With the Best Buy news and the Fed meeting this could be a big up day.
I think the market has approached Mad-Lib status (not picking on you, Joe!)
With the ______ (good/bad) news from _______ (S&P 500 firm here), we expect the effects on ______ (bonds/currencies/oil) to be _________ (positive/negative), and the market to ______ (rise/fall/crater) by ______ (random 3 digit number).
With the Best Buy news and the Fed meeting this could be a big up day.
Today really illustrates how the Federal Reserve is the markets. And that any notion that we have free markets is a complete fraud.
Absolutely horrible economic news is ignored. Why?
Because today is the day for the Federal Reserve to step in and intervene in our markets once again.
This is the source of ALL the problems we have today.
Markets do not reflect reality. They reflect the decisions of the Federal Reserve and their attempts to create a fantasy world that does not exist in reality.
These people have ruined the lives of millions of Americans with their meddling and incompetence.
This is why the market deals better with this than the government.
1. Bubble was created. By Fed.
2. Prices fall.
3. Supply shrinks.
4. Housing becomes affordable.
5. Buyer meets seller.
6. A floor is set.
Quick and painful vs long, painful and an alphabet soup of unintended consequences.
What's worse is that with many banks in the United States are continuing to try to sell homes with people losing their jobs. This asinine logic will only lead to more foreclosures and a harder collapse once the losses are recognized. The unemployment next year is going to be insane, but the problems are going to keep getting worse.
Giving money to corporations was never the answer and it will lead to long-term disaster.
The strongest move that Bernanke could make to lower long rates - his goal - is the one he will not make. If he announced that the Fed rate would hold at the current level and that the Fed would accept a certain limited amount of deflation before taking further action, the long rate would immediately drop. He should have taken that step 6 months ago... then he would have more ammo left to halt deflation at a determined point. Once deflation takes prices to a predetermined point, the Fed could resume 'actions', but would be in a stronger position than today. Today they are fighting the natural course of things; after some more deflation they will be moving with the cycle.
If I remember correctly back sometime in the summer you had a post calling for commenters to post up their estimates for housing starts or maybe new house sales and existing home sales for the same period next year.
Am I recalling that correctly? I'm wondering how this housing start number jibes with the median estimate given in that contest.
Dollar sinking to 89.83 yen
Best Buy down 77% and offering buyouts
CPI down the most since 1932 1.7%
Housing cliff diving
Goldman Sachs with record losses
Oil rising
Never been a better time to buy
Haha.
Why are futures up
OTTAWA Stephen Harper has delivered his bleakest forecast yet for the Canadian economy, warning yesterday the future is increasingly hard to read and conceding the possibility of a depression.
"The truth is, I've never seen such uncertainty in terms of looking forward to the future," the Prime Minister told CTV News in Halifax.
I find it hard to understand why anyone would be building right now? What is the logic behind building a house right now - the only sane reason I can think of is your house has burnt down and your uncle is a builder.
What's so great about 1932?
REBear
ROTFL. Sigh... nothing like competing with the best.
I'm with sportsfan, this will be spun into a lack of supply. But wait...
Look at all of the supply coming online. One of my friends just bought a place. (Sigh...) As we drove past the half dozen homes for sale on the way to his new Casa, we spoted quite a few condo complexes still being completed. We also noted two homes being extensively remodeled (ranch into 2 story).
Until we have capitualization, there is no recovery. Ugh... We're not there yet.
`They're a survivor and they continue to pick up market share, but it's going to be volatile and you have to be able to stomach some risk,'' said William Fitzpatrick
They're a sycophant of the Treasury Department and continue to solidify its too big to fail status, but as its balance sheet becomes more transparent you'll have to keep wearing adult diapers, said asl loves lenin.
thats why i think this unwinding will take so long. it like they didnt get the message that we have a huge surplus of houses. or maybe they just want to get theirs before everything hits
all that money didnt do a bit of good bet they going to need more money cant let them go down arent they the reason we bailed aig? poor henry hope he didnt really want to go back there.
--
Aren't these numbers and new Home Sales (SFH) much worse than what CR was forecasting about a year ago?
Can we say that CR has been "too optimistic?" This broken record will keep playing for years to come. CR wouldn't dare to err on the pessimistic side. After all, he is an economist.
Nice to see you keep the focus on employment. That will definitely determine depth of recession and maybe the trigger for new wave of defaults and further credit constraints. Vicious circle. Updated forecast soon ?
jas - I've been here for a couple of years now and I think you have been spot-on all along. EVERYONE knows your differences with CR so when he finally slides into your camp please try and handle it graciously. Thanks.
The way to turn today's starts data into good news - already done, by the way - is the same as always. The worse things get, the nearer the bottom we must be. Without regard to how much lower the bottom will be than the happy talk crowd is willing to admit.
By the way, before anybody bothers to praise Jas for his views, you should keep two things in mind. One is that Jas doesn't actually present any evidence. He just keeps saying "worse than that!, worse than that!". A child could do that.
The other is that Jas was apparently beaten up by an economist and now thinks every economist is a meanie. This has gone well into the realm of name calling and bigotry.
So, we have Jas claiming that people who work hard and show their work are evil, selfish and sinister while jumping up and down saying "worse than that!"
Jas needs to put his anxieties over economist boogie-men aside and join the grown-up discussion.
I just heard, in the background, Matt Lauer saying it is a good time to buy housing.
Well, it is a good time to refinance existing housing. A really good time. I locked in a 30-year fixed @ 4.875% with no points this morning. That's a quick $300 knocked off the monthly nut. I've gotta admit, I never dared to dream I would ever again see a 4-handle on 30-year rates.
But to buy still-depreciating assets that one doesn't already own, low rates or no? Umm, not so much.
Somewhat of a rehash of CR's post, but has a few more details. Here is what I posted on Zacks.com:
In November both housing starts and permits fell to record lows. I consider this to be good news, since it represents a decline is misallocation of resources and means we might eventually work off some of the huge inventory overhang and some day see an end to the housing mess that is ground zero of the economic turmoil. In the meantime though, it means that economic growth will be even weaker in the fourth quarter than most are currently expecting.
Building Permits, the best indicator of future housing starts, fell to a seasonally adjusted annual rate of 616,000, a 15.6% decline from the 730,000 rate in October and 48.1% below the 1,187 million rate of a year ago. All four regions of the country were down, both on a month to month basis, and year over year, but clearly the West held up best. Permits there fell just 3.7% for the month and ar3e down 43.6% year over year. Worst hit for the month was the Midwest where the monthly decline was 22.1%, and the year over year decline was 46.9%. The all important South region fell 18.7% for the month and is down 50.3% year over year, while the Northeast posted drops of 14.7% and 49.2%. From these numbers it is very clear that there will be no rebound in housing starts as we enter the new year. Given the inventory overhang of both new and existing homes, and a very weak economic environment which is most likely causing negative housing formation (more people deciding to take on room mates or move back in with Mom than setting up their own place) I think that the permits levels are still way to high.
Housing Starts tumbled 18.9% for the month, to a seasonally adjusted annual rate of 625,000 from 771,000 in October and 1,179,000 a year ago (-47.0%). Keep in mind that the housing slowdown has been going on for well over a year now, and that Housing Starts stayed over 2 million a month for over a year at the peak. The Northeast was hardest hit this month with a 34.6% decline, and down 60.2% on a year over year basis. The Midwest was the next worst, with a 23.1% decline for the month and a 55.5% year over year decline. The west was down 16.6% for the month and is down 47.5% for the year. The South, which is by far the biggest homebuilding region, posted a 15.9% decline for the month and is down 40.9% from a year ago.
The decline in permits and starts means that there will be more layoffs in the construction industry. So far housing completions have not fallen as far as starts, (down 22.8% year over year, and actually up 3.3% for the month). Of course workers work on the house until it is completed, they are not laid off at the housing start. But clearly the pipeline is starting to empty out. For most of the last year, some of the laid off workers in residential construction could find new work in Commercial real estate development. However, that is about to follow residential construction over the cliff.
I honestly dont know why most of the big publically traded homebuilders are still in business. Firms like Pulte (PHM), D.R. Horton (DHI), Ryland (RYL) and Beazer (BZH) simply serve no useful economic purpose at this time. I would continue to avoid them until we see at least half of the names in the industry go into chapter seven liquidation.
CR, thanks for these intriguing charts. The housing starts chart must be the most dramatic one I've ever seen. It reminds me (in look as well as subject matter) of a painting I saw in a slideshow in an art history class many years ago. It was titled "The East Wind" by Charles Burchfield. Here's what it looks like: The East Wind by Charles Burchfield
"Charles Ephraim Burchfield (April 9, 1893 - January 10, 1967), an American watercolor painter, was born in Ashtabula Harbor, Ohio. He is known for his visual commentaries on the effects of Industrialism on small town America as well as for his paintings of nature. His paintings are in the collections of many major museums in the USA and have been the subject of exhibitions at the Metropolitan Museum of Art, and the Museum of Modern Art as well as other prominent institutions."
The following may not be a popular sentiment except here in New England: If no new houses were built in my town ever again, I and a lot of people that I know would be happy. New construction has almost stopped for the time being, so we and our beautiful woods are getting a well-deserved break.
--
"Jas needs to put his anxieties over economist boogie-men aside and join the grown-up discussion."
k harris,
Look who is talking. You guys are disgustingly lazy. I have made my forecasts and the root causes of the current CRISIS years ago. I don't engage in monthly, or quarterly forecasts.
CR has been dead wrong on many forecasts related to Housing, CRE and the nature of this recession, but how is a lazy person to know. This is what I posted in early 2008:
"CR, Didn't you forecast that New Home Sales would bottom at 600K? My forecast has been for a new low below 400."
Jas just has a subscription to A.G. Shilling's Insight. The whole housing matter was laid out there from 2003-2005. That is his PhD in economics or either the University of Phoenix's on line course.
Also in Insight Shilling predicted in the 1980's that the long bond would go to 3%.
Learning is important to investment there CR. Jas has nothing to learn from dopes except the ones he dare not mention.
I'm in Norfolk VA & this Virginia Beach/Norfolk MSA is a huge Navy & military area. Just got the new Basic Housing Allowance for 2009 chart (with its 6.9% increase), & an E-5 with dependents will get $1410.00 monthly BHA (tax-free) & w/out dep's will get $1154.00
Low interest & the $0-down VA loans are available.
Median price here has only dropped about 4%, so those BHA numbers still allow military people to buy for their tours here-- (if they don't think too hard about their re-sale chances when they leave.)
The local paper's still embargoing the bad local housing news & the historic glut in inventory here, tho it did grudgingly report recently that local foreclosure rate is "rising" (our one local rag doesn't like to burden us with lots of "hard" numbers & statistics & such...) but the rise is "mitigated" by foreclosure moratoriums over the hol's by the Feds.
So presumably, we're not to worry.
My not-too-brilliant observation is that given the "variable" of increased & generous DOD housing allowances, all bubbles in military areas will be the slowest to deflate. Boosting the BHA on military areas on the coasts does help to put a floor under those local house prices.
Also, if memory serves, I went rootin' round on the OCWEN site some time ago-- evidently they service lots of Gov. foreclosures-- & I was quite surprised to find in the fine print that anybody can buy a VA foreclosure, at the VA interest rate, & it was either without a credit check or without checking credit scores-- will go back there if time allows & see.
" Tom Stone writes:
Bob Dobbs,lots of new stripmalls and tract homes still going up in beautiful Dixon CA,home of the "Milk Farm".
Tom Stone | 12.16.08 - 9:33 am | # "
I haven't stopped in Dixon in 30 years. I'm sure it's gotten bigger; but I doubt that it's improved.
I can't imagine who'd live there -- unless it's trying to be Davis' first suburb.
Dirk, well said. We agree this report is, at face value, good news as the excessive single family and condo inventory overhang must be worked off to have any chance at restoring rational housing dynamics. The worst bubble markets are years away from recovery with more housing blood to be let this next year or two.
Several have asked where houses are being built consider cities with (relatively) strong employment given economic conditions and home for sale inventories at or near equilibrium Dallas, Fort Worth, Houston to name a few. Should they be building? We sure wouldnt be developing new projects now.....
Well, since the houses at the peak were mostly built by illegals, that stat is bullshit. Those people are going back to Mexico (I hope). It was one of the biggest scams in history.
There are two items that cause a need for new construction: (1) existing houses removed from inventory due to aging or destruction, and (2) new household formation.
It would be interesting to come up with a graph of "need for new housing" and plot that against actual construction.
If we assume that on average a house will last 80 years until it is no longer usable or destroyed through fire or other accidents or disasters, then a proxy for the removal rate is simply the new home construction 80 years ago (averaged over, say a 20 year period to even out year to year jumps).
To that add the annual change in the number of households, and that gives you the need for new construction estimate.
Wally is spot on- government policies should be designed to allow for deflation to the point where middle class affordability is back in place and the bubble effects are gone, then using all of its powder to stabilize things and to strengthen that middle class.
Related, Jas' consistent rap has been that we prefer to see goverment policy as rationally-based, but there are always hidden agendas that we don't like to consider and are not in our best interests.
I don't like Jas' mean-spiritedness but I think he's just trying to shock the conversation in a more clear-headed direction, reminding us that we have weak boundaries and too much tolerance for incompentence and abuse by moneyed interests in the US.
what I dislike here most is short-term investors dominating the conversation. You all don't seem to realize that your intention to make money on present day phenomenon is, on a macro scale, exactly what's gotten us all into this mess.
first
Expired
Japanese workers protest massive wave of job cuts by major companies
Woot another record! We'll be setting new records for a while.
With the Best Buy news and the Fed meeting this could be a big up day.
I think the market has approached Mad-Lib status (not picking on you, Joe!)
With the ______ (good/bad) news from _______ (S&P 500 firm here),
we expect the effects on ______ (bonds/currencies/oil) to be
_________ (positive/negative), and the market to ______ (rise/fall/crater)
by ______ (random 3 digit number).
There's gotta be a way to spin this. Come on, put on your NAR hats, people.
Welcome to the Great Recession!
For JJ: Welcome to the GD2!
Drop in consumer prices is most since 1932.
>
What's so great about 1932?
With the Best Buy news and the Fed meeting this could be a big up day.
Today really illustrates how the Federal Reserve is the markets. And that any notion that we have free markets is a complete fraud.
Absolutely horrible economic news is ignored. Why?
Because today is the day for the Federal Reserve to step in and intervene in our markets once again.
This is the source of ALL the problems we have today.
Markets do not reflect reality. They reflect the decisions of the Federal Reserve and their attempts to create a fantasy world that does not exist in reality.
These people have ruined the lives of millions of Americans with their meddling and incompetence.
This is why the market deals better with this than the government.
1. Bubble was created. By Fed.
2. Prices fall.
3. Supply shrinks.
4. Housing becomes affordable.
5. Buyer meets seller.
6. A floor is set.
Quick and painful vs long, painful and an alphabet soup of unintended consequences.
The only I would make to Eric's Mad-Lib format is to allow the number to be either a 3 or 4 digit number.
Welcome to the Great Recession!
Dave of SV | 12.16.08 - 8:58 am | #
Nah.... futures are up. It's just a mental recession, you hater.
Sell the news on the FOMC announcement ?
Goldman Sachs-
The loss proves the turmoil in the financial markets has tripped up even the best-run financial institutions.
Best run?
With Hank and Ben giving them 100's of billions they still managed to lose 4.97 a share.
No need for comedy or satire anymore
There's gotta be a way to spin this.
Sure. Supply is shrinking. Get one before they're all gone.
What's worse is that with many banks in the United States are continuing to try to sell homes with people losing their jobs. This asinine logic will only lead to more foreclosures and a harder collapse once the losses are recognized. The unemployment next year is going to be insane, but the problems are going to keep getting worse.
Giving money to corporations was never the answer and it will lead to long-term disaster.
Frankly, I shake my head in wonder whenever I see someone still building houses in California.
That said, almost all these few projects are high-end single homes, not developments. Buyers from Mars, I guess.
I'm waiting for the numbers on housing stops.
Only 7 non shopping days till Festivus!
OT,
Goldman declares 2.1 Billion Dollar loss...
Market raises middle finger at GS: "I told you so".
Off topic.
The strongest move that Bernanke could make to lower long rates - his goal - is the one he will not make. If he announced that the Fed rate would hold at the current level and that the Fed would accept a certain limited amount of deflation before taking further action, the long rate would immediately drop. He should have taken that step 6 months ago... then he would have more ammo left to halt deflation at a determined point. Once deflation takes prices to a predetermined point, the Fed could resume 'actions', but would be in a stronger position than today. Today they are fighting the natural course of things; after some more deflation they will be moving with the cycle.
CR,
If I remember correctly back sometime in the summer you had a post calling for commenters to post up their estimates for housing starts or maybe new house sales and existing home sales for the same period next year.
Am I recalling that correctly? I'm wondering how this housing start number jibes with the median estimate given in that contest.
Dollar sinking to 89.83 yen
Best Buy down 77% and offering buyouts
CPI down the most since 1932 1.7%
Housing cliff diving
Goldman Sachs with record losses
Oil rising
Never been a better time to buy
Haha.
Why are futures up
OTTAWA Stephen Harper has delivered his bleakest forecast yet for the Canadian economy, warning yesterday the future is increasingly hard to read and conceding the possibility of a depression.
"The truth is, I've never seen such uncertainty in terms of looking forward to the future," the Prime Minister told CTV News in Halifax.
"I'm very worried about the Canadian economy."
This page is available to GlobePlus subscribers
At least he'll entertain the possibility.
"Why are futures up"
Viva Viagra?
I find it hard to understand why anyone would be building right now? What is the logic behind building a house right now - the only sane reason I can think of is your house has burnt down and your uncle is a builder.
Well,GOOD MORNING SUNSHINE! Let's all sing a few verses of "every body is beautiful",then go outside and kill something....
Wally, good thinking. Send him an SMS.
What's so great about 1932?
REBear
ROTFL. Sigh... nothing like competing with the best.
I'm with sportsfan, this will be spun into a lack of supply. But wait...
Look at all of the supply coming online. One of my friends just bought a place. (Sigh...) As we drove past the half dozen homes for sale on the way to his new Casa, we spoted quite a few condo complexes still being completed. We also noted two homes being extensively remodeled (ranch into 2 story).
Until we have capitualization, there is no recovery. Ugh... We're not there yet.
Got Popcorn?
Neil
`They're a survivor and they continue to pick up market share, but it's going to be volatile and you have to be able to stomach some risk,'' said William Fitzpatrick
They're a sycophant of the Treasury Department and continue to solidify its too big to fail status, but as its balance sheet becomes more transparent you'll have to keep wearing adult diapers, said asl loves lenin.
Buy now - they aren't making any new houses, you know.
thats why i think this unwinding will take so long. it like they didnt get the message that we have a huge surplus of houses. or maybe they just want to get theirs before everything hits
GS is screwed unless BO awards Blankfein a Treasury job.
Mozo Maz: "There's gotta be a way to spin this."
Housing starts may be down, but land starts haven't dropped at all. The bottom must be in.
all that money didnt do a bit of good bet they going to need more money cant let them go down arent they the reason we bailed aig? poor henry hope he didnt really want to go back there.
This must be good news, everything on my ticker is green that's trading premarket.
Ah, well. Anonymous @ 9:19 beat me, with a better line.
[everything on my ticker is green that's trading premarket.
Comrade Kristina]
GREEN is the new black.
The way things are going we should add refrigerator boxes to the number of housing starts.
--
Aren't these numbers and new Home Sales (SFH) much worse than what CR was forecasting about a year ago?
Can we say that CR has been "too optimistic?" This broken record will keep playing for years to come. CR wouldn't dare to err on the pessimistic side. After all, he is an economist.
Jas
mavens on bubblevision all smiles since GS is GREEN. They're all ex GSers and prolly have an "interest"
Bob Dobbs,lots of new stripmalls and tract homes still going up in beautiful Dixon CA,home of the "Milk Farm".
CR,
Nice to see you keep the focus on employment. That will definitely determine depth of recession and maybe the trigger for new wave of defaults and further credit constraints. Vicious circle. Updated forecast soon ?
Someone please tell me why housing starts are greater than zero.
Bernanke: "You want the truth? You can't handle the truth."
jas - I've been here for a couple of years now and I think you have been spot-on all along. EVERYONE knows your differences with CR so when he finally slides into your camp please try and handle it graciously. Thanks.
CR lobs up selective, very well made softballs, and posters get to hit 'em out of the park. Very good discovery process. Batter up.
"Bernanke: "You want the truth? You can't handle the truth.""
The Greeks said it the best: "You silly woman, the truth is ugly."
This is a good thing.
We already have more homes in the US than we can sell right now.
So the big question is how long will it be until they are absorbed and we really do need some new ones built?
Cobradriverville--10 years. Miami Dade, hummm, maybe 5-6 years. Brevard, maybe 4.
A VERY weak report ...
Sure, but a necessary weakness. Inventory's gotta get reduced before the housing market can start to recover.
I won't be happy until housing starts are 0 for about a year. Then we may some sanity.
I just heard, in the background, Matt Lauer saying it is a good time to buy housing. How did the NAR get to him so quickly. Shameless!
Mozo,
The way to turn today's starts data into good news - already done, by the way - is the same as always. The worse things get, the nearer the bottom we must be. Without regard to how much lower the bottom will be than the happy talk crowd is willing to admit.
By the way, before anybody bothers to praise Jas for his views, you should keep two things in mind. One is that Jas doesn't actually present any evidence. He just keeps saying "worse than that!, worse than that!". A child could do that.
The other is that Jas was apparently beaten up by an economist and now thinks every economist is a meanie. This has gone well into the realm of name calling and bigotry.
So, we have Jas claiming that people who work hard and show their work are evil, selfish and sinister while jumping up and down saying "worse than that!"
Jas needs to put his anxieties over economist boogie-men aside and join the grown-up discussion.
US population:
1970: 213,3 million
1980: 236,5 million
1990: 258,7 million
2000: 291,4 million
Now : 300+ million
Take also these into account when comparing those numbers...very very week report indeed.
weak, not week.
I just heard, in the background, Matt Lauer saying it is a good time to buy housing.
Well, it is a good time to refinance existing housing. A really good time. I locked in a 30-year fixed @ 4.875% with no points this morning. That's a quick $300 knocked off the monthly nut. I've gotta admit, I never dared to dream I would ever again see a 4-handle on 30-year rates.
But to buy still-depreciating assets that one doesn't already own, low rates or no? Umm, not so much.
"balance" happens when, and ONLY WHEN, supply AND demand meet.
Econ 101.
Somewhat of a rehash of CR's post, but has a few more details. Here is what I posted on Zacks.com:
In November both housing starts and permits fell to record lows. I consider this to be good news, since it represents a decline is misallocation of resources and means we might eventually work off some of the huge inventory overhang and some day see an end to the housing mess that is ground zero of the economic turmoil. In the meantime though, it means that economic growth will be even weaker in the fourth quarter than most are currently expecting.
Building Permits, the best indicator of future housing starts, fell to a seasonally adjusted annual rate of 616,000, a 15.6% decline from the 730,000 rate in October and 48.1% below the 1,187 million rate of a year ago. All four regions of the country were down, both on a month to month basis, and year over year, but clearly the West held up best. Permits there fell just 3.7% for the month and ar3e down 43.6% year over year. Worst hit for the month was the Midwest where the monthly decline was 22.1%, and the year over year decline was 46.9%. The all important South region fell 18.7% for the month and is down 50.3% year over year, while the Northeast posted drops of 14.7% and 49.2%. From these numbers it is very clear that there will be no rebound in housing starts as we enter the new year. Given the inventory overhang of both new and existing homes, and a very weak economic environment which is most likely causing negative housing formation (more people deciding to take on room mates or move back in with Mom than setting up their own place) I think that the permits levels are still way to high.
Housing Starts tumbled 18.9% for the month, to a seasonally adjusted annual rate of 625,000 from 771,000 in October and 1,179,000 a year ago (-47.0%). Keep in mind that the housing slowdown has been going on for well over a year now, and that Housing Starts stayed over 2 million a month for over a year at the peak. The Northeast was hardest hit this month with a 34.6% decline, and down 60.2% on a year over year basis. The Midwest was the next worst, with a 23.1% decline for the month and a 55.5% year over year decline. The west was down 16.6% for the month and is down 47.5% for the year. The South, which is by far the biggest homebuilding region, posted a 15.9% decline for the month and is down 40.9% from a year ago.
The decline in permits and starts means that there will be more layoffs in the construction industry. So far housing completions have not fallen as far as starts, (down 22.8% year over year, and actually up 3.3% for the month). Of course workers work on the house until it is completed, they are not laid off at the housing start. But clearly the pipeline is starting to empty out. For most of the last year, some of the laid off workers in residential construction could find new work in Commercial real estate development. However, that is about to follow residential construction over the cliff.
I honestly dont know why most of the big publically traded homebuilders are still in business. Firms like Pulte (PHM), D.R. Horton (DHI), Ryland (RYL) and Beazer (BZH) simply serve no useful economic purpose at this time. I would continue to avoid them until we see at least half of the names in the industry go into chapter seven liquidation.
CR, thanks for these intriguing charts. The housing starts chart must be the most dramatic one I've ever seen. It reminds me (in look as well as subject matter) of a painting I saw in a slideshow in an art history class many years ago. It was titled "The East Wind" by Charles Burchfield. Here's what it looks like:
The East Wind by Charles Burchfield
A snippet from a bio of Burchfield:
Charles E. Burchfield - Wikipedia, the free encyclopedia
"Charles Ephraim Burchfield (April 9, 1893 - January 10, 1967), an American watercolor painter, was born in Ashtabula Harbor, Ohio. He is known for his visual commentaries on the effects of Industrialism on small town America as well as for his paintings of nature. His paintings are in the collections of many major museums in the USA and have been the subject of exhibitions at the Metropolitan Museum of Art, and the Museum of Modern Art as well as other prominent institutions."
The following may not be a popular sentiment except here in New England: If no new houses were built in my town ever again, I and a lot of people that I know would be happy. New construction has almost stopped for the time being, so we and our beautiful woods are getting a well-deserved break.
--
"Jas needs to put his anxieties over economist boogie-men aside and join the grown-up discussion."
k harris,
Look who is talking. You guys are disgustingly lazy. I have made my forecasts and the root causes of the current CRISIS years ago. I don't engage in monthly, or quarterly forecasts.
CR has been dead wrong on many forecasts related to Housing, CRE and the nature of this recession, but how is a lazy person to know. This is what I posted in early 2008:
"CR, Didn't you forecast that New Home Sales would bottom at 600K? My forecast has been for a new low below 400."
Jas
Black Dog
Jas just has a subscription to A.G. Shilling's Insight. The whole housing matter was laid out there from 2003-2005. That is his PhD in economics or either the University of Phoenix's on line course.
Also in Insight Shilling predicted in the 1980's that the long bond would go to 3%.
Learning is important to investment there CR. Jas has nothing to learn from dopes except the ones he dare not mention.
I'm in Norfolk VA & this Virginia Beach/Norfolk MSA is a huge Navy & military area. Just got the new Basic Housing Allowance for 2009 chart (with its 6.9% increase), & an E-5 with dependents will get $1410.00 monthly BHA (tax-free) & w/out dep's will get $1154.00
Basic Allowance for Housing (BAH)
Low interest & the $0-down VA loans are available.
Median price here has only dropped about 4%, so those BHA numbers still allow military people to buy for their tours here-- (if they don't think too hard about their re-sale chances when they leave.)
The local paper's still embargoing the bad local housing news & the historic glut in inventory here, tho it did grudgingly report recently that local foreclosure rate is "rising" (our one local rag doesn't like to burden us with lots of "hard" numbers & statistics & such...) but the rise is "mitigated" by foreclosure moratoriums over the hol's by the Feds.
So presumably, we're not to worry.
My not-too-brilliant observation is that given the "variable" of increased & generous DOD housing allowances, all bubbles in military areas will be the slowest to deflate. Boosting the BHA on military areas on the coasts does help to put a floor under those local house prices.
Also, if memory serves, I went rootin' round on the OCWEN site some time ago-- evidently they service lots of Gov. foreclosures-- & I was quite surprised to find in the fine print that anybody can buy a VA foreclosure, at the VA interest rate, & it was either without a credit check or without checking credit scores-- will go back there if time allows & see.
You got to admire Jas's perversity. To prove his prescience he quotes himself from 2008.
The prediction for housing was out there five years ago. CR took us through its unfolding.
" Tom Stone writes:
Bob Dobbs,lots of new stripmalls and tract homes still going up in beautiful Dixon CA,home of the "Milk Farm".
Tom Stone | 12.16.08 - 9:33 am | # "
I haven't stopped in Dixon in 30 years. I'm sure it's gotten bigger; but I doubt that it's improved.
I can't imagine who'd live there -- unless it's trying to be Davis' first suburb.
Dirk, well said. We agree this report is, at face value, good news as the excessive single family and condo inventory overhang must be worked off to have any chance at restoring rational housing dynamics. The worst bubble markets are years away from recovery with more housing blood to be let this next year or two.
Several have asked where houses are being built consider cities with (relatively) strong employment given economic conditions and home for sale inventories at or near equilibrium Dallas, Fort Worth, Houston to name a few. Should they be building? We sure wouldnt be developing new projects now.....
In half! Yikes! Using banskter math that's almost 50%!
Well, since the houses at the peak were mostly built by illegals, that stat is bullshit. Those people are going back to Mexico (I hope). It was one of the biggest scams in history.
I saw a story about this on that CNBC show On The Money...
Even though it isn't a good time to buy...isn't better to get something cheap and OWN rather than RENT...
There are two items that cause a need for new construction: (1) existing houses removed from inventory due to aging or destruction, and (2) new household formation.
It would be interesting to come up with a graph of "need for new housing" and plot that against actual construction.
If we assume that on average a house will last 80 years until it is no longer usable or destroyed through fire or other accidents or disasters, then a proxy for the removal rate is simply the new home construction 80 years ago (averaged over, say a 20 year period to even out year to year jumps).
To that add the annual change in the number of households, and that gives you the need for new construction estimate.
Wally is spot on- government policies should be designed to allow for deflation to the point where middle class affordability is back in place and the bubble effects are gone, then using all of its powder to stabilize things and to strengthen that middle class.
Related, Jas' consistent rap has been that we prefer to see goverment policy as rationally-based, but there are always hidden agendas that we don't like to consider and are not in our best interests.
I don't like Jas' mean-spiritedness but I think he's just trying to shock the conversation in a more clear-headed direction, reminding us that we have weak boundaries and too much tolerance for incompentence and abuse by moneyed interests in the US.
what I dislike here most is short-term investors dominating the conversation. You all don't seem to realize that your intention to make money on present day phenomenon is, on a macro scale, exactly what's gotten us all into this mess.
Tanta vive!