Anonymouse writes:
Just what we need...

more statistics- I mean more houses.
Anonymouse | 05.16.08 - 9:00 am | #

barely writes:
[Builders broke ground on 692,000 single-family homes at an annual rate, down 1.7 percent from March and the fewest since January 1991, the Commerce Department said today in Washington.]

These figures from bloomberg article. bullish.
barely | 05.16.08 - 9:06 am | #

charlie writes:
No doubt this will be bullish for the market. I wonder why permits are going up. Maybe the builders didn't like the prices for their land and decided it would be better to build and sell homes at a discount instead of selling land at a discount.
charlie | 05.16.08 - 9:07 am | #

smallfryallcash writes:
So what is the difference between "Privately-owned housing starts" (up 8.2) and "Single-family housing starts" (down ±11.7%)? I can't find the explaination in the press release.
smallfryallcash | 05.16.08 - 9:11 am | #

Banned By Ritholtz writes:
Providing money to a condo developer is like giving Ripple to a wino. Obviously C&I loans increased because these drunks took down their lines before the window closed.

Cheers

Ross
Banned By Ritholtz | Homepage | 05.16.08 - 9:12 am | #

Calculated Risk writes:
smallfryallcash, total housing starts include building with more than one unit - like apartments and condos.

Best to all.
Calculated Risk | Homepage | 05.16.08 - 9:14 am | #

byzantine_ruins writes:
These figures from bloomberg article. bullish.

Yeppers.

Here in Bizzaro World, when you add more stock to a pool of inventory that's stagnant, that means Dow 13000+!

Yippie!
byzantine_ruins | Homepage | 05.16.08 - 9:14 am | #

scav writes:
Hey, so long as at least one number is positive, anywhere, there cannot be a crisis, right?

Actually, seriously, I'm thinking there's undoubtedly a lot of regional variation behind this number. Nor are we out of reach of statistical noise. Not that they'll not roll out the marching bands and parade down wall st. based on this, but blah blah blah. They probably need the exercise.
scav | 05.16.08 - 9:14 am | #

Bob Dobbs writes:
"Maybe the builders didn't like the prices for their land and decided it would be better to build and sell homes at a discount instead of selling land at a discount."

Is it possible that some builders sold planned, ready-to-go projects to other builders at a discount, including land? Who are hoping to be able to complete at lower cost?

That happened with a condo project near me; don't know if it's common.
Bob Dobbs | Homepage | 05.16.08 - 9:14 am | #

yourkillingmelarry writes:
AP

"The surprising rebound was expected to be temporary given the headwinds builders are confronting, from slumping sales to soaring home foreclosures.

The strength in April came entirely from a huge rebound in apartment construction, which can be extremely volatile from month to month. Apartment building jumped by 40.5 percent to a seasonally adjusted annual rate of 326,000 units.

The larger single-family sector dropped by 1.7 percent to an annual rate of 692,000 units.

Economists believe that housing construction will remain under pressure until builders have more success in reducing a huge backlog of unsold homes."

This is statistical noise on apartment construction.
yourkillingmelarry | 05.16.08 - 9:15 am | #

VennData writes:
Build it, and they will come
VennData | 05.16.08 - 9:20 am | #

Mel writes:
Is there a survey taken to show how many foreclosures lead to homelessness? At some point, the in-laws kick you out of their house. On second thought, is there a survey showing the increase in homicides resulting from family dislocations?
Mel | 05.16.08 - 9:21 am | #

bluestatedon writes:
Since the "seasonally-adjusted" price of gasoline declined in April by 2% — when it actually rose 5.6% — I have a hard time taking any "seasonally adjusted" data seriously.
bluestatedon | 05.16.08 - 9:21 am | #

safe_as_apartments writes:
It makes sense that apartment starts are going up (assuming this is a trend): There is growing demand for rentals from informed buyers and foreclosed upon FBs.

Of course, more apartments just adds to the total number of housing units. Once housing becomes more affordable and credit is repaired, watch out below for rentals. And then, watch out for housing as rents dip...
safe_as_apartments | 05.16.08 - 9:22 am | #

smallfryallcash writes:
"Calculated Risk writes:
smallfryallcash, total housing starts include building with more than one unit - like apartments and condos."

Thanks CR. Since condos are so overbuilt, the 1.7 % decrease in SF seems the more important indicator of the direction we're heading.
smallfryallcash | 05.16.08 - 9:23 am | #

dan writes:
Bluestatedon

It's a feature of the "new economics" - deflationary price increases!
dan | 05.16.08 - 9:24 am | #

Anonymous writes:
Since oversupply is the problem, how is this good news, like it is being claimed as throughout the MSM?
Anonymous | 05.16.08 - 9:24 am | #

number2son writes:
Since oversupply is the problem, how is this good news, like it is being claimed as throughout the MSM?

It's not good news anyway you want to parse it. But in this market, anything that can be spun as good news will be, and stock prices follow.

Will reality come back to the market? Yes, eventually. When? No one really knows.
number2son | 05.16.08 - 9:30 am | #

Aheadofthecurve writes:
There is a macro trend going on behind all the "credit crisis" cr*p. Americans are finally going to join the rest of the world and adapt to fuel prices that are still well below what most countries were paying 10 years ago. That means living in smaller, energy-efficient housing (Even multi-family, heaven forfend!) near centers of employment, shopping and recreation (Like inner suburbs and even cities) and driving fuel-efficient cars and even using public transportation. Is this the Greater Depression? Only if you think the Netherlands or Denmark have been in a Depression for the last 25 years. It could even mean a boom in new construction, new car production to replace SUV dinosaurs and green energy.

You guys laughed when I said to buy the market in February and March. Well I ignored you and bought a bunch of call options. I'm glad I did.

Listen and learn and try to stay..

Aheadofthecurve
Aheadofthecurve | 05.16.08 - 9:30 am | #

Kp writes:
I love the smell of hubris in the morning!
Kp | 05.16.08 - 9:42 am | #

gm writes:
oil is the new subprime...at least today
gm | 05.16.08 - 9:43 am | #

Charles J Gervasi writes:
If prices really are well above their historical norms, and the supply curve hasn't shifted, shouldn't we expect a lot of building activity?

That's bad news for people who made financial bets counting on real estate prices never going down. Those were dumb bets in the first place and no new or policy will make up for that.

Unless they add barriers to building new houses, I would expect the supply of houses to keep increasing until prices return to their historical average.
Charles J Gervasi | Homepage | 05.16.08 - 9:43 am | #

Kp writes:
I thought supply has already overshot demand?

Why should it continue to overshoot? Momentum?

Don't the price declines seen of late suggest that momentum has subsided/inflected?

Isn't it more likely that these increases are either statistical anomalies are simply sloppiness in the overall downward trend?
Kp | 05.16.08 - 9:49 am | #

safe_as_apartments writes:
You guys laughed when I said to buy the market in February and March. Well I ignored you and bought a bunch of call options. I'm glad I did.

Here's the rub with this macro story regarding the U.S.: the U.S. economy is based on household consumption. If energy prices double or triple from here, this is clearly going to have a negative impact on the part of our economy dependent on disposable income. This in turn should lead to job losses and income declines as more money is sent directly overseas through fewer U.S.-based suppliers.

It's not to say we won't adjust, but I believe the change could be painful. In other words, except for normal short-term volatility, I doubt it would be the time to go long the broader market.
safe_as_apartments | 05.16.08 - 9:49 am | #

Yal writes:
CR,

a month ago these numbers were not so good and I think this was bullish (because the rate of increased supply was going down) so now these numbers mean more supply on the market in 9 month ?
Yal | 05.16.08 - 9:50 am | #

byzantine_ruins writes:
Is this the Greater Depression? Only if you think the Netherlands or Denmark have been in a Depression for the last 25 years.

The Netherlands and Denmark, you may notice, are considerably smaller than America, and also did not make the shift under intense macroeconomic pressure.

It could even mean a boom in new construction, new car production to replace SUV dinosaurs and green energy.

Meaning more raw materials costs for infrastructure renewal while in the midst of an energy-led downturn, a raw-materials intensive global industrialization, and while all the lenders suffer from capital depletion? Sounds to me like a recipe to being the ~#4 global economy in a decade.
byzantine_ruins | Homepage | 05.16.08 - 9:51 am | #

ipodius writes:
Sounds to me like a recipe to being the ~#4 global economy in a decade.


And, byzantine, who will be the top three? What percentage would they have to grow, and we have to decline, for that to happen?

I'm on the side of the current run-up in those prices to be partly due to demand, but mostly due to bubble/dollar issues. Those problems will subside over the next few months one way or another as demand in the short term will fall due to the economic slump. And i don't think that some of the countries you might mention are going to go gangbusters while we slump. So the demand slack is going to be prolonged as it ripples through the supply chain.
ipodius | 05.16.08 - 9:56 am | #

Average Citizen writes:
It amazes me that the financing is there for all of this new construction. Here where I live, hotel occupancies are down, but 4000 new rooms are coming soon... Downtown office vacancy rates over 20%, yet new developments are popping up, complete with tax abatements and TIF money. And apartments, condos and houses, oh my.
Reality, it's what's for TV!
Average Citizen | 05.16.08 - 9:58 am | #

Yal writes:
Average Citizen,

maybe they know something you and I don't ?
Yal | 05.16.08 - 10:00 am | #

Average Citizen writes:
Yal... LOL. That the taxpayer is financing it in the long run, so full speed ahead? Damn the taxpayer?
Average Citizen | 05.16.08 - 10:01 am | #

Anonymous writes:
"Damn the taxpayer?"

Do we have any of those in this country?
Anonymous | 05.16.08 - 10:03 am | #

TradingStats writes:
been waiting for 1427, patiently....

all in 7x short...
TradingStats | 05.16.08 - 10:05 am | #

Average Citizen writes:
Seriously though, I need someone to help me understand this asit is beyond my comprehension. WHO, in their right mind, would continue to finance such foolishness?
Average Citizen | 05.16.08 - 10:10 am | #

Flic writes:
Ahh, yes...starts up....

This apparantly is generating a fresh new round of bottom-calling.....LOL. Just had someone at work this morning come over and tell be housing had bottomed since starts are up today. I asked them who was going to buy the homes they are "starting" and I just got a blank stare...
Flic | 05.16.08 - 10:13 am | #

rich writes:
There is still an enormous pipeline of construction in progress of all types. Here in New York, two giant new stadiums are being built at the same time (one for Yankees and one for Mets).

Condos, offices, govt. buildings, college buildings, etc. etc. are in the pipeline or coming out.

But very little is starting to go into the pipeline. So the drag from construction downturn will be long and strong.

A lot of those projects in the pipeline will fail and default or be underutilized. This will crush the banking system, the pension system, PBGC and FDIC.
rich | 05.16.08 - 10:17 am | #

Mook writes:
It amazes me that the financing is there for all of this new construction.

Well, for the completions, and most of the starts, you're talking about financing arranged 9, 12, 18 months ago - before the credit death spiral took hold.

And if you're a homebuilder, and you have the land, plans, and financing to build homes, what are you going to do? Go into the flash memory business? At some point you've got to acknowledge you have a workforce to pay and lights to keep on.

I *am* surprised that the permits are up (though down more than 1/3 from last year) but again, just as homebuilders build, loan officers loan. It's what they do. Show me a bank whose loan officers get bigger bonuses for *not* writing loans. If underwriting says it's OK, and the Fed is generously keeping the real rates on their primary sources of funds negative ... heck, why not?

Or maybe the bottom is in! :D
Mook | 05.16.08 - 10:21 am | #

Peripheral Visionary writes:
Still too many homebuilders. What is needed for the housing market to stabilize is for homebuilders to go bankrupt; but as long as they're able to hold on, they'll do the only thing they know how to do--build more houses, putting even more pressure on already depressed markets.

The question of where the finance is coming from is an interesting one, and I don't have a definitive answer. My guess would be that the builders are out of cash, and are financing operations primarily from loans from regional banks. The big national banks are capital constrained right now, but regional banks aren't as restricted. I completely agree with CR's conclusion that bank failures are on the way due to a pending implosion in construction lending.
Peripheral Visionary | 05.16.08 - 10:24 am | #

Average Citizen writes:
When the cops show up at the party, you put the pipe down. But no, look, the cops brought crack! Fire it up!
Average Citizen | 05.16.08 - 10:25 am | #

Alec writes:
AOTC,

IIRC you disappeared sometime in January, so forgive me if I take what you write with a metric ton of salt. You were looking at medical companies, not financials.

I had written that financials would be worth looking at before reporting in April around that time(to O-joe), but as CR wrote in the HELOC thread, I've tightened my trailing stops and am looking to get out at the right moment.
Alec | 05.16.08 - 10:26 am | #

Yal writes:
with consu conf in 28 years low - hy is the market near all time high ?

Are things going to get so much better as new pres takes office ?
Yal | 05.16.08 - 10:29 am | #

brokeback benny writes:
I talked to a builder/developer this morning here in the southeast. He has been in the business for 40 years. Ouote: "the business is grinding to a complete stop around here." Spin the numbers all you want, this suckers going down fast. This is goint to be long and ugly! I suggested they get those bulldozers going to level some of the excess!
brokeback benny | 05.16.08 - 10:34 am | #

Name writes:
I don't like the recession marker on that chart, don't think we're in one. I guess if you're doing all of the work, then you can draw gray lines wherever you want though. I'm just here to nitpick and complain.
Name | 05.16.08 - 10:40 am | #

Gamma writes:
I'm sure some will say "it's not that bad without the financials". Well that may be, but that's not reality. Strip out all the losers in any calculation and everyone is a winner. Sorry, it doesn't work that way. It's also notable that the damage is being done to the financial institutions at the beginning of this downturn, rather than at the end - which is what we typically see.

Standard & Poor's Index Services says S&P 500 Q1 earnings were down 25.9% YoY; financials again posts negative earnings

According to preliminary figures released today by Standard & Poor's Index Services, Q1 operating earnings for the S&P 500 declined 25.9% over 1Q07, marking the third consecutive quarter the index has reported declining earnings -- an event not seen since the fourth quarter of 2001. With 95% of the data in, first quarter operating earnings for the S&P 500 are preliminarily set at $16.59 per share, compared to $22.39 for the first- quarter of 2007. For the third consecutive quarter, S&P 500 As Reported earnings also posted a decline, falling 27.1% to $15.56 per share from the $21.33 per share posted in Q1 2007. "The shift in earnings continues, with Energy contributing 23.2% of S&P 500 operating earnings during the first quarter, up from 13.6% a year ago... Conversely, Financials have now become a negative contributor after accounting for 29.7% of operating earnings this time last year."
Gamma | 05.16.08 - 10:43 am | #

Cooking ramen in my percolator writes:
MarketWatch headline says "Housing-starts rally finished"... Why oh why do consumers' sentiments have to ruin everything?!
Cooking ramen in my percolator | Homepage | 05.16.08 - 10:43 am | #

Yal writes:
Name:

My guess is also we are not yet in an official recession. CR is usually conservative in making such estimates but i think the numbers this time will be low but not negative until close to the election.
Yal | 05.16.08 - 10:44 am | #

Cooking ramen in my percolator writes:
Yal,

I think there would be a November surprise by this administration that, all of a sudden, the economy was surging after all. All to McCain's advantage to continue GWB's corrupt legacy.
Cooking ramen in my percolator | Homepage | 05.16.08 - 10:47 am | #

goose writes:
sorry to change the subject, but this chinese earthquake will have a major effect on the mktplace. with certain cmmdty mkts, it already has..estimates in the news of 20 bln $$ for the damage caused are ridiculously low. the damage will be north of 200 bln. there is no insurance. the chinese have 1.7 trillion in us dollar reserves. smells like some of them reserves will move into the rebuilding. look at metals, oil last two days..no real reason for them to be up ..anyway, expect this earthquake to be far more impactful on the mkts than it has been. this will raise an already 9% inflation rate even further. not good for us dollar...not good for any paper money
goose | 05.16.08 - 10:51 am | #

Gary writes:
"We're in a hole. What do we do?"

"Dig faster!"
Gary | 05.16.08 - 10:53 am | #

get sum writes:
My understanding is that much (all?) of the increase is apartment/condo. Since renting is a substitute for owning, it's no surprise to see a increase in apartment construction given that people would have to be crazy to buy right now (not to mention all the other people being foreclosed). It would be interesting to see if apartment construction has "boomed" during past housing busts.
get sum | 05.16.08 - 10:55 am | #

Anonymouse writes:
"Dig up Stupid!"
Anonymouse | 05.16.08 - 10:55 am | #

Scribe writes:
1) No sub-prime loans results in fewer first time buyers on the low end of the market being able to afford a SFR.
2) Builders are sitting on land with bank loans. They need to build something now and if they can't build (relatively) expensive houses they will build more (cheaper) multi-family.
3) Builders can make more profit on the low end with multi-family housing than single-family housing in the current market.
4) Demand by investors for more rental units.
Scribe | 05.16.08 - 11:08 am | #

Ransom41 writes:
Mook writes:

"Show me a bank whose loan officers get bigger bonuses for *not* writing loans."

Take a look at Westamerica Bancorp (WABC) - essentially zero loan growth over the past five years. Unlike most banks, the loan officers compensation is tied directly to the performence of the loans they underwrite. The CEO works out of a cube.

Current and 5-YrAvg P/B of 4.2 and 4.1 respectively.

For a California bank no less!
Ransom41 | 05.16.08 - 11:09 am | #

Aheadofthecurve writes:
Alec: The pharmas are the one thing I bought back in January that has not done well, except for the major one I hold, ELN, which is approaching D-Day for their potential Alzheimers blockbuster. Otehrwise, I loaded up on oil, rail and Canada and Brazil (which ares now at all-time highs).


My point is not that this is a bull market (I see it as a sideways market and we may be getting near a short-term top). My point is that most people here are unremittingly negative. If I believed this blog, no one is buying, building or renovating houses. Yet, almost every house in my neighbourhood that goes on the market sells within a month and when I try to sit on my patio and listen to the birds, all I hear is the hammering and bulldozering from the major renovations that my neighbours are doing. And then I have to dodge trucks headed to the new project they're building down the street from me, targeting retiring boomers. And I go to Montreal very frequently-every square inch there is under construction. And do you think China might have some re-building to do?

As Groucho Marx said, "Who are you gonna believe, me or your own eyes?"
Aheadofthecurve | 05.16.08 - 11:12 am | #

Sebastian writes:
get sum said: "...It would be interesting to see if apartment construction has "boomed" during past housing busts."

Looking at CR's chart (which has one-unit structures in red and total starts in blue) it looks like things top-out when the one-unit structures lag and multi-unit structures shoot upwards.

It also looks like in 5 of the last 6 recessions when total starts get down to around 1 million that's about the bottom. That's not even adjusted for population.


Sebastian
Sebastian | 05.16.08 - 11:19 am | #

son of zinger writes:
Anonymouse writes:
"Dig up Stupid!"
Anonymouse | 05.16.08 - 10:55 am | #


Naah...declare that the "hole" is really a "hill".
son of zinger | 05.16.08 - 11:25 am | #

Aheadofthecurve writes:
"The Netherlands and Denmark, you may notice, are considerably smaller than America, and also did not make the shift under intense macroeconomic pressure.


I often hear that argument, but I'm not sure I buy it. Yes it's 3,000 mile from NY to LA, but how many people drive it? In almost any American city, it is possible to live within a few miles of centers of employment, shopping and recreation.

The bigger point is the vehicle fleet though. Simply shifting from the current 20 mpg fleet to one that gets 40 mpg would have a huge impact on the country and on family budgets. How does the distance from coast to coast in anyway prvent Americans from driving fuel efficient cars? If you wanted a larger car for that once in a lifetime cross-country trip, you could always rent one...
Aheadofthecurve | 05.16.08 - 11:33 am | #

Eric writes:
Sebastian: "It also looks like in 5 of the last 6 recessions when total starts get down to around 1 million that's about the bottom. That's not even adjusted for population."

Didn't Case make that same point a few days ago? It seems a bit misleading to ignore inventory, but I cannot think of any reason why there would not have been similar inventory overhangs in the prior >>1MU numbers.
Eric | 05.16.08 - 11:46 am | #

k harris writes:
goose,

I think you are right. The China quake hit the center of the factory region. Odds are China will be importing lots of commodities to go into rebuilding (and lots more if the building is to a higher standard), while factory exports will grow more slowly and perhaps fall for a while. Sadly, that means upward pressure on commodity prices, all else equal, and upward pressure on prices of factory goods.

Much as I like to moan about the housing sector, I would note that the pace of decline in single-family starts has slowed progressively. That makes sense, given that starts are already down about 40% from a year ago and 55% from the peak. Ignoring the case in which starts slow by half a house and then a quarter and so on, a progressively slowing is the path to eventual gains. With completions and homes under construction below the level of starts, we could be approaching a time when starts stabilize. Not yet, though.
k harris | 05.16.08 - 12:15 pm | #

Alec writes:
AOTC,

I'm sure springtime in Schenectady has something to do with the uptick in remodeling, I also assume that Spitzer getting turfed has something to do with it as well. So while your eyes aren't decieveing you, you are deluding yourself to think that the rest of the US is much like the Capital district.

But before I get ahead of myself, look at this map of GDP by state, this map of price declines and this map of delinquencies by county and contemplate what this means now that unemployment claims are rising and industries are predicting nominally flat growth( negative in real terms.)
Alec | 05.16.08 - 12:27 pm | #

get sum writes:
Sebastian writes: "Looking at CR's chart (which has one-unit structures in red and total starts in blue) it looks like things top-out when the one-unit structures lag and multi-unit structures shoot upwards."

I'm not sure what you meant exactly, but I was subtly asking CR for the chart showing the difference between total and one unit structures. Just eyeballing the existing chart suggests a lot of substitution to non-one-unit structures following one unit structure "busts." Namely, you can see the vertical distance between the blue and red lines really climbs following one unit structure busts. My original point is that we should expect this divergence in the current environment.
get sum | 05.16.08 - 12:30 pm | #

Tom Lindmark writes:
I'm having trouble reconciling this news with the news you posted yesterday regarding the NAHB indices. Anyone got any idea for the cognitive disonance or do we just have some static in the numbers?
Tom Lindmark | Homepage | 05.16.08 - 12:31 pm | #

Alec writes:
We've got static in the numbers as builders tap their last lines of credit.
Alec | 05.16.08 - 12:38 pm | #

BB writes:
Great ..Paulson just said that we are closer to the end and the end of the year would be better!

Yippee?!?
BB | 05.16.08 - 12:49 pm | #

mock turtle writes:
Gamma

thanks for the s&p earnings report

hadn't seen it yet
mock turtle | 05.16.08 - 12:53 pm | #

Tom Lindmark writes:
OK, I figured it out. The uptick in the numbers is attributable to a surge in apartment construction. There is no good news for SFH here.
Tom Lindmark | Homepage | 05.16.08 - 12:59 pm | #

Uncle Ar writes:
Sebastian: It also looks like in 5 of the last 6 recessions when total starts get down to around 1 million that's about the bottom. That's not even adjusted for population.
---------------------------
Way to try to use population growth in your favor. Why don't you input population growth to the Wright Model B? Can you say negative GDP when adjusted for population (= RECESSION)?
Uncle Ar | 05.16.08 - 1:01 pm | #

FatalException writes:
byzantine_ruins (among others) said:

Here in Bizzaro World, when you add more stock to a pool of inventory that's stagnant, that means Dow 13000+!

I'm glad I'm not the only one who thought, "and this is good news, why!?"

In every other industry I can think of, an anticipated surge of supply, given low sales and saturated inventories, is bad news. Yet this morning it is cause for euphoria, with the press linking it to a rise in the dollar and DJIA futures.

Clearly, my meager knowledge of antiquated trivialities like supply and demand cannot be brought to bear on matters so complex as the housing market.
FatalException | 05.16.08 - 1:07 pm | #

Aheadofthecurve writes:
Alec: I'm in Albany, not Schenectady and the remodeling went on all through the winter; it just didn't bother me as much with the windows closed.

But you've really piqued my curiosity-what exactly does Spitzer's extracurricular activities and his departure from office have to do with people remodeling their homes? Are my neighbours all trying to placate their spouses in case they are Client #10? I thought that was Paulson, but who knows?
Aheadofthecurve | 05.16.08 - 1:32 pm | #

Alec writes:
The gravy train is back to work with the new gov.
Alec | 05.16.08 - 1:35 pm | #

ShortCourage writes:
Aheadofthecurve,

Yes, you should believe your own eyes.

But you should also make sure your eyes get a good looksie at Las Vegas, South Florida, Phoenix, and most of California.

And notice how the collapse has come at different times in different cities. Just because the Silicon Valley hasn't collapsed yet, I'm not assuming that it won't. It will.

You must have read a good book about the Great Depression and noticed how the negative spiral feeds on itself. What's going to stop it this time?
ShortCourage | 05.16.08 - 1:55 pm | #

byzantine_ruins writes:
And, byzantine, who will be the top three? What percentage would they have to grow, and we have to decline, for that to happen?

Barring state failure and other geopolitical risk (which is quite a ceteris paribus over the next decade):

China
Eurozone
India
USA

Roughly. All of these state / state-groupings are exposed to substate fragmentation risks. I would say that one, possibly even two of them will not make it through the next decade with an intact central policymaking apparatus.

In terms of catching up, only India is particularly far away, at 4T GDP vs. the US 13T. The Eurozone is bigger than the US already. Given the US debt burden going forward and the massive recapitalization required for us to enter post-commuter society, I don't see how we're going to hold our place.
byzantine_ruins | Homepage | 05.16.08 - 2:08 pm | #

Aheadofthecurve writes:
Of course where speculators flourished things are worse. Even in those areas, stable neighbourhoods where people bought to live, rather than speculate are holding much better. I will bet you that prices are still at least 50% (probably more like 100%) higher than they were 10 years ago. So I won't cry for the very large number of residents of those areas (as opposed to speculators) who bought a home 10 or 20 years ago.

As for negative spirals, in every weak patch/recession there are those who say what will stop it? If you are talking about some poorly-built "development" plunked down in the desert far from anything, probably nothing; bulldoze 'em for all I care. More desirable locations just need to reach a price where they seem cheap to someone and they will sell.

The fact that there are empty properties somewhere doesn't mean no-one will or should ever again. There are millions of empty houses in inner cities throughout the country, many of which have sat for decades. While there may be a large surplus of McMansions in the desert, there may be a shortage of the type of housing that's really needed- energy-efficient, accessible to public transit, designed for aging boomers.

Finally on China and India; they were at the center of the world's economy for most of human history. The last 200 years in which they were not, was an exception. This is now reverting to mean. Whether or the US is in a recession or only a weak patch, take the world as a whole and growth is very strong. The fact that a company is based in the US doesn't prevent it from profiting from global growth. In fact, most are.
Aheadofthecurve | 05.16.08 - 2:43 pm | #

Name writes:
"reverting to mean" is a religion.

Are we headed to the mean between calculators and the abacus?

Will we shrink back to five-foot-two like the mean human height between 4000BC and 1800?

Don't worry about global warming, we'll eventually revert to the mean - been doing it for something like 4 billion years.

Housing size, wealth of nations, personal income, S&P growth rate, mortgage default rate, Middle-Eastern borders ... just stand back and they'll revert to the mean for us.

How depressing to belong to a faith of predestiny. There is no free will.
Name | 05.16.08 - 5:16 pm | #