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Post by unlawflcombatnt on Feb 16, 2007 16:18:47 GMT -6
Today's Housing Start report indicates home construction has basically fallen off a cliff. January's Housing Starts declined from 1.643 million/year rate in December to only 1.408 million/year. This was far less than the 1.610 million predicted by "the market." Below is a bar graph from Briefing.com showing the sharp decline in Housing Starts. This can also be found at Briefing.com-Housing Starts. (As has recently become the case with Briefing.com when reporting negative economic news, there has been a delay in posting the total numbers. They had not posted the results available at 8:30 AM EST as of 5 PM EST. Again, they never seems to be any delay in posting "positive" results. Only negative ones.) Again, January Housing Starts declined from an annualized rate of 1.643 million/year in December to 1.408 million/year in January. This is a 1-month change of -14.3%. In addition, January 2007's annualized rate marks a 37.8% decline from January 2006's rate of 2.265 million/year. Below is a copy of Table 3 from today's housing report from the Census Bureau. The total monthly Housing Starts for January 2007 was only 95,400, down from 113,000 in December 2006, and down even further from January 2006's monthly total of 153,000. Also worth noting is that peak Housing Starts occurred in May 2006, with a monthly total of 190,200 units. January 2007's total of 95,400 is only half the number of May 2006. Starts have declined rapidly since May. In fact, the annualized rate of decline in Housing Starts has been a whopping 85% since May 2006. To put the May to January decline in perspective, the annualized rate of decline since May of 85% is over 2 times the annualized rate of decline (of 37.8%) since January of 2006. It's likely that the measured, year-over-year decline will be much greater over the following months since monthly starts increasing through May. Thus all of the annualized decline occurred over only the last 7 months. If this rate of decline is sustained, it would be expected to ultimately cause a proportionate decline in home construction employment. Though some analysts were predicting a direct loss in residential construction jobs of 600,000 in 2007, that decline could be much larger if the current rate of decline in home construction continues.
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Post by jeffolie on Feb 16, 2007 20:01:19 GMT -6
FLASH: Housing starts plunge 14.3% to 10-year low - New home construction down 37.8% year-on-year Millions will go unemployed during this REIC downturn. Just like the telecom implosion in 2000, way too much capacity, way too little demand. The unemployment will only make the housing ponzi scheme unraveling even worse. Panic is knocking. Knock. Knock. Knock. Knock. Can you hear it? You should. WASHINGTON (MarketWatch) - U.S. home builders started the fewest homes in nearly a decade in January, as housing starts plunged 14.3% to a seasonally adjusted annual rate of 1.408 million, the Commerce Department reported Friday. It's the lowest rate for starts since August 1997. Housing starts were down 37.8% compared with January 2006. The starts figure was much lower than expected on Wall Street, where economists were looking for a 2% drop to 1.60 million annualized units. The permits figure was close to the 1.58 million expected by median forecast in the MarketWatch survey of economists. The stunning drop in home building indicates that builders are scaling back their plans on a massive scale to work down the excess inventory of unsold homes on the market. Hopes that a bottom in the housing market has been reached will have to be re-evaluated Starts of single-family homes dropped 11.2% to a seasonally adjusted annual rate of 1.108 million, the lowest since August 1997. Permits for single-family homes fell 4% to 1.121 million, the lowest since December 1997. Two weeks ago, the Commerce Department reported that the number of vacant homes increased by 34% in 2006 to 2.1 million at the end of the year, nearly double the long-term vacancy rate. Economists said there are 1 million excess homes. housingpanic.blogspot.com/The free flow of money for builders to finance housing is drying up as subprime lenders are reduced by their 'warehouse' lenders going out of business and tightening credit standards. Because about 27% of mortgages in 2006 were subprime, there will be less first time buyers. Even Alt-A and prime mortgages are seeing tighter lending standards. Add this to about 1 million less real estate construction jobs, the economy will collapse this year.
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Post by unlawflcombatnt on Feb 17, 2007 4:01:55 GMT -6
FLASH: Housing starts plunge 14.3% to 10-year low - New home construction down 37.8% year-on-year Millions will go unemployed during this REIC downturn. Just like the telecom implosion in 2000, way too much capacity, way too little demand. The unemployment will only make the housing ponzi scheme unraveling even worse.... The free flow of money for builders to finance housing is drying up as subprime lenders are reduced by their 'warehouse' lenders going out of business and tightening credit standards. Because about 27% of mortgages in 2006 were subprime, there will be less first time buyers. Even Alt-A and prime mortgages are seeing tighter lending standards. Add this to about 1 million less real estate construction jobs, the economy will collapse this year. I couldn't agree more. Add to this a decline in consumer spending that is financed by home equity extraction, to the income lost from those construction jobs, and there'll be a huge decline in funding for consumer spending. Also, add to this the decline in manufacturing employment (and wages). Consumer spending is going to fall off a cliff.
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Post by jeffolie on Feb 19, 2007 12:53:03 GMT -6
Why has the consumer not fallen of the cliff now that mortgage equity withdrawls have reduced significantly? Because the consumer is now making up the difference by funding their purchases with credit cards. Credit cards bought a relatively supportive Xmas spending.
Consumerism lives and has more lifes than a cat. Unsurprizing, the credit cards source of liquidity is the world of complex financial instruments. The newly created debt can be and often is securitized and sold off to the world to the extend that the credit card companies want to lay off their bets just like a bookie laying off their bets.
IMHO the consumer will retract when the media starts to focus on rising unemployment and failing lenders. The main street media lacks these stories unless the blogs are all on board.
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Post by unlawflcombatnt on Feb 19, 2007 16:56:10 GMT -6
Why has the consumer not fallen of the cliff now that mortgage equity withdrawls have reduced significantly? Because the consumer is now making up the difference by funding their purchases with credit cards. Credit cards bought a relatively supportive Xmas spending. Consumerism lives and has more lifes than a cat. Unsurprizing, the credit cards source of liquidity is the world of complex financial instruments. The newly created debt can be and often is securitized and sold off to the world to the extend that the credit card companies want to lay off their bets just like a bookie laying off their bets. That's a great point about securitization of credit card debt. I hadn't even thought of that. This certainly allows for further expansion of credit card spending. And it explains why credit card spending continues to increase, despite appearances of already being maxed out. Credit card companies can simply raise credit card limits. And that's exactly what's happening. Credit card companies are now raising the limits on many of their credit cards already issued. This enables consumers, who were previously at their limit, to continue spending and further increase their debt. In addition, credit card issuers are now even more protected against defaults, as a result of limitations by the latest Bankruptcy Act. IMHO the consumer will retract when the media starts to focus on rising unemployment and failing lenders.... Let's hope so. The sooner this happens, the less damage it will do. Like any bubble (or balloon), the bigger it gets, the bigger the bang when it bursts.
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Post by jeffolie on Feb 19, 2007 21:36:06 GMT -6
I have a HELOC that I got because the incentive was a $500 Home Depot gift card. I have never used it and it expires this year. The issuer has raised the line of credit to $125,000 from $50,000. I do not know how they account for the HELOC, maybe they are booking it as an asset.
I expect that the economic numbers will need to be bad for at least 3 months in a row before the main street media jumps on them.
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