Housing Market Tracker - Macro and Global Effects of Housing Crisis

Mar. 5.08 | About: ManpowerGroup Inc. (MAN)

Quote of the Day

"It's probably obvious to everybody that we're in the midst of a rather dramatic downswing, and it looks like it's going to turn out to be the deepest downswing, the most rapid downswing, since the great depression." - David Seiders, chief economist for the National Association of Home Builders. (Builder Online, Mar. 4th)

Macro Impact, And Will The Housing Slump Cause A Recession?

Bernanke Urges Banks to Forgive Portion of Mortgages. "Federal Reserve Chairman Ben S. Bernanke urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting... Bernanke's call goes beyond the stance of the Bush administration and previous Fed comments, indicating that he sees housing as a serious threat to the economy that can't be addressed by fiscal or monetary policy alone. The Fed's Feb. 27 report to Congress called for lenders to "pursue prudent loan workouts'' through means such as modifying mortgage terms and deferring payments... Bernanke said the "recent surge'' in delinquencies has been "closely linked'' to the slide of home equity." (Bloomberg, Mar. 5th)

Europe Central Banks May Hold Housing Key. "U.K.'s Royal Institution of Chartered Surveyors 2008 Housing Review: Europe's great housing boom stalled in late 2007... The outlook for 2008 will depend on how European central banks cope with slowing economic growth and rising inflation... There were prospects for some declines in house prices in 2008, but the scale of any housing-market downturn is likely to be far lower than was the drop in the early 1990s... Credit has become more expensive and less available since the U.S. subprime-mortgage crisis washed over to Europe late last summer... But RICS said high interest rates have been the real culprit for the recent housing slowdown." (Wall St. Journal, Mar. 5th)

Rapid Deterioration. "The NAHB's latest forecast calls for new-home sales to drop 22% this year, bringing sales 55% under the peak reached in late 2005. Housing starts are predicted to tumble 31% in 2008, putting starts 60% off their high of three years ago. "More and more of the country is now involved in the contraction, where six months ago it was not as widespread," said David Seiders, the NAHB's chief economist: "Housing is in a major contraction mode and will be another major, heavy weight on the economy in Q1." (MarketWatch, Mar. 4th)

NAHB Leaders Want More Federal Policy Changes to Boost Housing. "National Association of Home Builders (NAHB) CEO Jerry Howard Tuesday... called on the federal government to save housing and the U.S. economy... pleading for... a tax credit for buyers of new homes. NAHB chief economist Dave Seiders: "Housing is... pushing the overall economy to the brink of recession if not into it at this point." Yet, hope persists. Seiders said recent indications from the Reuters/University of Michigan Consumer Sentiment Survey shows consumer thinking improving in January and February, and surveys of prospective buyer traffic from NAHB membership show more people coming to look at homes." (Builder Online, Mar. 4th)

European Staffing Cos Signal Wider Slowdown. "Two of Europe's major staffing companies Tuesday signaled that the slowdown in U.S. markets and the banking sector is widening to Europe and other sectors as subprime and credit market problems bite. Switzerland-based Adecco SA, the world's largest temporary employment firm ahead of Manpower Inc. of the U.S. (NYSE:MAN), and U.K.-based Michael Page Group PLC said the European and Asian markets were so far holding up, but their outlooks were much more cautious [now]... Adecco's CEO Dieter Scheiff: "As the U.S. remains weak and as growth rates in Europe are a tick slower, we are unlikely to reach our (medium-term) growth targets in 2008." (Dow Jones via CNN Money, Mar. 4th)

Construction Spending Drops 1.7% in January. "Commerce Dept.: Total spending on construction fell 1.7% in January from December, the biggest monthly drop since 1994. Construction spending fell to a seasonally adjusted annual rate of $1.12 billion, down from a downwardly revised December number of $1.14B, and 3.3% below January of last year. The drop was more than twice as deep as was expected on Wall Street. Residential construction spending [fell] 3% from December to $455.7 million in January, which is 19.4% the level of January2007 and 33.7% below January 2006. Total private construction spending was off 2.2% on a month-to-month comparison to a seasonally-adjusted annual rate of $827.4B." (Big Builder Online, Mar. 3rd)

Economic Recovery Possible In Late 2008 Says Credit Trade Insurer. "Dan North, chief economist for Euler Hermes ACI, a trade credit insurer, says the nation's economic landscape is likely to rebound in Q4'08... North: "The recession will likely end when the housing market stabilizes and when monetary policy easing takes full effect. Housing executives seem to have a consensus that the housing market will likely come out of its slump by late 2008 or early 2009. The Fed started cutting interest rates in September of 2007, and since these actions usually take around a year to work, it is likely that their stimulus will fully kick in around Q4'08." (Industry Week, Mar. 3rd)

Credit Crisis Seen As Economic Threat. "In a survey being released Monday, 34% of the members of the National Association for Business Economics ranked the financial market turmoil from those loan defaults as the No. 1 threat to the economy over the next two years. That compares with 18% from an August survey, when the most serious threat was seen by 20% of the economists as terrorism and the conflicts in the Middle East. A year ago, the credit crisis did not even register as a chief threat. The latest survey found that 18% of association members listed excessive debt held by households and businesses as the top problem." (AP via LA Times, Mar. 2nd)

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