CR: is it possible to see stock market peformance as it relates to these graphs too? its odd that we're reaching an all time high in equities as many are predicting the bottom falling out.
or perhaps the market is rising on valuation alone using DCF and the ten year yields.
as an anectdote - i seem to be attracting a higher quality construction worker these days for the same price. it could be my expert marketing or reputation, or it could be an indication that there is more talent available now than before and for better prices....
dc1000, even if residential construction falls back 40% (it's 20% so far), there will still be business. And of course you are diversified - and slowdowns are great opportunities for strong players. In my business we grew during every slowdown - and experienced explosive growth after the slowdown.
re: Stock Market. The market is terrible at predicting recessions. I know that runs counter to common wisdom - but the data suggests common wisdom is wrong. I'll try to post a graph of SP500 vs. recessions like the housing graph.
There is an article at What bubble? that states:
"we will have a bad situation in housing of balloons popping rather than air coming out," David Lereah of the NAR (Nat'l Assoc. of Realtors) said."
I can't believe this quote!
This does not seem possible.
This could not be good old Dave talking. Did he leave his job?
dc1000 - you might find a decent starting point with Ellis' "Ahead Of the Curve" for which some graphs are posted online: Ahead of the Curve by Joseph H. Ellis
I've done some similar exercises and found the work holds up. You might find the book worthwhile just from looking ahead for your business as well.
CR - think these graphs tell us even mor e than you credit them for, though I recall going down this path before:New Home Sales between [600K,800K] looks to be the normal range with a 90s secular shift due to the most benign conditions we've seen in a while and a 00s' boom. Let's see the new norm is [800k, 1000K]. Will we have to run below that for 2-3 years to make up the overhang ?
If so that'll take out the rest of your employment growth in construction ?
CR, what about wall street wisdom about stock market indicator to be least 6 months ahead of economy..
Also, prior to boom of 1999-2006, yrly new home sales ~ 800-900 k/yr..the excesses in the last 6 yrs amount to ~ 1 mil homes ( of course many are second homes) may need to be "really" absorbed as well...pop growth at 1 mil houshold meaning only 700 k new homes needed (as per old 65-70% homeownership rule) as remaining 30% are too poor to own.
CR,
Not sure what you were doing around 1973. But here is a comment from Fleckenstein's website (Hedge Fund manager)
"most of us weren't in the business in September and October of 1973. Two I know who were have observed the similarities between the Dow's rally then and the one occurring now. That September/October rally was the last rally before the market got annihilated. In fact, after that rally ended in late October 1973, the market dropped close to 20% in a month's time. A year later, it was down almost 40% from those October highs. The macro backdrop is worse now than then, so it's worth contrasting that data with the euphoria I keep hearing about on Bubblevision."
I'm looking at replacing air conditioning/heating in my home, and the best offer I've gotten is from a company that normally does home builder installs and servicing. As the salesman said, "I've got eight crews to keep busy, so I'm going to make you a smokin' deal"....
From looking at your graph, it does appear that all recessions have been led by a drop off in residential construction (Ex the last recession), but not all drop offs in residential construction have been followed by recessions. Look at the drop from the Jan 94 peak as an example.
The market near my home in suburban DC is dead. One of my neighbors had their home under contract and it fell through. They've given up trying to sell. Maybe next spring they'll try again.
Another neighbor's home has been on the market for about 6 months. They've dropped the price about $100k and it still hasn't sold.
Another neighbor just listed their home and are asking the zillow.com price. I think it will sit until they drop the price 20% or so. They asked my advice and I told them to list it lower than comparables in the area. I guess they don't think my advice is any good. We'll see what happens.
There was an article in th eWSJ yesterday that noted one big difference between 1994-5 and now, then the yield curve didn't even flatten, let alone invert.
Probably picking any one indicator as a sign there will be a recession is a mistake. But presently there are a whole series of indicators blinking.
One of my favorites is based on economists predictions of the chances of a recession. They are always overly optimistic. When on average they give a 30% (I can't remember the exact figure) chance of a resession, there almost always is one.
I'll say this again, CR -- having identified housing as the critical piece, you are conducting a simply superb analysis, and by far the best, of the unfolding developments.
CR: is it possible to see stock market peformance as it relates to these graphs too? its odd that we're reaching an all time high in equities as many are predicting the bottom falling out.
or perhaps the market is rising on valuation alone using DCF and the ten year yields.
as an anectdote - i seem to be attracting a higher quality construction worker these days for the same price. it could be my expert marketing or reputation, or it could be an indication that there is more talent available now than before and for better prices....
dc1000, even if residential construction falls back 40% (it's 20% so far), there will still be business. And of course you are diversified - and slowdowns are great opportunities for strong players. In my business we grew during every slowdown - and experienced explosive growth after the slowdown.
re: Stock Market. The market is terrible at predicting recessions. I know that runs counter to common wisdom - but the data suggests common wisdom is wrong. I'll try to post a graph of SP500 vs. recessions like the housing graph.
Best Wishes.
There is an article at What bubble? that states:
"we will have a bad situation in housing of balloons popping rather than air coming out," David Lereah of the NAR (Nat'l Assoc. of Realtors) said."
I can't believe this quote!
This does not seem possible.
This could not be good old Dave talking. Did he leave his job?
dc1000 - you might find a decent starting point with Ellis' "Ahead Of the Curve" for which some graphs are posted online: Ahead of the Curve by Joseph H. Ellis
I've done some similar exercises and found the work holds up. You might find the book worthwhile just from looking ahead for your business as well.
CR - think these graphs tell us even mor e than you credit them for, though I recall going down this path before:New Home Sales between [600K,800K] looks to be the normal range with a 90s secular shift due to the most benign conditions we've seen in a while and a 00s' boom. Let's see the new norm is [800k, 1000K]. Will we have to run below that for 2-3 years to make up the overhang ?
If so that'll take out the rest of your employment growth in construction ?
Just want to let you know that a realtor told me that the housing market is bottoming and will be heading up next year at 7-8% rates.
You don't want to know what i told this dunce.
CR, what about wall street wisdom about stock market indicator to be least 6 months ahead of economy..
Also, prior to boom of 1999-2006, yrly new home sales ~ 800-900 k/yr..the excesses in the last 6 yrs amount to ~ 1 mil homes ( of course many are second homes) may need to be "really" absorbed as well...pop growth at 1 mil houshold meaning only 700 k new homes needed (as per old 65-70% homeownership rule) as remaining 30% are too poor to own.
as an anectdote - i seem to be attracting a higher quality construction worker these days for the same price.
/////////////////////////////
err....??? could it be your tools??? ;>) Sorry..couldn't resist!!!
In Korea, the situation in real estates market is not good exept some apartments where rich people live.
Here is my question for you. What is more reliable indicator for future economy? land price? or house(apartment) price?
In US, do land price trend and house price trend go together?
DaveL and Sam, thanks for those thoughts ... I've been thinking about that issue.
Best to all.
CR,
Not sure what you were doing around 1973. But here is a comment from Fleckenstein's website (Hedge Fund manager)
"most of us weren't in the business in September and October of 1973. Two I know who were have observed the similarities between the Dow's rally then and the one occurring now. That September/October rally was the last rally before the market got annihilated. In fact, after that rally ended in late October 1973, the market dropped close to 20% in a month's time. A year later, it was down almost 40% from those October highs. The macro backdrop is worse now than then, so it's worth contrasting that data with the euphoria I keep hearing about on Bubblevision."
I'm looking at replacing air conditioning/heating in my home, and the best offer I've gotten is from a company that normally does home builder installs and servicing. As the salesman said, "I've got eight crews to keep busy, so I'm going to make you a smokin' deal"....
From looking at your graph, it does appear that all recessions have been led by a drop off in residential construction (Ex the last recession), but not all drop offs in residential construction have been followed by recessions. Look at the drop from the Jan 94 peak as an example.
The market near my home in suburban DC is dead. One of my neighbors had their home under contract and it fell through. They've given up trying to sell. Maybe next spring they'll try again.
Another neighbor's home has been on the market for about 6 months. They've dropped the price about $100k and it still hasn't sold.
Another neighbor just listed their home and are asking the zillow.com price. I think it will sit until they drop the price 20% or so. They asked my advice and I told them to list it lower than comparables in the area. I guess they don't think my advice is any good. We'll see what happens.
Bob,
There was an article in th eWSJ yesterday that noted one big difference between 1994-5 and now, then the yield curve didn't even flatten, let alone invert.
Probably picking any one indicator as a sign there will be a recession is a mistake. But presently there are a whole series of indicators blinking.
One of my favorites is based on economists predictions of the chances of a recession. They are always overly optimistic. When on average they give a 30% (I can't remember the exact figure) chance of a resession, there almost always is one.
I'll say this again, CR -- having identified housing as the critical piece, you are conducting a simply superb analysis, and by far the best, of the unfolding developments.