When home builders start going bankrupt at the rate homemoaners are defaulting then their new homes will enter the marketplace with the correct pricing structures and the gap will disappear. Well, not entirely. You see the monthly nut for new houses is much higher than for the equivalent used house. That won't go away until municipalities socialize disparate tax burdens.
When an existing home is sold, the housing stock doesn't change, and the only direct contribution to the economy are the transaction costs.
Are transaction costs really a "direct contribution to the economy"?
Put another way: If we could convince two neighbors to sell their houses back and forth to each other enough times, would that make our economy strong?
I believe I know what you mean. But conflating "the economy" with "economic activity" is one of the fallacies at the core of our problems...
Although I think we've seen the bottom for new home sales, - CR
You might be right, but I don't think we've seen the bottom. I expect existing home prices to keep falling and that alone will drive new home sales lower as cost to build will not fall as fast as the cost of existing homes.
None yet, There are interesting whispers about Lyons but nothing that rises to rumor. That's the problem. The HBs are burning lines and shedding options and disposing of assets. They were very deep because of the bubble. It's taken forever but the muddlecession can persist longer than they can pretend.
Put another way: If we could convince two neighbors to sell their houses back and forth to each other enough times, would that make our economy strong?
Sure! The lawyers and RE Agents get their cut, and if you do it enough times, the increase in the value of all of the other homes that were not sold increases, providing principle to base HELOC's on-
Oct. 22 (Bloomberg) -- Wells Fargo & Co. earned almost a third of its pretax quarterly profit by hedging mortgage- servicing rights, producing gains similar to those that have helped some of the biggest U.S. banks offset weaker consumer- lending businesses.
Wells Fargo’s hedges outperformed writedowns it took on the so-called MSRs by $1.5 billion and JPMorgan Chase & Co. came out ahead by $435 million. The two banks, as well as Bank of America Corp. and Citigroup Inc., wrote down MSRs by at least $5 billion in the third quarter as mortgage rates fell by about 0.26 percentage point.
“The earnings level is unsustainable,” Rochdale Securities analyst Richard Bove said yesterday, and cited mortgage servicing as he cut his rating on Wells Fargo to “sell” from “neutral.” Shares of San Francisco-based Wells Fargo dropped 5 percent in New York trading to $28.90, with most of the decline coming after Bove’s report.
Banks’ mortgage units are using gains on mark-to-market adjustments and hedging derivatives to drive earnings as lenders record losses on consumer loans during the worst recession since World War II. Net gains on MSRs and hedges also added $1 billion to Wells Fargo’s earnings in the second quarter and to JPMorgan’s in the first.
gabyjan - not unusual in the Senate to get "poison pill" amendments proposed, like the ACORN or e-Verify amendments, since amendments do not need to be germaine in the Senate, especially on a bill that the party leaders do not really want to delay by having it sent to conference to resolve differences, like the UE extension bill, so they can force a favorable vote on the amendment to get to 60 on the underlying legislation, then force the House to vote in favor of the Senate bill with the poison pill amendments so they can get the legislation to the president without having to go through a conference committee. Forcing a vote on ACORN is going to leave a bad taste in the Dems mouths.
No prob. Just mark new construction down to distressed-existing price levels. Presto, new construction is competitive. "Nothing price won't fix."
Folks across the street wanted to build a 3k sq. ft. home on an existing lot, and their contractor quoted $850k. WTF! That guy must be living in an alternate universe or something-
Extension of the carryback period for writing off losses on corporate income tax?
They can't have much income to protect with those carry-backs. They must be selling assets to keep the doors open. But I thought most of their assets were leveraged, so I don't know how they can get much by selling them...
On second thought, NOL relief only applied to smaller businesses, right? So while it no doubt kept some small builders afloat it doesn't actually answer your question.
None yet, There are interesting whispers about Lyons but nothing that rises to rumor. That's the problem. The HBs are burning lines and shedding options and disposing of assets. They were very deep because of the bubble. It's taken forever but the muddlecession can persist longer than they can pretend.
There've been a number of building lots with full sets of engineering drawings put on the market on Ashburnham, MA in the past few weeks, some at fire sale prices. Gotta assume some builder is trying to liquidate.
See, Cinco, their answer should be, "We just saw a couple of HUD repos listed at $50k. Take it or leave it."
(The contractor just isn't hungry enough, YET.)
Forgive me for reposting re the proposed expanded tax credit:
I'm on the sidelines and have been since 2007. If I had wanted to buy in 2009, I would not have gotten the credit because I've only been renting since 2007 thereby missing "first time buyer" requirement. Also my income doesn't work with this. Now it is being extended to "move-up" buyers, with the new requirements we still don't get it.
Now, stay with me here. I can afford to buy at this point- something. However there is a tax credit jacking up the market, one that I can't get. People who have lower income probably can't afford something decent around here even with the credit.
So, basically what this is doing is giving money to the people who would be competing against us for houses thereby discouraging us from getting in the housing market. Can't someone do the math and figure out how many people for whom it is a disincentive rather than an incentive? There has to be a point where it tips over that way and I'm guessing we passed it.
Just negative propaganda slamming one of the most honest and trustworthy institutions in Merica, perhaps the entire world. It's nay-sayer's like this that have caused a minor economic down-turn to turn into a crisis.
I keep reading on CR that New Home sales are more important than existing. Since most new homes are bigger, better and more expensive, wouldn't the key target buyer be an existing homeowner? And if an existing homeowner can't sell in order to move up (or down to FL to retire for example) then can't we say that new and existing are equally important?
"Rob Dawg (homepage, profile) wrote on Wed, 10/28/2009 - 9:04 am
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Wells Fargo bet it all on black and saved the company for another quarter."
when your assets suck why wouldn't you make out like a bandit on the hedges you take out
I was just arguing that very topic on two other forums...I'm convinced these people have never used a dictionary...Much ado about nothing. I'm an aspiring whore FWIW. I just can't quite figure a way to sell my soul for money...
Alternative solution to the excess supply of existing homes: allow permanent immigration of any foreign national that can bring the equivalent of $8K USD cash and is willing to assume the mortgage on an existing foreclosure.
Since most new homes are bigger, better and more expensive, wouldn't the key target buyer be an existing homeowner?
Most of the newly built homes (except at the very high end) are not at all better. Both materials and construction quality are inferior. Judging by CR's chart, what move-up activity there is, is headed to existing homes.
Edit: Not to mention that a lot of newly-built homes are in undesirable locations, out in the middle of nowhere, a long commute from employment centers.
when your assets suck why wouldn't you make out like a bandit on the hedges you take out
Farmers, miners, and others who dabble in commodities learned long ago that hedging helps in a falling market, but does nothing during a long period of weak prices.
I have a feeling that this previously commodity-specific lesson is going to be extended to the entire economy at large over the next couple of years.
Clearly, to get the economy humming again, we need to outlaw the sale of existing homes. Afterall, such sales are not productive activities and new home construction is.
OT: apologies but I find this interesting. Did China really think oil would be supported at $140/ppb? and Russia is developing direct oil lines there, so shouldn't their refining/capacity improve over that. Could it be that Chinese domestic demand is DOWN?
Oct. 28 (Bloomberg) -- PetroChina Co., the world’s second most valuable company, posted a 24 percent drop in third-quarter profit, missing estimates, after crude oil prices fell from a record and refining margins declined.
Net income fell to 30.8 billion yuan ($4.5 billion), or 0.17 yuan a share, from a restated 40.3 billion yuan, or 0.22 yuan a year earlier, the Beijing-based oil producer and refiner said in a statement to the Shanghai stock exchange today. That’s below the 35 billion yuan median estimate of five analysts surveyed by Bloomberg News. Sales fell 12 percent to 267.7 billion yuan.
“We knew the company was affected by the fall in oil prices from last year’s highs, but it looks like refining margins have fallen, too,” said Michael Yuk, analyst at Sun Hung Kai Financial in Hong Kong. PetroChina didn’t publish figures for gains from processing oil into fuels.
MuffinTop- nice summary. But things like that don't matter. This is Congress we are talking about, here.
At any rate, the people who will actually, truly benefit from the credit seem to be "Norm Abrams types" who will buy an extreme fixer-upper HUD repo or something and actually live in it while they fix it up. I am not sure that is a majority of buyers these days. Applying it to an actual new construction home in a bubble zone still seems like a way to throw good money after bad.
Clearly, to get the economy humming again, we need to outlaw the sale of existing homes. Afterall, such sales are not productive activities and new home construction is.
What's needed is a renovation tax credit. I'm sure that's something the NAR would support, right?
Judging by CR's chart, what move-up activity there is, is headed to existing homes.
Nobody wants a bubbledome. It is a little bit of everything; Quality, construction, cost, design, transect.
If my hood is any indicator the jewels are staid single story rambling California Ranches on large lots with few "improvements" in either structure or neighborhood. Whointhehell wants a circular foyer with 30 ft ceiling and roman tile alcove floor? Waste of.. well everything.
the error bar on the -3.6% new home sales is more than +/-10%. These are some of the noisiest data published and should be interpreted with a full dose of salt.
I keep reading on CR that New Home sales are more important than existing. Since most new homes are bigger, better and more expensive, wouldn't the key target buyer be an existing homeowner? And if an existing homeowner can't sell in order to move up (or down to FL to retire for example) then can't we say that new and existing are equally important?
No - just because an existing house sells doesn't mean they buy a new home - they could buy an existing home [most do]. Likewise not all new home buyers are buying up - some [quite a lot really] are first time buyers - especially in mass produced tract product. So while your scenario is accurate for a subset it isn't by any means universal.
I can't stay and discuss, but I had to pop in and comment on something I just noticed from the prior thread:
Regarding the chart CR presented on "New Home Sales and Recessions", the data shows that no recession since 1970 has ended with New Home Sales running below 500,000 (SAAR).
So once again, there's evidence that the current recession probably hasn't ended yet, even if we get a positive ("Federal-debt-stimulated") GDP print for one quarter.
Well exactly Rob Dawg. You might also extend that to the need of the boomer population with empty nests and aching hips needing to find a single story place to die in which isn't a high maintained/service home. There are literally hoards who will require safe but modest housing, that need is mostly unfulfilled attm. Its a demographic largely ignored by homebuilders with the except of condos perhaps. Warehousing the boomer population isn't going to be doable.
... the jewels are staid single story rambling California Ranches on large lots with few "improvements" in either structure or neighborhood.
FWIW, that fits what I am seeing in mid-west, too. Smallish older homes that are structually sound, decent lots in older neighborhoods, selling (when they sell) at half-off. Knock yourself out repainting, tile the "foyer" yourself, hang a little drywall on the weekend, let the SO pick out a nice half-off carpet, that sort of thing.
Don't have to be Norm to pull off something like that, especially if you ain't flippin' but livin', brother.
That is an easy fix. Just make the homeowner go through the local union to claim the credit. Hell, the union could even cut a side deal to sell the owner the certificate allowing him to use whoever he/she wanted.
The commodity hedging question is an interesting one, the area that has had my attention is natural gas hedges...it seems most all the producers were well hedged going into the price downturn of the past year or so, but those are beginning to come off - in addition to a more limited ability to hedge now, there seems to be a perverse effect when the whole industry is well hedged, as the suppliers of the commodity are not receiving the price signal of the marketplace due to the hedge, resulting in an extended period of oversupply...
cinco-x:Folks across the street wanted to build a 3k sq. ft. home on an existing lot, and their contractor quoted $850k. WTF! That guy must be living in an alternate universe or something-
C'mon now, not if the house has pergo and granite.
That is an easy fix. Just make the homeowner go through the local union to claim the credit. Hell, the union could even cut a side deal to sell the owner the certificate allowing him to use whoever he/she wanted.
That's not what the union was suggesting. They preferred an increase to something >$50K, so that people initiate major renovation jobs.
Anyway, I said it wrong; it's not a $10K tax credit, it's a tax credit on the first $10K of a job, which amounts to a couple of grand. Still helpful, but not gigantic.
But you'd be amazed at the number of small jobs all of my family and friends initiated around their homes to take advantage of it.
Hubby and I are looking into being "move down" buyers. In our mid 50s, both lower our current payments and have the property paid off at retirement. I don't think we are out of the ordinary.
"When an existing home is sold, the housing stock doesn't change, and the only direct contribution to the economy are the transaction costs." - CR
Respectfully disagree. When someone buys a home, they usually make some changes. Carpet, paint, wallpaper, appliances, landscaping, etc. Furniture is a biggie. Also window treatments. First-time buyers also go for lawn mowers and so forth. In fact, one major reason for the recession is the way the "housing related" industries have been dragged into this mess-- from the furniture companies in North Carolina, to carpet in Georgia, to lumber in the NorthWest. And all the small business people who did things like window blinds and upholstery are in deep trouble.
The commodity hedging question is an interesting one, the area that has had my attention is natural gas hedges...it seems most all the producers were well hedged going into the price downturn of the past year or so, but those are beginning ot come off - in addition to a more limited ability to hedge now, there seems to be a perverse effect when the whole industry is well hedged, as the suppliers of the commodity are not receiving the price signal of the marketplace due to the hedge, resulting in an extended period of oversupply...
I only know agriculture, and although I probably wrongly assume that large natgas producers are more sophisticated, farmers in general do not respond to external market signals, except for determining planting decisions. It's not until they are actually deep in the red that they really start reducing planting acres and production quantities. I'm generalizing, but this is the usual trend.
I have a feeling no company is going to make any drastic changes until they are forced to by a declining bank account. Since they're all hedged, they maintain full production. In a rational world hedging is a godsend. In reality, it just delays the inevitable.
Anyone noticing how when the market starts selling off hard lately, it's followed by sudden spikes? As if somebody is literally pushing a "BUY" button with a massive pile of freshly printed cash?
Are you thinking tax deduction vs. tax credit? The deduction would be multiplied times the tax rate for the benefit, but a credit is dollar for dollar...
Are you thinking tax deduction vs. tax credit? The deduction would be multiplied times the tax rate for the benefit, but a credit is dollar for dollar...
Even car sales are related to housing. The boom made homes close to the city too expensive, but you still needed 2 incomes to buy anything. Hence "far suburbs" homes on tiny lots, with a 2 or 3 car garage. Hence the rise of roadside espresso stands. And mass numbers of fast food joints on the way in to work. Most of the stuff you see in the landscape, along any major road, is related to the housing bubble in some way.
Its a negative feedback: deflation in discretionary consumer vs inflation in services/food, etc. Over supply, just in time mfg and job losses; models that fail when credit dries up for consumers, small businesses that bank their payrolls on it, etc. Its one reason for being enraged as bankstas have profoundly exacerbated the situation.
actually, the hedging in natural gas appears to have made things worse, as production is maintained or even expanded into a price decline and storage becomes ever more full...
Meh, somebody will need to supply the bag ladies with 'feel good-no worries' as they live out of their refrigerator boxes and a McHappyMeal from peddling outside the NYSE. Its going to be a public service in the not too distant future. dripping with sarcasm
Respectfully disagree. When someone buys a home, they usually make some changes. Carpet, paint, wallpaper, appliances, landscaping, etc. Furniture is a biggie. Also window treatments.
Minimal compared to the total inputs in a new home build... in addition the new home build also requires furniture, curtains etc. It is an order of magnitude difference.
Plus not all buyers of existing homes replace everything - else there'd be no moving companies. I realize the recent bubble MEW-a-plenty mindset was that way but overall - that is an aberration... in most periods people kept furniture, appliances - etc. - until they failed. Rugs & curtains until they wore out. I think part of the new austerity is a return to that. But then YMMV.
ISTM that this is probably due to a perfectly rational decline in housing STARTS after the bubble peak. Probably driven more by the banks than the builders, but this should mean that we can start working through the backlog.
suppliers of the commodity [natgas] are not receiving the price signal of the marketplace due to the hedge, resulting in an extended period of oversupply...
I am so glad I didn't break plan and short Anadarko. Just watching has been a free education.
Remember the old days when there was a small but still real possibility of having to take delivery?
No way can a self respecting owner of an $800K McMansion park an $8,000 used car in the driveway. I mean, a $50K flash ride adds less than 10% to the cost of livin large!
Most of the stuff you see in the landscape, along any major road, is related to the housing bubble in some way.
My favorite: the supermarket and hot-food deli with the bank, the coffee house, dry cleaners, and optometrist on premises. And there was a beauty parlor and a dentist in the same strip mall. All the basics in one place for the harried, end-of-day long-distance commuter. It was about 50 miles out of San Francisco in a commuter helltown.
actually, the hedging in natural gas appears to have made things worse, as production is maintained or even expanded into a price decline and storage becomes ever more full...
Natgas is its own animal, as storage is difficult, expensive, and hard to expand. For agriculture, adding storage is as simple as renting a warehouse and dumping grain on the floor.
Same in Atlanta: Also included hair/nail salons, dentists, pharmacy out of the superduper giant supermarket that require a motorized buggy to get around in...they were located every 3-5 miles along with the Targets, Walmarts and multi-story malls. This was BEFORE the last massive build too.
My favorite: the supermarket and hot-food deli with the bank, the coffee house, dry cleaners, and optometrist on premises. And there was a beauty parlor and a dentist in the same strip mall. All the basics in one place for the harried, end-of-day long-distance commuter. It was about 50 miles out of San Francisco in a commuter helltown.
This tax credit phased out at the income of people who don't have lots of leftover money after a home purchase. If there's any positive effect, we'll see it in furniture and home improvement retail sales in the next 3 quarters.
I realize the recent bubble MEW-a-plenty mindset was that way but overall - that is an aberration... - D
No. And no. You're not thinking about all the industries that feed into home-buying. That's where most of the industrial production has ultimately been aimed. A sofa isn't just wood, it's fabric, which affects everybody from wool ranchers and cotton farmers to dye makers and weaving machinery makers. A can of paint is water, plus polymers (oil) plus pigments-- usually ICI-- from China. Electrical goods use plastics, metals, glass, chemicals, etc. Carpet is all about nylon (chemicals) dyes (chemicals) and wool (sheep ranchers around the world). Computers and appliances, all multi-source products. All of this stuff implies machinery and factories.
And all of this was dependent on cheap energy-- oil and electricity.
It's ultimately all about retail sales, baby-- that's the ultimate driver, and the Western, especially American, consumer was doing most of that. And the American consumer is not buying heavy industrial equipment-- they are buying stuff to use, to wear, and to live in.
Its a little discouraging that CR never talks about the income disparitiy in this country that is now higher than it was during the Depression. Home sales won't bottom until the income gap closes.
The distressing gap is the increase in the rate of unemployment multiplied by the increase in homelessness and foreclosures multiplied by the increased number empty houses.
The distressing political gap is a Congress apparently ready to re-confirm a Fed chair who has a mandate to lower unemployment but is not capable of imagining any policy choice other than handing huge stacks of cheap cash to rich bankers.
No. And no. You're not thinking about all the industries that feed into home-buying. That's where most of the industrial production has ultimately been aimed. A sofa isn't just wood, it's fabric, which affects everybody from wool ranchers and cotton farmers to dye makers and weaving machinery makers.
This is true, but on a transaction-by-transaction basis, compared to a new home, dryfly is right that it's an order of magnitude difference. If they're extremely extravagant, a couple moving into an existing home and not making any major renovations will spend less than $20K on those sorts of enhancements. While that tiny bit of demand will flow through the system, it's still very tiny. Remove retail markups, and wholesale values would be less than $15K per home. There is more wholesale value in the furnace, air-conditioner, and water heater that goes into a single new home.
William Least Heat Moon had two brothers who had names like most heat, and more heat Moon. William went to the U of Missouri, and wrote the book, I bought a copy, lent it out, and never got it back. A shame, good pictures too.
And, Louisville KY had drive thru liquor stores in the '70s.
"Building" an economy can't work when you send what finite work there is to China.
You mean those stories we were told about not needing the LOSER manufacturing jobs weren't true?! I thought if everybody was employed in "services" we could have unlimited prosperity.
scone all you have to do is add up the dollars - the new home build is orders of magnitude larger. I've had these discusions withe appliance mfgrs in trying to understand their forecasting. Same thing applies to furniture - etc.
New home cost something like what - $250K or more? [Even cheap ones cost $100K-$150K]... those are costs not selling prices. That is raw mat'l, equipment, labor... THEN they fill it with furniture, appliances & other crap on top of that.
Compare w/ existing homes - much less so. Who puts $100K to $250K of furniture into a home... not average Americans I can 100% assure of that. Order of magnitude less impact
That is CR's point... not that existing homes sales have zero impact - just much much less economic impact.
In fact, if you go back to 1945, the return of the GIs and the beginning of the modern suburb, you can see the roots of the boom and bust. Everything about the '50s was a reaction against the horrors of the Depression. It was all about making the world safe for Levittown breeders who wanted a new car, a couple of babies, and a brand new washer and dryer bought on "layaway" or the "installment plan."
The boomers have known nothing else but mass consumerism-- they've been brainwashed their whole lives to think that consumerism is the American Way, and therefore the highest and best good. The way they have been acting is a direct result of the way they were raised. And it looks like we're about to repeat that grand cycle all over again-- with another Depression.
I thought if everybody was employed in "services" we could have unlimited prosperity.
Perhaps unemployment services.
I calculated yesterday that I've spent roughly 1000 hours looking for a job in the past year.
A lot of what happens in IT now is churn.
My project in 2008 could have been done in a year by 4 skilled Americans, but instead it accumulated about twenty "support" people, extraneous project managers onshore, extraneous managers offshore, constant shifting of "assigned" resources who switched in and out so lost context & knowledge of the project, somebody to monitor the hours, etc.
Jobs are finite.
"Building" an economy can't work when you send what finite work there is to China.
As has been said here, eventually most manufacturing will be automated to the point that it employs very few people. We just took the easy and quick way out here in the U.S. by outsourcing the work to very cheap workforces overseas.
But whether you automate jobs away or ship them away, you have to eventually deal with all the people standing around with nothing to do and no livelihood. In a society run by people chasing the short-term profit and short-term jackpot, that problem only rises to the top when the people start seeking, ahem, "alternate leadership." Even buyin' em of with unemployment only lasts so long and does so much. Inevitable change is waiting, one way or the other.
AMZN's strength (if you can call it that) is simply AMAZING.....guess that happens when you have such large ownership in the hands of so few. Won't let it drop below it's PM low from Monday....
CR devoted Labor Day to unemployment and associated distress and has periodically acknowledged that lower real estate prices is good for the buyer/renter's "market" (especially if real income ever rises).
One day he may even see that these aggregate numbers (esp. GDP) don't add much value without intelligent analysis of the details, which he often gives plenty of.
I wholeheartedly agree with you on income disparity. It is at the core of our problems. Combined with immoral household debt pushing by banks it will be our downfall.
I calculated yesterday that I've spent roughly 1000 hours looking for a job (that meets my pay expectations, is permanent, where I won't have to work with lamebrains, assholes or asskissers, or generally suffer fools in any way, shape or form) in the past year.
No. You aren't seeing the interconnections, and you don't realize how cheap housing is to build. It's about $50 per square foot for production housing, and sold for $100 - $150 per square foot, or more. The money that went into this disappeared into the banks, never to be seen again. In a sense, it was the "stuff" that actually drove the housing, not the other way around-- because you can't put a lot of "stuff" into a small urban apartment. That's why you need the house. So that Junior and Juniorette can get a "good" suburban education, be insulated from dangerous "urban" zones, and Mommy and Daddy can get on with their careers, which are mostly about paper-pushing. Most of the growth in the last few decades in America has been driven by the suburbs, and the whole value system it engenders.
Bob Dobbs (homepage, profile) wrote (in reply to...) on Wed, 10/28/2009 - 10:03 am
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broward wrote:
Jobs are finite.
"Building" an economy can't work when you send what finite work there is to China.
As has been said here, eventually most manufacturing will be automated to the point that it employs very few people. We just took the easy and quick way out here in the U.S. by outsourcing the work to very cheap workforces overseas.
But whether you automate jobs away or ship them away, you have to eventually deal with all the people standing around with nothing to do and no livelihood. In a society run by people chasing the short-term profit and short-term jackpot, that problem only rises to the top when the people start seeking, ahem, "alternate leadership." Even buyin' em of with unemployment only lasts so long and does so much. Inevitable change is waiting, one way or the other.
So what changes may be waiting, any thoughts? Two of mine are(neither easy sell)
One job per family household, the norm
Significant % of population will have to be employed in sustainable solar powered food production(not oil based).
One day he may even see that these aggregate numbers (esp. GDP) don't add much value without intelligent analysis of the details, which he often gives plenty of.
You know who else really enjoyed analyzing details? Henry Paulson. Now there is a misunderstood man, a man who will be honoured by future generations for his tireless efforts before, during, and after the financial crisis.
yeah, the algo's are dancing around the 50 day SMA on SPX, the Dow with the 20 day, the NASDAQ and R2K are both through their respective 50's...make of that what you will
Combined with immoral household debt pushing by banks it will be our downfall.
Until the peasants are hungry enough to see the winners as being the "amoral scumbag" the system can't be changed. Right now, there's still way too much delusional worship by the peasants OF their masters (coupled with the usual peasant self-loathing of each other). Ayn Rand still rules in the minds of the peasants. Not the true end-game-results of amoral unregulated capitalism.
Imo, the metric to follow is starts, not new home sales.
I hear ya. CR has covered this - they both measure different things and are a proxy for the real activity but in different ways.
Like I said above - had a very interesting conversation a couple years ago w/ the global supply chain mgr for a large multi-national appliance maker - told me how they forecast. In effect they look at BOTH replacement estimates AND new build numbers... then compare w/ cost of money & number of households. The result was that the replacement market was larger BUT relatively constant... the new home & move up buyer market was erratic but considered the icing on the cake. Has to do with variable vs. fixed cost & break even numbers.
I had this conversation about 3-4 years ago just as MEW was rocketing up - they were seeing unit sales go from flat line 600-800K per year to 1.2MM-1.5MM units... almost double baseline replacement. I haven't talked to them in years but my guess is they are back down to baseline or close to it [even after all the consolidations & plant closings].
That was one interesting conversation into the head of a mass market mfgr.
First of all, assets didn’t always appreciate faster than GDP. For the first several decades of this history, economic growth, not paper wealth, was king. We were getting richer by making things, not paper. Beginning in the 1980s, however, the cult of the markets, which included the development of financial derivatives and the increasing use of leverage, began to dominate. A long history marred only by negative givebacks during recessions in the early 1990s, 2001–2002, and 2008–2009, produced a persistent increase in asset prices vs. nominal GDP that led to an average overall 50-year appreciation advantage of 1.3% annually. That’s another way of saying you would have been far better off investing in paper than factories or machinery or the requisite components of an educated workforce. We, in effect, were hollowing out our productive future at the expense of worthless paper such as subprimes, dotcoms, or in part, blue chip stocks and investment grade/government bonds.
Automated mass manufacturing does no good for anyone if the manufactured products are not distributed for use by masses of people. Doesn't matter who pays, profits, or does what little work is left.
Economic loss from mass unrest/starvation/war in the short run can be a large multiple of whatever silly long-term gains the Randians think are realized by forcing a union to work for Chinese sweatshop wages or starve. And the concentrated wealth owners didn't earn those fucking billions in bonuses anyway.
There's all sorts of subtle effects going on, too. The death of the afternoon newspaper, and the "paper" side of the media in general, is largely because there's no one home in the afternoon to read that paper. And since Mom and Dad both work, and have to get the kids off to school early, they don't have time to read the morning paper, either. These days, most people read the news off the laptop in the cubicle farm, or on the radio. When they're not listening to shock jocks, that is.
shaw industries is laying off 3% of it work force in north ga. hope it dont trickle down here to south ga
According to a map of Georgia watersheds, the trickle should generally move from Northeast to Southwest. So if you're in the southeast corner, like south of Savannah, you might be okay.
Ayn Rand still rules in the minds of the peasants. Not the true end-game-results of amoral unregulated capitalism.
NaRm,
Ayn Rand had it all wrong. It's not those at the top that make our society go-round. It's the core in the middle. When the middle goes Galt, then you get a depression or a revolution. Ayn Rand's John Galts are actually the leeches, think present day financiers and self-enriching CEOs. They will never, ever voluntarily withdraw as Rand thought.
Ayn Rand is a dope. So is her protege, Greensham. Both of their core beliefs are founded on mud.
So what changes may be waiting, any thoughts? Two of mine are(neither easy sell)
IMO, any kind of "top-down" decisions like this are doomed to fall. If you want anything approximating free-markets (not saying you should or not, but if you do) you first have to address the question of: How is this system going to keep the smart amoral scumbags from capturing it. When you figure THAT out (and if you really believe in free-markets) the number of people working in a house-hold will figure itself out WITHOUT the government (somehow) deciding this.
If you go with a top-down systems of guilt-ridden-mommy-socialists or kick-ass-frat-boy-fascist then, but by definition (almost), you know the smart-amoral-scumbag will be running scams and taking the loot.
The money that went into this disappeared into the banks, never to be seen again.
No banks are where the money came from to fund the build - they go into construction labor, wood, carpet, nails, gas for bobcats, siding paint - etc. Once built the money returns to the banks plus interest via the home owners payments over a generation.
If you want to understand interconnections at least understand the directions & MAGNITUDES of the flows. Again even at $50/sq [which is low even for here - I know builders and the numbers are more like $80-100]... but even at $50 a 2000 sgft home inputs at $100K THEN they add the same furniture they'd add in a complete redo of an existing home.
Ayn Rand is a dope. So is her protege, Greensham. Both of their core beliefs are founded on mud.
I agree, but most Merican peasants still drink the kool-aid of: the smartest MORAL RIGHTEOUS people run bidness. Generally, this is because most humans can't look in the mirror and self-judge themselves and most Mericans have a delusional view of their own history.
That's a good argument, Bob. But I'll argue back that under the current system, what we now have is a lot of peer-to-peer confusion. Instead of one central bank & policy, we now have many acting from different perspectives. Instead of one regulatory agency, we have many. Instead of one language, we have many.
We have a complex system of trading and shipping and what does it buy us, really?
A whole lot of complexity & risk, no clear management directives or leaders, and for what?
Not entirely correct ... Today's leeches BELIEVE themselves to be Rand's Galt. Or do you think Rand worshipped the banksters? Clearly not so ... she worshipped productive capitalists, idea-men who invented and built. Edison, Whitney, Wright, Ford, etc. (The men, not the modern-day shells.)
Not defending Rand, necessarily, but she was not on the side of the leeches.
she worshipped productive capitalists, idea-men who invented and built. Edison, Whitney, Wright, Ford, etc
It's easy to selectively worship a small group of people, but you can't make the leap that the small group represents in ANYWAY reality. A reality-based society has to deal with the (uh) reality of humans. The smart amoral scumbags that have always run everything are normal in society; all societies have them. If you can't control these people (within the framework of your system - or "ism") then the ONLY end-game possible is exactly where we are at right now. Which is where all nobility based (worship of the righteous based) systems have ALWAYS ended up.
Rand thought that Goverrnment was evil at all levels. That is just idiotic. ALL successful economies have Government involvement. It's a matter of degree of course, but Rand's view that the Government was a parasite is just bogus. Further, her point that a small few are the foundation of the economy is wrong.
Looking at the difference between Existing Home Inventory and New Home Inventory I would expect the exact situation we are seeing today. Existing Home inventory is still incredibly high at 4M homes compared to 1M homes in 2001. New Home inventory has come way down, from a high of 500k Homes to 250k today vs. 300k in 2001. New homes and existing homes are pretty much equivalent to a buyer, you may expect to pay a bit less for a similar existing home, and in this environment you would expect to pay even less.
Until the Existing Home inventory is worked through you won't see this gap close.
Firstly, the present day financiers and self-enriching CEOs are the James Taggarts of the world, not the John Galts. Second, anyone who thinks Greenspan at all exhibited Randian tendencies needs to get a head examination. He was a central banker for crying out loud.
Maybe I am just cold-hearted, but I really do not find this very distressing.
House panel votes for new rating agency rules
House panel votes to set new rules for credit rating agencies after financial crisis
In all honesty, it would be REALLY distressing to me if they were still cranking out McMansions like they were in 2005-
Search Results - THOMAS (Library of Congress)
and i can get a clickable link with this. sorry
this is about hr 3448 it the 3rd one down.
i got
should read cant get
DiTech and glod is BACK!
So the housing tax credit is likely providing a negative economic benefit.
When home builders start going bankrupt at the rate homemoaners are defaulting then their new homes will enter the marketplace with the correct pricing structures and the gap will disappear. Well, not entirely. You see the monthly nut for new houses is much higher than for the equivalent used house. That won't go away until municipalities socialize disparate tax burdens.
But no homebuilder BKs?
Or did I miss some news?
Hey CR --
When an existing home is sold, the housing stock doesn't change, and the only direct contribution to the economy are the transaction costs.
Are transaction costs really a "direct contribution to the economy"?
Put another way: If we could convince two neighbors to sell their houses back and forth to each other enough times, would that make our economy strong?
I believe I know what you mean. But conflating "the economy" with "economic activity" is one of the fallacies at the core of our problems...
got 2 ford ads and a goldline first ones ive had all morning
lost ads
Dawg --
We have been waiting three years for the first major homebuilder bankruptcy. How come it never happened? (Honest question.)
Nemo wrote:
i like to call it "pragmatic". cold-hearted has such a negative connotation.
didnt toll go bk?
EXCELLENT question.
No prob. Just mark new construction down to distressed-existing price levels. Presto, new construction is competitive. "Nothing price won't fix."
That's inflationary, right?
Although I think we've seen the bottom for new home sales, - CR
You might be right, but I don't think we've seen the bottom. I expect existing home prices to keep falling and that alone will drive new home sales lower as cost to build will not fall as fast as the cost of existing homes.
We have a supply glut.
sm_landlord wrote:
None yet, There are interesting whispers about Lyons but nothing that rises to rumor. That's the problem. The HBs are burning lines and shedding options and disposing of assets. They were very deep because of the bubble. It's taken forever but the muddlecession can persist longer than they can pretend.
Nemo wrote:
Sure! The lawyers and RE Agents get their cut, and if you do it enough times, the increase in the value of all of the other homes that were not sold increases, providing principle to base HELOC's on-
Nemo wrote:
Extension of the carryback period for writing off losses on corporate income tax?
Nemo: Did you see this article:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ap8qFd_z2rFs
gabyjan - not unusual in the Senate to get "poison pill" amendments proposed, like the ACORN or e-Verify amendments, since amendments do not need to be germaine in the Senate, especially on a bill that the party leaders do not really want to delay by having it sent to conference to resolve differences, like the UE extension bill, so they can force a favorable vote on the amendment to get to 60 on the underlying legislation, then force the House to vote in favor of the Senate bill with the poison pill amendments so they can get the legislation to the president without having to go through a conference committee. Forcing a vote on ACORN is going to leave a bad taste in the Dems mouths.
threetorches wrote:
Folks across the street wanted to build a 3k sq. ft. home on an existing lot, and their contractor quoted $850k. WTF! That guy must be living in an alternate universe or something-
Terry wrote:
Medicine has to taste bad to be good-
The HBs are burning lines and shedding options and disposing of assets. They were very deep because of the bubble.
Or maybe the pension funds are being extremely forebearing? Don't have to BK if your creditors are caring kindly organizations.
Yalt wrote:
They can't have much income to protect with those carry-backs. They must be selling assets to keep the doors open. But I thought most of their assets were leveraged, so I don't know how they can get much by selling them...
So how is the NAR going spin this one....
Good luck Yun....
On second thought, NOL relief only applied to smaller businesses, right? So while it no doubt kept some small builders afloat it doesn't actually answer your question.
Rob Dawg wrote:
There've been a number of building lots with full sets of engineering drawings put on the market on Ashburnham, MA in the past few weeks, some at fire sale prices. Gotta assume some builder is trying to liquidate.
Here's the window I open for a quick peek at "homebuilders": Quotes for FRE, FNM, HOV, ... - Yahoo! Finance
Not a good day.
Builders WCI and Levitt both went under.
Blob Troll made out like a bandit though. He and his bro made hundreds of millions.
See, Cinco, their answer should be, "We just saw a couple of HUD repos listed at $50k. Take it or leave it."
(The contractor just isn't hungry enough, YET.)
Angry Saver wrote:
LOL-
Blob Troll? I'm afraid to ask...
"Builders WCI and Levitt both went under under."
And the icing on the cake, in WCI's case, is that Icahn took a huge bath along with them.
Ciao
MS
Blob Troll? I'm afraid to ask...
Bob Toll, chief pumper, shill and asset stripper for Toll Bros.
Forgive me for reposting re the proposed expanded tax credit:
I'm on the sidelines and have been since 2007. If I had wanted to buy in 2009, I would not have gotten the credit because I've only been renting since 2007 thereby missing "first time buyer" requirement. Also my income doesn't work with this. Now it is being extended to "move-up" buyers, with the new requirements we still don't get it.
Now, stay with me here. I can afford to buy at this point- something. However there is a tax credit jacking up the market, one that I can't get. People who have lower income probably can't afford something decent around here even with the credit.
So, basically what this is doing is giving money to the people who would be competing against us for houses thereby discouraging us from getting in the housing market. Can't someone do the math and figure out how many people for whom it is a disincentive rather than an incentive? There has to be a point where it tips over that way and I'm guessing we passed it.
As much a manwhore as Mozillo....
That's quite a feat!
terry
thanks
Nanoo-Nanoo wrote:
Just negative propaganda slamming one of the most honest and trustworthy institutions in Merica, perhaps the entire world. It's nay-sayer's like this that have caused a minor economic down-turn to turn into a crisis.
snark
Wells Fargo bet it all on black and saved the company for another quarter.
As much a manwhore as Mozillo....
Just don't call him or anyone else a "K Street" whore. The thought police over at Fox News won't allow it.
I keep reading on CR that New Home sales are more important than existing. Since most new homes are bigger, better and more expensive, wouldn't the key target buyer be an existing homeowner? And if an existing homeowner can't sell in order to move up (or down to FL to retire for example) then can't we say that new and existing are equally important?
"Rob Dawg (homepage, profile) wrote on Wed, 10/28/2009 - 9:04 am
reply ignore user
Wells Fargo bet it all on black and saved the company for another quarter."
when your assets suck why wouldn't you make out like a bandit on the hedges you take out
I was just arguing that very topic on two other forums...I'm convinced these people have never used a dictionary...Much ado about nothing. I'm an aspiring whore FWIW. I just can't quite figure a way to sell my soul for money...
Alternative solution to the excess supply of existing homes: allow permanent immigration of any foreign national that can bring the equivalent of $8K USD cash and is willing to assume the mortgage on an existing foreclosure.
I think somebody is a little touchy this morning...
Burning Madolf wrote:
Most of the newly built homes (except at the very high end) are not at all better. Both materials and construction quality are inferior. Judging by CR's chart, what move-up activity there is, is headed to existing homes.
Edit: Not to mention that a lot of newly-built homes are in undesirable locations, out in the middle of nowhere, a long commute from employment centers.
Its also fun gambling when youre using other peoples money....
......
a.s. - I think fox news is doing a good job totally destroying the R's.... That party needs to be reconstructed from the ground up... I await it....
poic wrote:
What confuses me is who would take the other side of the trade. I mean WFC is the ultimate insider here.
poic wrote:
Farmers, miners, and others who dabble in commodities learned long ago that hedging helps in a falling market, but does nothing during a long period of weak prices.
I have a feeling that this previously commodity-specific lesson is going to be extended to the entire economy at large over the next couple of years.
I need rich to show up and tell me everything's going to be OK with my GDX.
Clearly, to get the economy humming again, we need to outlaw the sale of existing homes. Afterall, such sales are not productive activities and new home construction is.
Eric wrote:
Any thoughts on a good hedge for that?
OT: apologies but I find this interesting. Did China really think oil would be supported at $140/ppb? and Russia is developing direct oil lines there, so shouldn't their refining/capacity improve over that. Could it be that Chinese domestic demand is DOWN?
http://www.bloomberg.com/apps/news?pid=20601087&sid=ao9n6N840JK8
MuffinTop- nice summary. But things like that don't matter. This is Congress we are talking about, here.
At any rate, the people who will actually, truly benefit from the credit seem to be "Norm Abrams types" who will buy an extreme fixer-upper HUD repo or something and actually live in it while they fix it up. I am not sure that is a majority of buyers these days. Applying it to an actual new construction home in a bubble zone still seems like a way to throw good money after bad.
Yancey Ward wrote:
What's needed is a renovation tax credit. I'm sure that's something the NAR would support, right?
Rob Dawg wrote:
It's the new Fed self-hedging program. You virtually hedge the other side of your bets and take whichever side wins.
noob goldberg wrote:
You might get some support from Lowes and Home Depot on that plan.
What confuses me is who would take the other side of the trade. I mean WFC is the ultimate insider here.
Rob Dawg,
It's so sad, but the taxpayer is the patsy in that trade, likely via AIG, C, BAC, GMAC, etc.
There are also off balance sheet "vehicles" and friendly "arms length" loans to certain hedge funds that make these deals go round.
I'm not really complaining, it's a high beta play, so market down 1% GDX down 4% is somewhat
but not unexpected.
sm_landlord wrote:
Nobody wants a bubbledome. It is a little bit of everything; Quality, construction, cost, design, transect.
If my hood is any indicator the jewels are staid single story rambling California Ranches on large lots with few "improvements" in either structure or neighborhood. Whointhehell wants a circular foyer with 30 ft ceiling and roman tile alcove floor? Waste of.. well everything.
i liked well fargo better when they were stage coachs.
Just a reminder...
the error bar on the -3.6% new home sales is more than +/-10%. These are some of the noisiest data published and should be interpreted with a full dose of salt.
Burning Madolf wrote:
No - just because an existing house sells doesn't mean they buy a new home - they could buy an existing home [most do]. Likewise not all new home buyers are buying up - some [quite a lot really] are first time buyers - especially in mass produced tract product. So while your scenario is accurate for a subset it isn't by any means universal.
sm_landlord wrote:
We did it in Canada, and AFL-CIO complained because, at $10K, it was too small a credit to encourage homeowners to use union labour.
Eric wrote:
You want some beta, try Corriente (ETQ)
And GDX is probably a buy again if it gets down to 35 or so.
OT, but can someone explain the vampire squid from hell meme?
I can't find the glossary to look it up.
Thnx
I can't stay and discuss, but I had to pop in and comment on something I just noticed from the prior thread:
Regarding the chart CR presented on "New Home Sales and Recessions", the data shows that no recession since 1970 has ended with New Home Sales running below 500,000 (SAAR).
So once again, there's evidence that the current recession probably hasn't ended yet, even if we get a positive ("Federal-debt-stimulated") GDP print for one quarter.
Well exactly Rob Dawg. You might also extend that to the need of the boomer population with empty nests and aching hips needing to find a single story place to die in which isn't a high maintained/service home. There are literally hoards who will require safe but modest housing, that need is mostly unfulfilled attm. Its a demographic largely ignored by homebuilders with the except of condos perhaps. Warehousing the boomer population isn't going to be doable.
giacutter wrote:
google: vampire squid matt taibbi
Rob Dawg wrote:
FWIW, that fits what I am seeing in mid-west, too. Smallish older homes that are structually sound, decent lots in older neighborhoods, selling (when they sell) at half-off. Knock yourself out repainting, tile the "foyer" yourself, hang a little drywall on the weekend, let the SO pick out a nice half-off carpet, that sort of thing.
Don't have to be Norm to pull off something like that, especially if you ain't flippin' but livin', brother.
giacutter wrote:
The Great American Bubble Machine : Rolling Stone
First paragraph.
That is an easy fix. Just make the homeowner go through the local union to claim the credit. Hell, the union could even cut a side deal to sell the owner the certificate allowing him to use whoever he/she wanted.
giacutter
look under toys
The commodity hedging question is an interesting one, the area that has had my attention is natural gas hedges...it seems most all the producers were well hedged going into the price downturn of the past year or so, but those are beginning to come off - in addition to a more limited ability to hedge now, there seems to be a perverse effect when the whole industry is well hedged, as the suppliers of the commodity are not receiving the price signal of the marketplace due to the hedge, resulting in an extended period of oversupply...
C'mon now, not if the house has pergo and granite.
Yancey Ward wrote:
That's not what the union was suggesting. They preferred an increase to something >$50K, so that people initiate major renovation jobs.
Anyway, I said it wrong; it's not a $10K tax credit, it's a tax credit on the first $10K of a job, which amounts to a couple of grand. Still helpful, but not gigantic.
But you'd be amazed at the number of small jobs all of my family and friends initiated around their homes to take advantage of it.
Vampire squid...got it!
Thanks to all.
Hubby and I are looking into being "move down" buyers. In our mid 50s, both lower our current payments and have the property paid off at retirement. I don't think we are out of the ordinary.
"When a new home is sold, the housing stock of the nation increases, "
CR - I think that's "decreases".
Well, they would always prefer more, but my idea is that you simply give them money and they don't even have to supply the workers to do the job.
"When an existing home is sold, the housing stock doesn't change, and the only direct contribution to the economy are the transaction costs." - CR
Respectfully disagree. When someone buys a home, they usually make some changes. Carpet, paint, wallpaper, appliances, landscaping, etc. Furniture is a biggie. Also window treatments. First-time buyers also go for lawn mowers and so forth. In fact, one major reason for the recession is the way the "housing related" industries have been dragged into this mess-- from the furniture companies in North Carolina, to carpet in Georgia, to lumber in the NorthWest. And all the small business people who did things like window blinds and upholstery are in deep trouble.
New home sales better for the economy? Broken window fallacy, anyone?
energyecon wrote:
I only know agriculture, and although I probably wrongly assume that large natgas producers are more sophisticated, farmers in general do not respond to external market signals, except for determining planting decisions. It's not until they are actually deep in the red that they really start reducing planting acres and production quantities. I'm generalizing, but this is the usual trend.
I have a feeling no company is going to make any drastic changes until they are forced to by a declining bank account. Since they're all hedged, they maintain full production. In a rational world hedging is a godsend. In reality, it just delays the inevitable.
Anyone noticing how when the market starts selling off hard lately, it's followed by sudden spikes? As if somebody is literally pushing a "BUY" button with a massive pile of freshly printed cash?
noob,
Are you thinking tax deduction vs. tax credit? The deduction would be multiplied times the tax rate for the benefit, but a credit is dollar for dollar...
They can get all that second-hand from Ebay and abandoned homes that get scavenged.
scone
you are so right,its that old interconnected thing.
Yancey Ward wrote:
You're too rational for us Canadians.
energyecon wrote:
It's a 15% tax credit: Home Renovation Tax Credit (HRTC)
EDIT: I was a little charitable on saying it was worth a 'couple of grand'. Apparently the max payout is $1350.
Even car sales are related to housing. The boom made homes close to the city too expensive, but you still needed 2 incomes to buy anything. Hence "far suburbs" homes on tiny lots, with a 2 or 3 car garage. Hence the rise of roadside espresso stands. And mass numbers of fast food joints on the way in to work. Most of the stuff you see in the landscape, along any major road, is related to the housing bubble in some way.
Wells Fargo & Co. earned almost a third of its pretax quarterly profit by hedging mortgage- servicing rights,
ISTM that when one entity profits through hedging, there must be a counterparty that loses.
WHO LOST?
[Sorry, "look in the mirror" has been taken.]
EDIT: After reading, noticed that Rob and noob already discussed this.
Its a negative feedback: deflation in discretionary consumer vs inflation in services/food, etc. Over supply, just in time mfg and job losses; models that fail when credit dries up for consumers, small businesses that bank their payrolls on it, etc. Its one reason for being enraged as bankstas have profoundly exacerbated the situation.
Why rich college kids can sell dope and you can't - Denver News - The Latest Word
Edit: The future "smart amoral scumbags" of Merica.
Meanwhile:
Iran to seek changes in uranium offer - UPI.com
Tick,tick,tick, etc.....
Ciao
MS
actually, the hedging in natural gas appears to have made things worse, as production is maintained or even expanded into a price decline and storage becomes ever more full...
Meh, somebody will need to supply the bag ladies with 'feel good-no worries' as they live out of their refrigerator boxes and a McHappyMeal from peddling outside the NYSE. Its going to be a public service in the not too distant future. dripping with sarcasm
scone wrote:
Minimal compared to the total inputs in a new home build... in addition the new home build also requires furniture, curtains etc. It is an order of magnitude difference.
Plus not all buyers of existing homes replace everything - else there'd be no moving companies. I realize the recent bubble MEW-a-plenty mindset was that way but overall - that is an aberration... in most periods people kept furniture, appliances - etc. - until they failed. Rugs & curtains until they wore out. I think part of the new austerity is a return to that. But then YMMV.
ISTM that this is probably due to a perfectly rational decline in housing STARTS after the bubble peak. Probably driven more by the banks than the builders, but this should mean that we can start working through the backlog.
energyecon wrote:
I am so glad I didn't break plan and short Anadarko. Just watching has been a free education.
Remember the old days when there was a small but still real possibility of having to take delivery?
Even car sales are related to housing.
Scone,
No way can a self respecting owner of an $800K McMansion park an $8,000 used car in the driveway. I mean, a $50K flash ride adds less than 10% to the cost of livin large!
scone wrote:
My favorite: the supermarket and hot-food deli with the bank, the coffee house, dry cleaners, and optometrist on premises. And there was a beauty parlor and a dentist in the same strip mall. All the basics in one place for the harried, end-of-day long-distance commuter. It was about 50 miles out of San Francisco in a commuter helltown.
energyecon wrote:
Natgas is its own animal, as storage is difficult, expensive, and hard to expand. For agriculture, adding storage is as simple as renting a warehouse and dumping grain on the floor.
Same in Atlanta: Also included hair/nail salons, dentists, pharmacy out of the superduper giant supermarket that require a motorized buggy to get around in...they were located every 3-5 miles along with the Targets, Walmarts and multi-story malls. This was BEFORE the last massive build too.
Bob Dobbs wrote:
Its the new normal nationwide.
This tax credit phased out at the income of people who don't have lots of leftover money after a home purchase. If there's any positive effect, we'll see it in furniture and home improvement retail sales in the next 3 quarters.
My favorite in Atlanta were the DRIVE-THRU liquor stores!!
Nanoo-Nanoo wrote:
Of course, it's the same in all the boom-population areas. I don't see how all these places will stay open (as is) with their current traffic levels.
My favorite in Atlanta were the DRIVE-THRU liquor stores!!
AKA "Brew thru"
I realize the recent bubble MEW-a-plenty mindset was that way but overall - that is an aberration... - D
No. And no. You're not thinking about all the industries that feed into home-buying. That's where most of the industrial production has ultimately been aimed. A sofa isn't just wood, it's fabric, which affects everybody from wool ranchers and cotton farmers to dye makers and weaving machinery makers. A can of paint is water, plus polymers (oil) plus pigments-- usually ICI-- from China. Electrical goods use plastics, metals, glass, chemicals, etc. Carpet is all about nylon (chemicals) dyes (chemicals) and wool (sheep ranchers around the world). Computers and appliances, all multi-source products. All of this stuff implies machinery and factories.
And all of this was dependent on cheap energy-- oil and electricity.
It's ultimately all about retail sales, baby-- that's the ultimate driver, and the Western, especially American, consumer was doing most of that. And the American consumer is not buying heavy industrial equipment-- they are buying stuff to use, to wear, and to live in.
Better known as I-285
ratio for existing home sales divided by new home sales.
Proof of re-inflated bubble!
Its a little discouraging that CR never talks about the income disparitiy in this country that is now higher than it was during the Depression. Home sales won't bottom until the income gap closes.
For one last look @ America before it became all the same...
"Blue Highways" by William Least Heat-Moon
The distressing gap is the increase in the rate of unemployment multiplied by the increase in homelessness and foreclosures multiplied by the increased number empty houses.
The distressing political gap is a Congress apparently ready to re-confirm a Fed chair who has a mandate to lower unemployment but is not capable of imagining any policy choice other than handing huge stacks of cheap cash to rich bankers.
Who destroy jobs rather than build an economy.
Jobs are finite.
"Building" an economy can't work when you send what finite work there is to China.
scone wrote:
This is true, but on a transaction-by-transaction basis, compared to a new home, dryfly is right that it's an order of magnitude difference. If they're extremely extravagant, a couple moving into an existing home and not making any major renovations will spend less than $20K on those sorts of enhancements. While that tiny bit of demand will flow through the system, it's still very tiny. Remove retail markups, and wholesale values would be less than $15K per home. There is more wholesale value in the furnace, air-conditioner, and water heater that goes into a single new home.
And yes, I'm completely making those numbers up.
William Least Heat Moon had two brothers who had names like most heat, and more heat Moon. William went to the U of Missouri, and wrote the book, I bought a copy, lent it out, and never got it back. A shame, good pictures too.
And, Louisville KY had drive thru liquor stores in the '70s.
broward wrote:
You mean those stories we were told about not needing the LOSER manufacturing jobs weren't true?! I thought if everybody was employed in "services" we could have unlimited prosperity.
scone all you have to do is add up the dollars - the new home build is orders of magnitude larger. I've had these discusions withe appliance mfgrs in trying to understand their forecasting. Same thing applies to furniture - etc.
New home cost something like what - $250K or more? [Even cheap ones cost $100K-$150K]... those are costs not selling prices. That is raw mat'l, equipment, labor... THEN they fill it with furniture, appliances & other crap on top of that.
Compare w/ existing homes - much less so. Who puts $100K to $250K of furniture into a home... not average Americans I can 100% assure of that. Order of magnitude less impact
That is CR's point... not that existing homes sales have zero impact - just much much less economic impact.
Dryfly,
Imo, the metric to follow is starts, not new home sales.
In fact, if you go back to 1945, the return of the GIs and the beginning of the modern suburb, you can see the roots of the boom and bust. Everything about the '50s was a reaction against the horrors of the Depression. It was all about making the world safe for Levittown breeders who wanted a new car, a couple of babies, and a brand new washer and dryer bought on "layaway" or the "installment plan."
The boomers have known nothing else but mass consumerism-- they've been brainwashed their whole lives to think that consumerism is the American Way, and therefore the highest and best good. The way they have been acting is a direct result of the way they were raised. And it looks like we're about to repeat that grand cycle all over again-- with another Depression.
NOTaREALmerican wrote:
Perhaps unemployment services.
I calculated yesterday that I've spent roughly 1000 hours looking for a job in the past year.
A lot of what happens in IT now is churn.
My project in 2008 could have been done in a year by 4 skilled Americans, but instead it accumulated about twenty "support" people, extraneous project managers onshore, extraneous managers offshore, constant shifting of "assigned" resources who switched in and out so lost context & knowledge of the project, somebody to monitor the hours, etc.
broward wrote:
As has been said here, eventually most manufacturing will be automated to the point that it employs very few people. We just took the easy and quick way out here in the U.S. by outsourcing the work to very cheap workforces overseas.
But whether you automate jobs away or ship them away, you have to eventually deal with all the people standing around with nothing to do and no livelihood. In a society run by people chasing the short-term profit and short-term jackpot, that problem only rises to the top when the people start seeking, ahem, "alternate leadership." Even buyin' em of with unemployment only lasts so long and does so much. Inevitable change is waiting, one way or the other.
Time for me to tend to some things I've been procrastinating...CR is EVIL.
Another great discussion and many thanks to all.
AMZN's strength (if you can call it that) is simply AMAZING.....guess that happens when you have such large ownership in the hands of so few. Won't let it drop below it's PM low from Monday....
Ciao
MS
Didn't even see Tim's post before mine...
CR devoted Labor Day to unemployment and associated distress and has periodically acknowledged that lower real estate prices is good for the buyer/renter's "market" (especially if real income ever rises).
One day he may even see that these aggregate numbers (esp. GDP) don't add much value without intelligent analysis of the details, which he often gives plenty of.
Tim wating for 2012.
I wholeheartedly agree with you on income disparity. It is at the core of our problems. Combined with immoral household debt pushing by banks it will be our downfall.
Listen to dryfly.
In the mid 1800s the doubters would be counting the cost of the Conestoga Wagon and none of its outfittings or expenses on the trip.
broward wrote:
There, fixed if for ya
SPX touched 1047 didn't like it, and jumped back above 1050 now.
scone
shaw industries is laying off 3% of it work force in north ga. hope it dont trickle down here to south ga
Order of magnitude less impact - D
No. You aren't seeing the interconnections, and you don't realize how cheap housing is to build. It's about $50 per square foot for production housing, and sold for $100 - $150 per square foot, or more. The money that went into this disappeared into the banks, never to be seen again. In a sense, it was the "stuff" that actually drove the housing, not the other way around-- because you can't put a lot of "stuff" into a small urban apartment. That's why you need the house. So that Junior and Juniorette can get a "good" suburban education, be insulated from dangerous "urban" zones, and Mommy and Daddy can get on with their careers, which are mostly about paper-pushing. Most of the growth in the last few decades in America has been driven by the suburbs, and the whole value system it engenders.
So what changes may be waiting, any thoughts? Two of mine are(neither easy sell)
1 currency now -yogi wrote:
You know who else really enjoyed analyzing details? Henry Paulson. Now there is a misunderstood man, a man who will be honoured by future generations for his tireless efforts before, during, and after the financial crisis.
yeah, the algo's are dancing around the 50 day SMA on SPX, the Dow with the 20 day, the NASDAQ and R2K are both through their respective 50's...make of that what you will
Angry Saver wrote:
Until the peasants are hungry enough to see the winners as being the "amoral scumbag" the system can't be changed. Right now, there's still way too much delusional worship by the peasants OF their masters (coupled with the usual peasant self-loathing of each other). Ayn Rand still rules in the minds of the peasants. Not the true end-game-results of amoral unregulated capitalism.
Angry Saver wrote:
I hear ya. CR has covered this - they both measure different things and are a proxy for the real activity but in different ways.
Like I said above - had a very interesting conversation a couple years ago w/ the global supply chain mgr for a large multi-national appliance maker - told me how they forecast. In effect they look at BOTH replacement estimates AND new build numbers... then compare w/ cost of money & number of households. The result was that the replacement market was larger BUT relatively constant... the new home & move up buyer market was erratic but considered the icing on the cake. Has to do with variable vs. fixed cost & break even numbers.
I had this conversation about 3-4 years ago just as MEW was rocketing up - they were seeing unit sales go from flat line 600-800K per year to 1.2MM-1.5MM units... almost double baseline replacement. I haven't talked to them in years but my guess is they are back down to baseline or close to it [even after all the consolidations & plant closings].
That was one interesting conversation into the head of a mass market mfgr.
Quote of the day, brought to you by PIMCO:
First of all, assets didn’t always appreciate faster than GDP. For the first several decades of this history, economic growth, not paper wealth, was king. We were getting richer by making things, not paper. Beginning in the 1980s, however, the cult of the markets, which included the development of financial derivatives and the increasing use of leverage, began to dominate. A long history marred only by negative givebacks during recessions in the early 1990s, 2001–2002, and 2008–2009, produced a persistent increase in asset prices vs. nominal GDP that led to an average overall 50-year appreciation advantage of 1.3% annually. That’s another way of saying you would have been far better off investing in paper than factories or machinery or the requisite components of an educated workforce. We, in effect, were hollowing out our productive future at the expense of worthless paper such as subprimes, dotcoms, or in part, blue chip stocks and investment grade/government bonds.
Automated mass manufacturing does no good for anyone if the manufactured products are not distributed for use by masses of people. Doesn't matter who pays, profits, or does what little work is left.
Economic loss from mass unrest/starvation/war in the short run can be a large multiple of whatever silly long-term gains the Randians think are realized by forcing a union to work for Chinese sweatshop wages or starve. And the concentrated wealth owners didn't earn those fucking billions in bonuses anyway.
There's all sorts of subtle effects going on, too. The death of the afternoon newspaper, and the "paper" side of the media in general, is largely because there's no one home in the afternoon to read that paper. And since Mom and Dad both work, and have to get the kids off to school early, they don't have time to read the morning paper, either. These days, most people read the news off the laptop in the cubicle farm, or on the radio. When they're not listening to shock jocks, that is.
gabyjan wrote:
According to a map of Georgia watersheds, the trickle should generally move from Northeast to Southwest. So if you're in the southeast corner, like south of Savannah, you might be okay.
Georgia Watersheds | GEORGIA RIVERS, STREAMS AND LAKES
Ayn Rand still rules in the minds of the peasants. Not the true end-game-results of amoral unregulated capitalism.
NaRm,
Ayn Rand had it all wrong. It's not those at the top that make our society go-round. It's the core in the middle. When the middle goes Galt, then you get a depression or a revolution. Ayn Rand's John Galts are actually the leeches, think present day financiers and self-enriching CEOs. They will never, ever voluntarily withdraw as Rand thought.
Ayn Rand is a dope. So is her protege, Greensham. Both of their core beliefs are founded on mud.
SNAFU wrote:
IMO, any kind of "top-down" decisions like this are doomed to fall. If you want anything approximating free-markets (not saying you should or not, but if you do) you first have to address the question of: How is this system going to keep the smart amoral scumbags from capturing it. When you figure THAT out (and if you really believe in free-markets) the number of people working in a house-hold will figure itself out WITHOUT the government (somehow) deciding this.
If you go with a top-down systems of guilt-ridden-mommy-socialists or kick-ass-frat-boy-fascist then, but by definition (almost), you know the smart-amoral-scumbag will be running scams and taking the loot.
Noob, don't get me started again.
I suppose you saw my 5 am eastern tirade...
1 currency now -yogi wrote:
Yes. I thought it only fair to give you a chance to join in the fun.
Alas, the
has cut this opportunity short 
scone wrote:
No banks are where the money came from to fund the build - they go into construction labor, wood, carpet, nails, gas for bobcats, siding paint - etc. Once built the money returns to the banks plus interest via the home owners payments over a generation.
If you want to understand interconnections at least understand the directions & MAGNITUDES of the flows. Again even at $50/sq [which is low even for here - I know builders and the numbers are more like $80-100]... but even at $50 a 2000 sgft home inputs at $100K THEN they add the same furniture they'd add in a complete redo of an existing home.
Order of magnitude difference to the economy.
Angry Saver wrote:
I agree, but most Merican peasants still drink the kool-aid of: the smartest MORAL RIGHTEOUS people run bidness. Generally, this is because most humans can't look in the mirror and self-judge themselves and most Mericans have a delusional view of their own history.
That's a good argument, Bob. But I'll argue back that under the current system, what we now have is a lot of peer-to-peer confusion. Instead of one central bank & policy, we now have many acting from different perspectives. Instead of one regulatory agency, we have many. Instead of one language, we have many.
We have a complex system of trading and shipping and what does it buy us, really?
A whole lot of complexity & risk, no clear management directives or leaders, and for what?
poic wrote:
Someone other than AIG is the counterparty?
Not entirely correct ... Today's leeches BELIEVE themselves to be Rand's Galt. Or do you think Rand worshipped the banksters? Clearly not so ... she worshipped productive capitalists, idea-men who invented and built. Edison, Whitney, Wright, Ford, etc. (The men, not the modern-day shells.)
Not defending Rand, necessarily, but she was not on the side of the leeches.
If Ayn Rand had lived to see 2001, she would have reversed her views. Greenspan doesn't have the capacity to evaluate opposing viewpoints.
Another
whose time and hair were cut a little short was ...
threetorches wrote:
It's easy to selectively worship a small group of people, but you can't make the leap that the small group represents in ANYWAY reality. A reality-based society has to deal with the (uh) reality of humans. The smart amoral scumbags that have always run everything are normal in society; all societies have them. If you can't control these people (within the framework of your system - or "ism") then the ONLY end-game possible is exactly where we are at right now. Which is where all nobility based (worship of the righteous based) systems have ALWAYS ended up.
Google Fordlandia if you think Henry was "productive".
Edison's most vaunted talent was probably in patenting.
Bell is my mythological inventor/hero. Bose-Einstein, Linus Pauling...
threetorches,
Rand thought that Goverrnment was evil at all levels. That is just idiotic. ALL successful economies have Government involvement. It's a matter of degree of course, but Rand's view that the Government was a parasite is just bogus. Further, her point that a small few are the foundation of the economy is wrong.
1 currency now -yogi wrote:
Hitler?
Looking at the difference between Existing Home Inventory and New Home Inventory I would expect the exact situation we are seeing today. Existing Home inventory is still incredibly high at 4M homes compared to 1M homes in 2001. New Home inventory has come way down, from a high of 500k Homes to 250k today vs. 300k in 2001. New homes and existing homes are pretty much equivalent to a buyer, you may expect to pay a bit less for a similar existing home, and in this environment you would expect to pay even less.
Until the Existing Home inventory is worked through you won't see this gap close.
Firstly, the present day financiers and self-enriching CEOs are the James Taggarts of the world, not the John Galts. Second, anyone who thinks Greenspan at all exhibited Randian tendencies needs to get a head examination. He was a central banker for crying out loud.