CR: "The key is that nonresidential construction declined for the second consecutive month."
WSJ: "Non-residential private construction spending was flat in October." (I already sent the authors an email chiding them.
Per usual, CR's factual reporting is more accurate, and his analysis more cogent.
That private non-residential construction peaked in August is a big deal. This was one of the things the soft-landing crowd pointed to to mitigate housing's falloff. Along with business spending, which is also declining... And oil prices are headed up...
I think the final GDP figure for the 3rd quarter is going to wind up bank in the
with all due respect, two marginal declines like this do not make a trend. in the run up there were two small down months in a row but no one proclaimed that to be the end of a trend.
i think we need to see more data to make a conclusive statement.
dc1000, the data rarely unequivocally confirm something until well after it's happened, and frankly, there isn't much challenge in stating the obvious.
in terms of non-residential construction from my perspective things are looking and feeling very strong. we have new commercial project coming on line regularly. we have projects for lease right now that are generating a great deal of interest. there are lots of tenants out there looking for space.
residentially speaking, my book is jam packed solid for the first 9 months of 2007. these are clients we brought in during 2006 and will be building starting at the beginning of the new year.
but i specialize in urban in-fill development and downtown residential.
in terms of sales side of our business, our commission revenue is down significantly from last year. we've had to cut prices on our projects drastically to get them to sell, but they have sold. our commission revenue will be off by almost 30% however.
Overall, residential spec building and its associated businesses i.e. architecture, building and sales - way off.
Owner occupied architecture and building, still strong.
Commercial design, building and leasing - the strongest of the bunch.
This question has probably been answered long ago. If so, I missed it.
The NAR generally inflates the sales numbers, then revises them down later. Do they generally follow-up with healines of sales increases by comparing the revised prior months with the current inflated month?
Is the Census Bureau now in this same pattern of revisions?
dc1000, I agree it is possible that nonresidential could still have more upside.
Historically nonresidential has peaked 3 to 5 quarters after residential - so if spending follows the typical pattern, we might have another quarter or two of upside. And there have been periods when this relationship didn't hold.
When I relocated to Phoenix in fall of '05, my wife had to find office space for her business. There was absolutely nothing available in the locations she preferred. Not much available in the locations she didn't prefer either. Most messages left with brokers weren't returned. The few that did reply said "if you want space, you're going to have to build it."
Dec '06: There are no fewer than 6 brand spanking new office complexes that are available. Completely vacant. And all were completed 6 months ago. And 5 more will be completed by Feb '07. The messages left unanswer one year ago are now being returned. Nothing like a follow-up call one year later.
the relationship between residential construction slowdown and nonresidential reflects the follow on development(strip shopping malls,roads,schools,commerical buildings) of creating new home developments. When anybody talks about nonresidential construction its growth and development only reflects the creation of large housing tracts on old farm land.
This is a process has been driven by boomers and population shifts to sunbelt states.
By the way China has been going through and still is this type of development involving 75-100 million people, creating vast new cities in land size greter then california.
You are in what is by far and away the least cyclical market in the U.S. and increases in Federal government spending in the last 5 years out-paced the rates during the Johnson administration, so it isn't surprising the market in DC is holding up longer than other places.
That said, I believe the DC market has become highly inflated. All the pressures on discretionary Federal spending are going to be downward. The mindless spending on Iraq reconstruction, much of which surely made it's way to beltway bandits is going to dry up very quickly.
The condo market there has already turned. You'll see it next in marginal-to-middle class neighborhoods where a lot of DC homeowners are over-leveraged. DC has had one of the highest rates of interest-only lending.
Mish, just posted this on his blog:
a bit follows:
From Ben Bernanke:
Speaking on behalf of all the Fed members we thought it was time to honestly address the situation the country is facing. This is part of our new policy to be as candid and honest as possible. Quite frankly we are frightened by the rapid falloff in housing permits, the rise in jobless claims, the rise in inventories, and the slowdown in consumer spending. It now appears the landing is not going to be soft and it is also doubtful the financial markets are fully prepared for it.
bob: no doubt about it, there are too many condos. the biggest problem is the townhouse converted to condos in marginal neighborhoods. it made perfect sense when people we're buying and now its painful.
lucky for us we only have one of those types of projects to process through of the pipeline.
for dc it really came down to how far can you stretch the yuppie first time buyer and 450ft seems to be the breaking point.
people forget that rents here aren't cheap at all. i've considered selling my house and renting but i can't find anything close to what i've got for the 30yrPITI payment i make. no such thing as a 4 br apartment and houses in my neighborhood just don't get rented.
re: federal spending. i'd say that rather than the old lines of who spends or who doesnt it basically comes down to the party in power spends and the opposition cries foul.
that all said: condo prices have really come down, we've marked down units 30% in the same building just to get them to move.
"Budget balance: As shown in chart 3.10, the fiscal deficit narrows over much of the period preceding the peak in house prices, though some deterioration appears to begin in quarter -4. The fiscal deficit widens significantly in the aftermath of the downturn in house prices, reaching nearly (negative) 5 percent of GDP about four years after the peak. These patterns are consistent with cyclical movements in budget balances resulting from fluctuations in economic activity that often accompany house price booms and busts."
Do you find in this occasion any relationship between budget balance and housing bust?
CR, when I click "click here to return to main page" it takes me to a poast from November 27th. Also, my links and shortcuts to your site take me to the same old post. Am I doing something wrong, or is your site not updating? Also, as a long-time lurker, I just wanted to say thanks for your awesome graphs.
IM, could you post the link to that paper again - I couldn't find the paper - thanks.
Bad Shift, I'm not sure what you are doing. If you could post or email me the links maybe I could figure it out. The way it is supposed to work is if you entry with a link to a post, and then click on the header - it should take you to the main page.
Thank you for linking to my post which should serve to clear up any doubt about what a bored and delusional blogger I am.
The jury is still out on whether Mish is delusional or not.
To his credit, though, the information on his blog (and others with a similar theme) has paid some real dividends in the past year if you know how to pick through it.
Namely, anybody who sold their house earlier this year and and moved the profits into the long bond, zeroes, and/or foreign high grade foreign denominated debt has done very well indeed.
At least by one very real metric maybe he's not so crazy.
Of course I've always be suspicious of goldbugs in general - like they might crack at any moment.
The WSJ point is essentially correct? TOTAL non-residential construction (includes govt. projects) was flat; private non-residential construction was down .7%. (Per Bloomberg)
No, read it again: "Non-residential private construction spending was flat in October." That's cut-and-pasted from their article. If it's different now, it's because they edited it.
Enteraining link, I like the tautology: housing stocks went up, it must mean the housing market is recoverig... why did they go up? because expectations for housing improved....
Can I read your blog if I'm merely washed-up and not definitively retired?
They joined a small but growing chorus including Federal Reserve Chairman Ben S. Bernanke and his predecessor, Alan Greenspan in saying the sector might have bottomed out.
Tis the season for caroling. I think for the next meeting with a rate cut, Greenie should come back for a reunion performance and they can all sing...
Here Comes Santa Claus!
Here Comes Santa Claus!
Right down Santa Claus Lane!
...
WethePeople,
Could you tell me which indices your funds track? I know of no index which has performed in excess of 25% YTD.
I'll agree that things are great on Wall Street. I work near that arena and there's no shortage of bonuses for the rainmakers. I'm just one of their beancounters, so only so much trickles down.
Thanks,
CR: "The key is that nonresidential construction declined for the second consecutive month."
WSJ: "Non-residential private construction spending was flat in October." (I already sent the authors an email chiding them.
Per usual, CR's factual reporting is more accurate, and his analysis more cogent.
That private non-residential construction peaked in August is a big deal. This was one of the things the soft-landing crowd pointed to to mitigate housing's falloff. Along with business spending, which is also declining... And oil prices are headed up...
I think the final GDP figure for the 3rd quarter is going to wind up bank in the
I think my < was interpreted as html. I think it will be revised back to
Bob_in_MA,
I think you
with all due respect, two marginal declines like this do not make a trend. in the run up there were two small down months in a row but no one proclaimed that to be the end of a trend.
i think we need to see more data to make a conclusive statement.
that said, look out below.
Ahh...the train out of bubbleville is running right on time!
dc1000, tell us how the trend is looking in your neck of the woods. No signs of a downturn?
um, back to less than 2%...
dc1000, the data rarely unequivocally confirm something until well after it's happened, and frankly, there isn't much challenge in stating the obvious.
BTW if you go into the report, Augusst and September's numbers were revised. Want to guess which direction?
Institute of Supply Management survey falls to 49.5, lowest since April 2003, missing analyst estimates.
in terms of non-residential construction from my perspective things are looking and feeling very strong. we have new commercial project coming on line regularly. we have projects for lease right now that are generating a great deal of interest. there are lots of tenants out there looking for space.
residentially speaking, my book is jam packed solid for the first 9 months of 2007. these are clients we brought in during 2006 and will be building starting at the beginning of the new year.
but i specialize in urban in-fill development and downtown residential.
in terms of sales side of our business, our commission revenue is down significantly from last year. we've had to cut prices on our projects drastically to get them to sell, but they have sold. our commission revenue will be off by almost 30% however.
Overall, residential spec building and its associated businesses i.e. architecture, building and sales - way off.
Owner occupied architecture and building, still strong.
Commercial design, building and leasing - the strongest of the bunch.
for now.
This question has probably been answered long ago. If so, I missed it.
The NAR generally inflates the sales numbers, then revises them down later. Do they generally follow-up with healines of sales increases by comparing the revised prior months with the current inflated month?
Is the Census Bureau now in this same pattern of revisions?
dc1000, I agree it is possible that nonresidential could still have more upside.
Historically nonresidential has peaked 3 to 5 quarters after residential - so if spending follows the typical pattern, we might have another quarter or two of upside. And there have been periods when this relationship didn't hold.
I'm glad your business is doing well.
Best to all.
WTP, showing the data going back too far would not support the pre-determined conclusion we are here to spin, so please stop trolling.
A non-residential anecdote from AZ:
When I relocated to Phoenix in fall of '05, my wife had to find office space for her business. There was absolutely nothing available in the locations she preferred. Not much available in the locations she didn't prefer either. Most messages left with brokers weren't returned. The few that did reply said "if you want space, you're going to have to build it."
Dec '06: There are no fewer than 6 brand spanking new office complexes that are available. Completely vacant. And all were completed 6 months ago. And 5 more will be completed by Feb '07. The messages left unanswer one year ago are now being returned. Nothing like a follow-up call one year later.
A very good forward measure of how the market is performing is to measure the amount of trolling and how defensive they get.
the relationship between residential construction slowdown and nonresidential reflects the follow on development(strip shopping malls,roads,schools,commerical buildings) of creating new home developments. When anybody talks about nonresidential construction its growth and development only reflects the creation of large housing tracts on old farm land.
This is a process has been driven by boomers and population shifts to sunbelt states.
By the way China has been going through and still is this type of development involving 75-100 million people, creating vast new cities in land size greter then california.
dc1000,
You are in what is by far and away the least cyclical market in the U.S. and increases in Federal government spending in the last 5 years out-paced the rates during the Johnson administration, so it isn't surprising the market in DC is holding up longer than other places.
That said, I believe the DC market has become highly inflated. All the pressures on discretionary Federal spending are going to be downward. The mindless spending on Iraq reconstruction, much of which surely made it's way to beltway bandits is going to dry up very quickly.
The condo market there has already turned. You'll see it next in marginal-to-middle class neighborhoods where a lot of DC homeowners are over-leveraged. DC has had one of the highest rates of interest-only lending.
Mish, just posted this on his blog:
a bit follows:
From Ben Bernanke:
Speaking on behalf of all the Fed members we thought it was time to honestly address the situation the country is facing. This is part of our new policy to be as candid and honest as possible. Quite frankly we are frightened by the rapid falloff in housing permits, the rise in jobless claims, the rise in inventories, and the slowdown in consumer spending. It now appears the landing is not going to be soft and it is also doubtful the financial markets are fully prepared for it.
bob: no doubt about it, there are too many condos. the biggest problem is the townhouse converted to condos in marginal neighborhoods. it made perfect sense when people we're buying and now its painful.
lucky for us we only have one of those types of projects to process through of the pipeline.
for dc it really came down to how far can you stretch the yuppie first time buyer and 450ft seems to be the breaking point.
people forget that rents here aren't cheap at all. i've considered selling my house and renting but i can't find anything close to what i've got for the 30yrPITI payment i make. no such thing as a 4 br apartment and houses in my neighborhood just don't get rented.
re: federal spending. i'd say that rather than the old lines of who spends or who doesnt it basically comes down to the party in power spends and the opposition cries foul.
that all said: condo prices have really come down, we've marked down units 30% in the same building just to get them to move.
Mr. Risk.
Accordng to the Fed, (see
http://federalreserve.gov/pubs/ifdp...841/ifdp841.pdf pg 13), budget balance is a leading indicator (by four quarters) of the economic slowdown that accompanies housing busts.
"Budget balance: As shown in chart 3.10, the fiscal deficit narrows over much of the period preceding the peak in house prices, though some deterioration appears to begin in quarter -4. The fiscal deficit widens significantly in the aftermath of the downturn in house prices, reaching nearly (negative) 5 percent of GDP about four years after the peak. These patterns are consistent with cyclical movements in budget balances resulting from fluctuations in economic activity that often accompany house price booms and busts."
Do you find in this occasion any relationship between budget balance and housing bust?
Best regards,
CR, when I click "click here to return to main page" it takes me to a poast from November 27th. Also, my links and shortcuts to your site take me to the same old post. Am I doing something wrong, or is your site not updating? Also, as a long-time lurker, I just wanted to say thanks for your awesome graphs.
poast = post (:
Mish, just posted this on his blog:
a bit follows:
Mish's Global Economic Trend Analysis: An email from Bernanke
I should take credit for doing that, but honestly it wasn't me.
BTW more crazy yield curve acrobatics today:
Bloomberg.com:
Government Bonds
IM, could you post the link to that paper again - I couldn't find the paper - thanks.
Bad Shift, I'm not sure what you are doing. If you could post or email me the links maybe I could figure it out. The way it is supposed to work is if you entry with a link to a post, and then click on the header - it should take you to the main page.
Best to all.
Thank you for linking to my post which should serve to clear up any doubt about what a bored and delusional blogger I am.
The jury is still out on whether Mish is delusional or not.
To his credit, though, the information on his blog (and others with a similar theme) has paid some real dividends in the past year if you know how to pick through it.
Namely, anybody who sold their house earlier this year and and moved the profits into the long bond, zeroes, and/or foreign high grade foreign denominated debt has done very well indeed.
At least by one very real metric maybe he's not so crazy.
Of course I've always be suspicious of goldbugs in general - like they might crack at any moment.
Time will tell...
CR,
Here it is. I focused on chart 10.3 and text on page 13th
http://federalreserve.gov/pubs/ifdp/2005/841/ifdp841.pdf
bob_in_ma:
The WSJ point is essentially correct? TOTAL non-residential construction (includes govt. projects) was flat; private non-residential construction was down .7%. (Per Bloomberg)
winjr,
No, read it again: "Non-residential private construction spending was flat in October." That's cut-and-pasted from their article. If it's different now, it's because they edited it.
Seen this?
Bankers Are Pulling The Plug On Loans -- Seeking Alpha
The underlying banker survey rather than the article itself. Good data to track, I think.
Mish,
Enteraining link, I like the tautology: housing stocks went up, it must mean the housing market is recoverig... why did they go up? because expectations for housing improved....
Can I read your blog if I'm merely washed-up and not definitively retired?
They joined a small but growing chorus including Federal Reserve Chairman Ben S. Bernanke and his predecessor, Alan Greenspan in saying the sector might have bottomed out.
Tis the season for caroling. I think for the next meeting with a rate cut, Greenie should come back for a reunion performance and they can all sing...
Here Comes Santa Claus!
Here Comes Santa Claus!
Right down Santa Claus Lane!
...
per a discussion regarding HB stock prices, this from thread from the Housingbubblebog:
recent insider sales: sample
Standard Pacific - $525,000 by CFO this month
Ryland - $3.58 million by CEO last month
Toll Bothers - $24 million sold by Bruce Toll in last two months
Countrywide - $29.4 million sold THIS MONTH
B of A - $58 million sold THIS MONTH, $26 million of it sold by CEO
Wells Fargo - $3.5 million sold by CEO this month
New Century - $12.5 million last two months
WethePeople,
Could you tell me which indices your funds track? I know of no index which has performed in excess of 25% YTD.
I'll agree that things are great on Wall Street. I work near that arena and there's no shortage of bonuses for the rainmakers. I'm just one of their beancounters, so only so much trickles down.
Thanks,
Re the Toll Bros, this amount is tiny compared to the major dump of July05, when the stock was trading ~$90, not the current $30.
TOL: Insider Transactions for TOLL BROTHERS INC - Yahoo! Finance
Countrywide looks more serious unloading some 11%:
Symbol Lookup from Yahoo! Finance
Wells Fargo's CEO unloading some $95M, not merely the paultry $3.5M as noted above:
WFC: Insider Transactions for WELLS FARGO & CO NEW - Yahoo! Finance
Ryland's CEO option transactions are here:
Insider
Trades -
DREIER R CHAD - Yahoo!
Finance
Ok, ron has thoroughly depressed me and I am unable to continue.
I see several comments here posted by "Mish"
None of the previous comments were made by me.
I have sent an email to CalculatedRisk and hopefully they will be removed.
Mish
Bob_in_Ma:
Sorry, guy, my mistake. I misread. WSJ miswrote. Go give 'em hell.
Thank you for that observation Mish, I was beginning to wonder.