paul Krugman.
Dryfly,
Bernanke is in both the there is no bubble camp and in the Fed should not interfere with bubbles camp. He has however, said that IF there is a housing bubble the appropriate response is regulatory. He has also affirmed the government put, and said it has to be carefully employed so as to penalize those who should have known better but not allow their disruptions to undermine financial stability (good luck on that one lol.) I think Bernanke may be of the clean up the mess later variety. Noland at Prudent Bear was criticizing Bernanke for holding that point of view this week.
The only U.S.-produced items that I can think of that exist in large quantities in China are dollar bills, said Matthew Crabbe, the managing director of Access Asia Ltd., a market research firm.
I read that piece in the NYTimes as well. At least it mentioned Chinese currency manipulation, import stipulations and rampant patent violation. If thats being printed in the NYTimes, the Chinese might as well send a representative to the Senate and formally ask for tariffs. Or they could just wait for US populist leaders to surface and foment nationalism and protectionism again, it worked out so well for the world last time
This is from a couple months ago and is for California only (you see the same thing to a lesser degree when looking at the national data) - the charts tell the story:
California Jobs
California Dreamin'
Excerpt:
Last month, these sectors accounted for all of the net new jobs (i.e., gains and losses in other sectors offset each other - these sectors accounted for 17,600 new jobs while the total number of new jobs was 17,200, on a seasonally adjusted basis):
--- 1. Trade, transportation, and utilities
--- 2. Leisure and hospitality
--- 3. Construction
Last month, as well as for the last few years, the dominant category within each of these sectors has been:
--- 1. Retail trade
--- 2. Food service
--- 3. Home building
Which roughly translates to the creation of a whole lot of jobs for:
--- 1. Wealth effect-enabled purchases of imported goods
--- 2. Wealth effect-enabled dining out
--- 3. Construction of new homes to create more wealth
It does seem that most of the job growth in the curent economic enviornment has been in regions with a booming housing market. Those areas with out this kind of growth have had subpar employment gains. Here in Connecticut, which has a mature economy, employment growth has been slow, despite in the past 4 years, rapidly appreciating housing prices. It does seem to me that this kind of arrangement (which is fixed by the Chinese) is doomed eventually. At what time? Who knows, but NOTHING lasts forever. The US economy is dependent on this kind of arrangement-when it ends-look out depression city. In my state of Connecticut, there will be a decline, but far less the compared to the real estate dependent geographic areas of the southwest, California and Florida.
This seems reasonable: that those states that have seen the most dramatic increases in housing prices are the most vulnerable to an economic slowdown. And those cities in those states that have seen the biggest gains in housing prices are the most likely to see the economic correction. But we have already seen how the (modest)foreclosure increases have come from the bedroom communities that service these hot spots. Those states that are relying on current real estate valuations of their residents may also be exposed to a downturn. Some states are more frugal than others, no? Not to mention the banks, should this be a large turndown.
I read the average number of sales per agent per year in CA is just over 1. Some agents do a ton. Some rarely make a deal. Maybe this cooling off will just shake out the weak hands.
Half a year? ago I saw the stat 1.4 sales/agent and the numbers that went with that showing that this was still a good (above median) income. This is where the productivity stat (maybe the GDP one too) really gets me excited. Really. [I am typing the rest of this with mitts on and close supervision so that the neighbors don't rush in and think I've been attacked by terrorists.] Nothing like a good muzzle.
I read the average number of sales per agent per year in CA is just over 1. Some agents do a ton. Some rarely make a deal. Maybe this cooling off will just shake out the weak hands.
I agree.
Not just the weak hands. Strong agents employ assistants such as other licenses to show property (buyers agents), transaction coordinators, and telemarketers so as transactions diminish their operations will be cut back. Most agents are somewhere in the middle which means if they were doing 2-4 deals per month mabye this goes to 0-1 deal. The sales per agent stats are also misleading because of the many part timers that joined the fray looking for one or two big commission payouts and often never make a dime.
Thanks dchog. Would you know if there is any 'give' in those FE commissions esp in a softening market? Or is that just taken up by a rising market in litigation as the lawyers wade smelling blood or partially cooked meat?
Your view that the larger nationally franchised RE companies will not go upside down but thin, seems reasonable. And then I consider GM that has lost $4B so far this year and wonder if size just gives you more time to get thin or whether large companies could just go upside down without much notice (Fannie). I'm hoping you are right.
Commissions were already under pressure and that will only grow. Discount brokers that survive will be in a good position to pick up market share as some sellers begin to get squeezed, also traditional brokers are much more likely to take less just to get the listing as transaction volume dries up. Another hit to commissions will come from foreclosures and short sales which typically do not pay 6%. Since most RE offices are franchisees, look for the most experienced broker/owners in managing their overhead to survive the shake out because revenues are already shrinking here in CA.
So if some large RE company was improperly hedged say, (having taken a bet that there would be no yield curve inversion), the fact that this risk was mismanaged affects only the shareholders and the employees would get to live another day, albeit at reduced salary. The lone gun RE agent, a dying breed to be sure, still has his arsenal intact. He is as flexible as ever, --no reduction for him on his rice and beans.
6% --how does that compare with an architect's fees? And how is it that the architect's professional association is incapable of learning from the real estate association?
I'm not sure how 6% compares with other professional service fees but the amazing thing about a real estate commission is its link to the sales price and not the service rendered. I worked for a c-21 broker in 91 that had a rule of not accepting listing contracts from sales people if the commission was below 6%. As the bust deepened she was the first to break her own rule. Commissions are negotiable however realtors and the NAR use fear (sevice level and lack of exposure myths) to keep consumers paying.
Hi there you have a great blog. I will be sure to come back again. I have a website that deals with buy property. When you have a chance please check it out. Please visit buy property
Thanks,
Don