Housing Market Tracker - Macro Outlook

Includes: BAC, CFC
by: Judy Weil

Quote of the Day

"In China, America is seen as a guiding light. America is called 'meiguo,' which means beautiful country. To own a piece of the beautiful country is the ultimate dream." – Real estate entrepreneur Chaim Katzap, of Lion's Property Development Group. Katzap believes the newly-rich Chinese will invest more in U.S. real estate, keeping the US out of a recession. (Int'l Herald Tribune, Jan. 13th)

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

U.S. Trade Deficit Widens "Commerce Dept.: The gap between what Americans import and export grew 9.3%, to $63.1 billion, the biggest deficit in 14 months... Some economists believe foreign demand has kept the American economy from slowing more substantially as domestic business suffers from the housing downturn. A slowdown in export growth may be troubling in light of the increasingly bearish forecasts for this year's economy. But the drop-off may be temporary; the trade deficit shrank in September to its lowest level in two years, and November's data was strongly influenced by the record-high price of crude oil." (Grand Forks Herald, Jan. 14th)

Caroline Baum: New Year Brings Another False Dawn For Housing "Residential construction may be a small share of the U.S. economy — 4% in Q3— but it has a big footprint. Construction activity ripples through a whole host of manufacturing industries: Half of the 18 NAICS codes (the system used by the North American Industry Classification System to define industries) tracked monthly by the Institute for Supply Management, according to Norbert Ore, chairman of the ISM Manufacturing Business Survey Committee. The nine manufacturing industries affected by housing are: wood products; furniture and related products; textiles; petroleum and coal products; plastics and rubber products; transportation equipment; primary metals; fabricated metal products; and nonmetallic minerals."
(Ashbury Park Press, Jan. 13th)

Slow Home Sales Hit Furniture Market California: Furniture stores are falling victim to the mortgage meltdown as mounting foreclosures, growing credit woes and shaky consumer confidence have reduced the demand for home furnishings. Hit hard by sluggish housing sales, chains such as Levitz Furniture Inc. and Bombay Co. are staging going-out-of-business sales... Nationwide, furniture stores are seeing declines. Like Levitz, two other chains with outlets in Southern California - Mattress Gallery and Sofa Express - are liquidating... The furniture business was down about 8% last year nationwide, the steepest decline since 1982." (Press Telegram, Jan. 13th)

Time To Make Outsaving The Joneses A Reality

"Federal Reserve: Nearly 10 million American households, or 9.2%, don't have bank accounts of any kind, [but] rely on payday lenders, pawnshops, rent-to-own stores, tax-refund lenders and other high-cost, quick-cash lenders to get by each week. Americans spent more than they earned in both 2005 and 2006 by charging the difference on credit cards. "One in seven families is dealing with a debt collector," Ray Boshara and Phillip Longman of the New America Foundation think tank wrote: "Children today are more likely to live through their parents' bankruptcy than their parents' divorce." And that likelihood will increase this year." (Chron.com, Jan. 12th)

Housing Slump Creates Prime Time To Remodel

"Fewer homes are being built, freeing contractors for renovation work that they might normally have turned down. The construction slowdown also means lower lumber and drywall prices, making remodeling more attractive to consumers... Greater Omaha Chamber of Commerce: The number of new homes being built in Omaha has dropped about 25% since 2005. Over the same period, the price of lumber has dipped nearly 20% at Millard Lumber. Drywall prices have dropped roughly 25%, too, according to Harter Co., an Omaha distributor... Folks who are having trouble selling have decided to remodel houses that are small or old."
(Omaha World Herald, Jan. 10th)

Fine in 2009 (Not So Great in 2008)

"The underlying cause of the problems in the financial sector is a persistent fall in house prices....The U.S. housing stock is worth about $23 trillion, so a 15% drop in house prices represents a wealth erasure of $3.45 trillion over a period of about two years. That figure represents about a quarter of annual GDP or about 12.5% of GDP per year for two years."(John H. Makin in Seeking Alpha, Jan. 9th)

Hub Fed Chief: Housing Prices Might Plunge

"The residential real estate market is going through its worst investment period in 50 years - and it could get even rougher if the U.S. economy slows significantly in the coming year, Boston Federal Reserve president Eric Rosengren warned yesterday... Real estate investments - which cover primarily construction and other real-estate expenses - started to decline in the U.S. in Q1'06 and haven’t recovered... If data confirms another expected decline in Q4'06, then the nation will have experienced its longest string of falling residential real-estate investments in 50 years, he said." (Boston Herald, Jan. 9th)

US Recession May Not Take Big Toll On China: Experts

"Fred Hu, managing director of Goldman Sachs (Asia): China [is] stepping up efforts to cool inflation to prevent the world's fastest growing major economy from overheating. Hu: "If the US economy really does enter into recession, there could be an impact on China in a direct way, but the timing however is not all that bad," he said at a conference on China's economic growth and its implications for the world. "If there is a mild recession, not a protracted, deep recession, that may provide some welcome cooling agent to the Chinese economy, whose rapid growth is largely export-driven." (AFP, Jan. 9th)

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