ac writes:

CR, we were wrong about the non-residential peak last month. =(

I feel like I've failed at life.

ac | 05.01.08 - 2:13 pm | #

Viewing with alarm writes:
My son-in-law, the home builder, was telling me that he expected to survive on remodeling this year. So far, he is amazed at the lack of inquiries. He is an established guy and has never had to advertise but suspects that people are changing their minds about their home being an investment vehicle.
Viewing with alarm | Homepage | 05.01.08 - 2:18 pm | #

Bob Dobbs writes:
Interesting to see how large an effect a 15-20 percent drop on the total number of home improvement stores. Perhaps much larger that we'd expect normally.

For many years, our county got by with a bunch of local hardware/lumberyard operations and a couple of OSH stores (old-school West Coast hardware chain). In recent years, a couple of Home Depots showed up, but all the old players are still there. Be interesting to see who survives.
Bob Dobbs | Homepage | 05.01.08 - 2:19 pm | #

Kp writes:
people will need to make room for their kids to come back....un-remodelling that office or library or game room.

Das bout it.
Kp | 05.01.08 - 2:20 pm | #

Calculated Risk writes:
ac, ROFLOL! No worries - we had the same problem when residential peaked in July 2005. The first release for October '05 was higher, and I was surprised - but then it was revised away. That is my guess here too - the slump has clearly arrived.

Best Wishes.
Calculated Risk | Homepage | 05.01.08 - 2:22 pm | #

Jas Jain writes:
--
CR, Home Improvement and CRE are coincident indicators.

Inflation is the next shoe to drop. It will fall from 4% to 0% over the next 8-12 months.

Jas
Jas Jain | 05.01.08 - 2:34 pm | #

revro writes:
ok party goes on, DOW is above 13k everything is fine, nothing happened xD ou wait a sec, wasnt there something like 14k DOW, ou dont worry that will be back 0%FFR is not that far.

btw. i red yesterday an article in which Trichet is asking the people to not ask for wage increases because that is the cause that the food went up. and as naive as i am, i thought it was because of the speculative money that went came from illiquid paper swapped at TAF FED for tressuries then sold for cash and invested to commodities :)

so dont forget, dont ask your boss for a rise because then the food will go up ;)
revro | 05.01.08 - 2:35 pm | #

ac writes:

BTW, with all the excitement yesterday I forgot to gloat about the fact that we broke through DOW 13000 as advertised previously.

Never underestimate bubble power.

ac | 05.01.08 - 2:42 pm | #

Bob Dobbs writes:
"Never underestimate bubble power."

Can we run cars with it?
Bob Dobbs | Homepage | 05.01.08 - 2:45 pm | #

Barley writes:
O/T but related...

Remember to review you home insurance policy and examine the "Replacement" amounts. Since there is a general softening in this the home improvement sector and if you have an insurance claim, the cost of replacement might be 20% or more below the amount you determined last year.

It will save you money on the premiums. Insurance companies make out like bandits in times like these as policy holders don’t review the replacement coverage and simply renew the policy and pay the premium.

Oh I almost forgot, if you intentionally over insure it may (depending on the state/province) give grounds for a denial should a claim be made.
Barley | 05.01.08 - 2:48 pm | #

Anonymous writes:
"Never underestimate bubble power."

Each one takes less time to blow up and pop, how long will this one last?
Anonymous | 05.01.08 - 3:00 pm | #

get sum writes:
I suspect this doesn't adjust for home ownership. Indeed, this chart looks oddly familiar -- a lot like the homeownership rate chart you posted Jan 29, 2008. No big surprise there.

But, here's something odd. In the 80's bust, ownership rate tumbled in early 80's as did investment. But from mid-80's to mid-90's it looks like ownership rate stayed level while investment went up quite a bit. What happened in that period?

And, if investment isn't necessarily tied to ownership, then what should we expect in the current ownership downturn?

In any case, can you adjust this chart for # of homes owned?
get sum | 05.01.08 - 3:04 pm | #

Negative Carrion writes:
i'm thinking if a few players can get AAPL up another 60 bucks or so, the additional 50 billion in portfolios might make the bond portfolio's less stinky.
Negative Carrion | 05.01.08 - 3:11 pm | #

dryfly writes:
I feel like I've failed at life.

LOL. You answered yourself... here:

"Never underestimate bubble power."

This thing is going to take a long time to unwind.

dryfly | 05.01.08 - 3:16 pm | #

Peripheral Visionary writes:
Kp: "people will need to make room for their kids to come back....un-remodelling that office or library or game room."

And don't forget garage conversions. Many a garage conversion underway even as we speak . . . I know of at least one case where not one, but two of the adult children (and their families) are moving back in with the parents, and a garage conversion is in the works. That will provide some business for home improvement.

Oh, and I almost forgot--a member of my own family sleeping in my own living room! But the only "home improvement" expenditure will be for a sleeper sofa. And if the family member in question is reading this, you're welcome to stay as long as you need to, but let's keep working on finding you a job . . .

CR, increase in household size is an overlooked factor, but it is very real, I have as many anecdotes (including my own!) as you'd care to hear.
Peripheral Visionary | 05.01.08 - 3:16 pm | #

Matt writes:
I am gonna bet on the overshoot of the recovery following the undershoot of the priced in future decline.

I will be rich! (In 100 years)
Matt | 05.01.08 - 3:21 pm | #

Peripheral Visionary writes:
get sum: "But, here's something odd. In the 80's bust, ownership rate tumbled in early 80's as did investment. But from mid-80's to mid-90's it looks like ownership rate stayed level while investment went up quite a bit. What happened in that period?"

I suspect a lot of homes were "behind" in repairs and improvement. Between the slump in the 70's and the gyrations of the markets in the 80's, a lot of people changed jobs and homes and may not have had the time or money to improve their home. When strong job growth picked up in the mid-90's, people started having money and a lot of improvements were started up. Anecdotally, I remember a lot of people in the mid- and late-90's gearing up for home improvements, mostly repairing old damage and replacing outdated appliances.

Of course, the real home upgrade craziness (granite countertops etc.) didn't really get going until the housing bubble started to inflate. We got "behind" on home repairs, but I suspect we're now well "ahead", and that the homes and interiors we've got will be the ones we'll be looking at for the next ten to twenty years.
Peripheral Visionary | 05.01.08 - 3:22 pm | #

Cal writes:
NAHB released a new report today:

http://www.nahb.org/generic.aspx...5& channelID=311

Foreclosures, Production, Prices, and Homeownership by State

And they have the handouts from last thursdays conference here:
http://www.nahbmonday.com/housee...08-05-01/ 1.html
Cal | 05.01.08 - 3:23 pm | #

Bill writes:
CR, why do you think investors are bidding up Lowes (up 18% YTD) given the grim home improvement (HI) outlook? Are they simply looking beyond the HI slowdown, or do you think something else is involved?

Thanks for a great site!

Bill
Bill | 05.01.08 - 3:24 pm | #

Kp writes:
I can't resolve how a sane person would be in this market right now.
Kp | 05.01.08 - 3:28 pm | #

Interesting Times writes:
I can't resolve how a sane person would be in this market right now.
Kp | 05.01.08 - 3:28 pm | #


It's not easy being insane.
Interesting Times | 05.01.08 - 3:32 pm | #

wally writes:
It looks like Home Depot, etc., have had their greatest run, probably ever.

Jas - I agree... wages have not moved up, with limited exceptions. If that holds true, then either prices drop or the standard of living changes - or some combination.
wally | 05.01.08 - 3:41 pm | #

Anonymous writes:
"I can't resolve how a sane person would be in this market right now."

They're Asians, got to keep us buying their crap somehow even if they have to give us the money.
Anonymous | 05.01.08 - 3:41 pm | #

rich writes:
The pool of skilled labor to do home improvement is drying up. Front-page today's NY Times.

http://www.nytimes.com/2008/05/0...=us& oref=slogin

"In a sign that the economic downturn is hitting hard among Latino immigrants, more than three million of them stopped sending money to families in their home countries during the last two years, the Inter-American Development Bank said on Wednesday.
Growing numbers of Latino immigrants are also considering giving up their foothold in the United States and returning home in response to a slump in low-wage jobs and the crackdown on illegal immigration, the bank reported in a survey of 5,000 immigrants from Latin America.

Latino immigrants said life had become more difficult for them here. Of those interviewed, 81 percent said it is harder to find a good-paying job. Almost 40 percent said they were earning less this year than the previous year. The largest group of immigrants in the survey — 18 percent — worked in construction, which has been especially hard hit in the slowdown."
rich | 05.01.08 - 3:42 pm | #

Peripheral Visionary writes:
Kp: "I can't resolve how a sane person would be in this market right now."

The "crisis averted" theme has become very deeply entrenched, with a wide variety of market observers, from Jim Cramer to Richard Russell, promoting it. The idea that this is a multi-stage crisis has not yet sunk in, but it will at some point. The main question is whether the next stage will be brought on by more problems in residential real estate, or if the trigger will be problems coming from a different sector, such as commercial real estate or consumer lending.
Peripheral Visionary | 05.01.08 - 3:42 pm | #

k harris writes:
Jas,

Take a look at the Dallas Fed data on the distribution of price gains among PCE components. There was a sharp drop in the number of components showing over 3% price gains in February and March, accompanied by a sharp rise in components showing declining prices. This fits pretty well with spencer's observation that the year over year change in NSA core CPI was slower in Q1 than a year ago. He finds that Q1 core CPI is highly predictive for the the full-year gain in core CPI. Can't speak to what will happen with food and fuel, but core items are beginning to show signs of disinflationary pressure.

Bill,

Just guessing, but maybe Lowes is up because Home Depot cancelled a bunch of store plans for this year. Less competition than expected?
k harris | 05.01.08 - 4:01 pm | #

bob writes:
The question is how much of home improvement spending is imputed
bob | 05.01.08 - 4:09 pm | #

RE writes:
Some input, in case you are trying to estimate tomorrow's non-farm payroll numbers:

Monthly Contributions of Birth/Death Model
RE | 05.01.08 - 4:16 pm | #

Pondering the Mess writes:
There is no recession - the Dow just keeps going up! Up, up, up! Everything goes up! Nevermind the inflation, job losses, price of gas, food, housing, etc. Nor the horrible profit numbers, save for exports. Nope, everything only goes up!

More on topic, I guess without the Housing ATM, people can't afford their granite and stainless steel. I think the world will be better for it!
Pondering the Mess | 05.01.08 - 4:16 pm | #

Wade Young writes:
The comment above on folks not seeing their house as something to invest in is, I'm afraid, right on. I've been surprised to see even people that plan to stay in their home appear to be waiting until the market goes up to start spending money on it.
Wade Young | Homepage | 05.01.08 - 4:40 pm | #

Nova writes:
Inflation is the next shoe to drop. It will fall from 4% to 0% over the next 8-12 months.

Jas
Jas Jain | 05.01.08 - 2:34 pm |

Why do you write this?
Nova | 05.01.08 - 6:15 pm | #

cutie writes:
OT, but brutally funny

"Dumbest Idea Ever" embraced by state pensions to plug nationwide deficit
cutie | Homepage | 05.01.08 - 7:15 pm | #