concrete guy

Targeted Relief: How to Rescue Housing in 2010

I agree that it is a better plan than what is currently being pursued by the Feds. Unfortunately, it stands no chance of being implemented because it is based on common sense and a basic understanding of economic principles. Cognitive dissonance rules the federal government.

U.S. Housing Numbers - More Nonsense

Buck_Wild.....in the last reporting period housing starts were down as a whole. One region of the country bucked the trend, and that was the Midwest, where starts were up a whopping 22%. How does that reconcile with your statement above?

U.S. Housing Numbers - More Nonsense

Jeff....thank you for the response. Rest assured that the "first leg down" in housing affected virtually all markets. Even in my relatively stable little corner of the world, new home starts fell 75% from peak to trough (the trough being March-April of 2009).

I disagree that the next leg down will affect all parts of the country. All real estate is local. Housing inventories are not fungible. It matters little to a buyer in Bloomington, IL what market conditions are like is Southern California.

While the distressed major metros will continue to face horrific headwinds over the next few years (unemployment and foreclosures being chief among them), the smaller more conservative metros that didn't participate in the worst excesses of the bubble will show steady, albeit incremental, progress towards more normal market conditions. Watch for the Northeast and Midwest regions to lead the way.

U.S. Housing Numbers - More Nonsense

Teresa....the banks are being hammered by the regulators. Appraisals these days are extremely low and pose yet another hurdle to financing residential RE projects. I imagine these issues are particularly acute in Detroit, where every market is likely defined as a "declining market". Where would the money come from to fund the new projects you describe.

My company operates across Central Illinois where we enjoy stable to rising home prices, low unemployment relative to the rest of the country, and strong local and regional banks. Even here, funding for new speculative residential RE projects is virtually impossible to come by. In the 10 county region we operate, I have not seen a new subdivision come on line since 2008. Bear in mind that it takes approximately 2 years to bring a new subdivision on line, so the most recent ones were started and funded in 2006.

11 Predictions for 2010

Happy New Year Scott. Thank you for your contributions to SA. I'm impressed by your unwavering optimism even in the face of off-the-charts incredulity and personal invective which unfortunately has come to characterize many SA commentators.

I agree with your 2010 predictions and am impressed with the accuracy of your past predictions.

U.S. Housing Numbers - More Nonsense

Jeff...something is missing in your analysis. As the owner of a large excavation and foundation construction company working in residential construction I can tell you first hand that there is virtually no speculative building going on as the banks will not loan for it. The vast majority of new home starts are pre-solds (built for a ready buyer who has contracted the construction).

In 2005 70% of our work was spec homes. Today that number is less than 3%. Check the total number of unsold new homes in this country. On a population adjusted basis, the inventory of unsold new homes is less than 1000 per million people. That is an inventory level much lower than anything the industry has ever experienced. When we emerged from the 82 recession, the inventory of unsold new homes was approximately 7000 per million population. At the time, we thought that was a very low number.

November New Home Sales Report Shows Significant Weakness

SATT stated: "As I have argued recently, the level of inventory and supply and level of completed new homes are still too high for a real sustained bottom for the new home market."

The inventory of unsold completed new homes is less than 1000 per million population, a level far below anything the industry has seen in the last 40 years. Our polulation continues to grow by approximately 3MM people per year. Approximately 1.5MM households are formed each year. Approximately 0.5MM homes become obsolite and are torn down each year.

When will the demographics start providing stabilization and growth to the new home construction industry? Just as soon as we start to see improvement in the foreclosure and unemployment numbers.

Opportunities in Agriculture and Soft Commodities

In 2008 Midwest farmers enjoyed record profitability, and then saw record increases in the cost of their inputs (fertilizer, seed, herbicides, farmland rental rates, etc.). In 2009 these same farmers are experiencing a very poor year (average yields, relatively low commodity prices, high drying costs due to the extremely wet fall). Consequently, the cost of their inputs for 2010 have fallen dramatically. In particular, fertilizer has fallen approximately 50%. It will take much higher commodity prices and a return to farm profitability to support a significant rise in fertilizer pricing.

As for limited land availability for farming, it should be noted that millions of acres have been returned to row crop production in the US in the last 2 years due to expiration of the Conservation Reserve Program (our tax dollars at work paying farmers not to farm their land). Also, Brazil and Argentina continue to bring huge new acreages into production each year.

Shortages of row-crop commodities will not be driving commodity prices higher. Speculation may, but not shortages.

U.S. Economy Gathering Momentum for Renewed Expansion

J-Dub.....if you think the Feds performance has been poor,or even dangerous, wait until it's actions are completely controlled by congress. A congressional audit swings the door open to the fed becoming 100% politicized.

U.S. Economy Gathering Momentum for Renewed Expansion

Good analysis Charles.

Most people don't understand the enormous danger posed by congress auditing the fed. Imagine a world where congress, post-audit, micro-manages the fed (dictates interest rates) and you have a world where interest rates are held too low for too long by a congress whose sole focus is lowering unemployment. The result would be the loss of the dollar as a store of wealth. The feds first duty to the American people is to keep inflation low and preserve the value of the dollar.

Are We Seeing a Housing Comeback?

Ops....didn't have my morning cup of coffee. The current inventory of unsold new homes is approximately 800 per million population. While the major distressed markets will continue to be pressured by foreclosures and myriad other headwinds, the smaller more conservative metros will benefit from the incredibly low inventory levels and should start to see a rebound in new construction activity in the coming year.

Are We Seeing a Housing Comeback?

When you look at the inventory of unsold new homes relative to population, the numbers are stunning. When the country emerged from the 1982 downturn there were approximately 7000 unsold new homes per one million population (that was considered at the time to be a low number). Today, there are approximately 1200 unsold new homes per million population. This is a level far below anything the industry has ever seen.

What Lies Ahead for the Housing Market?

Regarding your existing home inventory chart, adjust it for population growth and it will look very different. There are huge headwinds blowing against the housing market, but relative to our current population, inventories have declined significantly. If fact, relative to population, the inventory of unsold NEW homes is at a 40 year low (approximately 2000 per million population). As we emerged from the 1982 recession it was approximately 7000 per million.

More Foreclosure Sales, Please

Open questions...how does one reconcile the decreasing supply of unsold homes with what are purported to be rising vacancy rates? How is the latter calculated? Surely the banks aren't holding sufficient foreclosed properties off the market to push national vacancy rates up. What would be their motive in the face of a decreasing supply of unsold homes?

Three Factors that Will Drive New Home Sales

OP said: "Also, for some bizarre reason, we are STILL building houses in this country and that of course needs to stop. Insofar as it doesn't the inventory glut will take longer to disappear".

The only homes being built today are pre-solds (being built for a ready buyer). There is no speculative building going on as the banks won't lend for it. The pre-sold traffic is what's keeping our industry on life support.

I agree with the author here, the inventory of unsold new homes is at an all-time record low relative to the nations population, and at some point, simple demographics will revive the residential construction industry.