HaloScan.com - Comments

chickenlittle writes:
No kidding.

Many of the foreclosures are newer homes. New home areas is where forclosures are concentrated in addition to lower income neighborhoods.

We have enough inventory for the next few years if builders stop building completely.

Right now builders are dumping inventory below cost, how long do you think that will last? Maybe that is why starts are slowing compared to sales. Pretty soon both will be very close to zero....at least for a while.
chickenlittle | 03.18.08 - 12:15 pm | #

ac writes:

The huge overhang of existing home inventory, especially distressed sales, will pressure new home sales for some time.

Plus the housing inventory now has to compete with the inventory of tents.

ac | 03.18.08 - 12:15 pm | #

Tom Servo writes:
First and your graphs are awesome, CR
Tom Servo | 03.18.08 - 12:17 pm | #

NUREG writes:
OT -

Since we're losing, let's change the rules.
NUREG | 03.18.08 - 12:18 pm | #

ac writes:

First and your graphs are awesome, CR

Second, and I think the graphs are awesome too.

ac | 03.18.08 - 12:18 pm | #

jin writes:
What is the total inventory now?
jin | 03.18.08 - 12:19 pm | #

ipodius writes:
I have no idea what your post says chickenlittle, but I think that CR's point is that for a long time the builders were still building too much. Now they have cut back to the point where the overhang can be worked off, which will result in a return to somewhat historically normal inventory positions. IF these trends continue, that is.

And if that is the case, this can be marked as an inflection point and might be a sign of impending stabilization in prices for a lot of areas.

Now if the credit markets start to unstick I think that a bottom for housing would be in sight. Much to the chagrin of the doom camp here.
ipodius | 03.18.08 - 12:21 pm | #

Elvis writes:
I cannot believe how many people I meet who own 3 to 10 houses as "investments." Moreover, most of these people would never have afforded more than a primary residence if not for zero down ARMs. We haven't seen anything yet. This will continue to deteriorate to the point of horror over the next few years. The extent of "new home inventory" is still grossly underestimated by most as many new homes sold to speculators and were never occuppied. Although new home inventory may be "declining," it has an enormous way to go. Housing is dead.
Elvis | 03.18.08 - 12:23 pm | #

Bob Dobbs writes:
"Now if the credit markets start to unstick I think that a bottom for housing would be in sight. Much to the chagrin of the doom camp here."

What if they unstick at seven percent, or eight percent, or more. Or with a 20 percent down? Yes, there'd certainly be a bottom in sight. But in the doom camp, not a surfeit of chagrin.
Bob Dobbs | Homepage | 03.18.08 - 12:24 pm | #

energyecon writes:
Delta to offer severance to 30,000
16 minutes ago

ATLANTA - Delta Air Lines said Tuesday it will offer voluntary severance payouts to roughly 30,000 employees — more than half its work force — and cut domestic capacity by an extra 5 percent this year as part of an overhaul of its business plan to deal with soaring fuel prices.

Executives at Atlanta-based Delta said in a memo to employees that the airline's goal is to cut 2,000 frontline, administrative and management jobs through the voluntary program, attrition and other initiatives.

[snip]
energyecon | 03.18.08 - 12:24 pm | #

Marcus Aurelius writes:
Now if the credit markets start to unstick I think that a bottom for housing would be in sight. Much to the chagrin of the doom camp here.
ipodius | 03.18.08 - 12:21 pm

_____

And, as we know, wage increases to support the increased credit and consumption have been put in place, so the system is now fundamentally sound.
Marcus Aurelius | 03.18.08 - 12:25 pm | #

Bob Dobbs writes:
"Executives at Atlanta-based Delta said in a memo to employees that the airline's goal is to cut 2,000 frontline, administrative and management jobs through the voluntary program, attrition and other initiatives."

Including, I am sure, off-shoring every administrative possible job to low-wage countries.
Bob Dobbs | Homepage | 03.18.08 - 12:26 pm | #

Bob Dobbs writes:
"Including, I am sure, off-shoring every administrative possible job to low-wage countries."

Dyslexia -- It's not a job, it's an adventure.
Bob Dobbs | Homepage | 03.18.08 - 12:30 pm | #

energyecon writes:
ipodius,

nice Kevin Bacon imitation! ;-)
energyecon | 03.18.08 - 12:31 pm | #

FT Woods writes:
CR,
Is it possible to add a line for permits to the housing starts graphs?
FT Woods | 03.18.08 - 12:32 pm | #

chickenlittle writes:
My point is this:

Right now we have enough inventory for a few years simply from vacant inventory and foreclosures coming to market.

Becareful when people speak in terms of "stabilization" in rapidly declining environments.

A dead patient is the most stable patient. And right now our economy is heading in that direction.

In the last 24 hours, Greenspan, Gramley, Summers, and Bogle ALL said this was the WORST environment they have encountered since WWII.

Can anyone say than we are analyzing a DEPRESSION and not RECESSION?
chickenlittle | 03.18.08 - 12:33 pm | #

--Andrew writes:
OT- I don't know if anyone posted on this yet, but I thought it was interesting. Bloomberg has an article on just how good the financial oversight is of the SEC given their rosey statements regarding Bear Stearns just 3 days before the emergency takeover.

http://www.bloomberg.com/apps/ ne...id=a2uagR6Ze3Jg

"SEC Failure to Save Bear Exposes Cracks in Vigilance"

" March 18 (Bloomberg) -- U.S. Securities and Exchange Commission Chairman Christopher Cox was asked on March 11 if he was concerned about the financial condition of Bear Stearns Cos.

``We have a good deal of comfort about the capital cushions at these firms at the moment,'' Cox told reporters.

Three days later, the Federal Reserve said it was pumping emergency funds into the 85-year-old securities firm through JPMorgan Chase & Co., the third-biggest U.S. bank by assets. On March 16, JPMorgan announced it was buying Bear Stearns for $2 a share, or $240 million in stock, 90 percent less than the company's market value last week.

Bear Stearns's forced sale days after the SEC chief's reassurances is raising questions about the vigilance of the top U.S. securities regulator, which is charged with making sure Wall Street firms have enough cash to survive a crisis.

``It's really speaking to the lack of good supervision by the SEC,'' said David Hendler, an analyst at CreditSights Inc. in New York. ``They're not really a real regulator staying on top of things.''
...

The SEC may have been better off to say nothing about Bear Stearns, said U.S. Senator Jack Reed, a Rhode Island Democrat.

``The next time the SEC steps up to the plate to vouch for a company, will the market then say: `Oh my gosh, we have to head for the exit,''' said Reed, chairman of the Senate Subcommittee on Securities, Insurance and Investment. ``Or will they say: `This is something we can take to the bank.'''
..."
--Andrew | 03.18.08 - 12:33 pm | #

Elvis writes:
Can anybody do a quick calculation on the loss to the economy of 1.5 million houses per year to 500k per year in 2.5 years (down a million and still going). How many people are employed by the building of one home (construction, finance, suppliers, furniture, lumberjacks)? The ripple effects are huge and scary.
Elvis | 03.18.08 - 12:35 pm | #

chickenlittle writes:
Why builders MUST STOP BUILDING SPEC HOMES COMPLETELY!!!!!!!!!!!!!

“Sheriff’s Office Sgt. Keith Day said most of the homes in the Bonita Springs area are older, and that many of the newer homes are the ones in foreclosure. ‘In Cape Coral and Lehigh Acres, those are usually the ones being foreclosed upon,’ he said. ‘A lot of these places going into foreclosure are owned by banks.’”
chickenlittle | 03.18.08 - 12:36 pm | #

Deflationary Jane writes:
repost from earlier thread since it's likely to get lost:

I'm still waiting for county data but they did do a stealth release in Dec for states data. Check out the outmigration numbers.

California: 7/1/06 to 7/1/07
Total pop change 303,343
Births 569,897
Deaths 240,941
International 233,810
Outmigration -263,035

We also want to look at household creation and family size data but they haven't released that either.
Deflationary Jane | Homepage | 03.18.08 - 12:38 pm | #

energyecon writes:
Elvis,

Particularly with respect to state and municipal budgets - the knock on effects of "slamming on the brakes" in the credit markets are only beginning to manifest in the real economy - while food and energy inflation maul the consumer economy (and will do profit margins no favors either).
energyecon | 03.18.08 - 12:38 pm | #

cd writes:
Check out the top link of housing wire on CR home page...The GSE's are ready to reload and do this insane game again..

My taxes just became CDO's. I can't find them and don't know what their worth....
cd | 03.18.08 - 12:38 pm | #

Sebastian writes:
Elvis said: "I cannot believe how many people I meet who own 3 to 10 houses as "investments."..."

Just an anecdote, so take it with a grain of salt. (This surprised even me, who lives in a nice area with a strong local economy.)

Part of the crowd my daughter runs with is a lot more well-to-do than I thought. She tells me that they not only have second homes (for vacations and *not* investment), but *third* homes, too!

IMO, there's a *lot* more money floating around out there than can be deduced from the MSM delinquency and foreclosure stories. It may be concentrated among the upper-income levels, but it's there.

Sebastian
Sebastian | 03.18.08 - 12:39 pm | #

Anonymous writes:
CR wrote
"New home sales have fallen just below 600 thousand (SAAR) in February 2008. This suggests that new home inventory is currently declining at about a 100 thousand per year rate (25+ thousand unit decline in Q1)."

Are you including cancellations in that calculation? If not, wouldn't that suggest no inventory decline and actual inventory still increasing.
Anonymous | 03.18.08 - 12:39 pm | #

Anonymous writes:
All the homes in my town just sold, or were taken off the market. This happened over night. Happy days are here again.......dah dah dah da da dah da
Anonymous | 03.18.08 - 12:39 pm | #

cd writes:
heres link on GSE capital constraints

http://www.housingwire.com/2008/...ing-completion/
cd | 03.18.08 - 12:42 pm | #

Rob Dawg writes:
This suggests that new home inventory is currently declining at about a 100 thousand per year rate (25+ thousand unit decline in Q1).

Ummmm, not necessarily. "New Home Sales" are not sales but a small extrapolated sample of builder reported initiated purchase contracts. Expect a significant portion of these to fall through or get revised.
Rob Dawg | Homepage | 03.18.08 - 12:44 pm | #

Kicker writes:
Part of the crowd my daughter runs with is a lot more well-to-do than I thought. She tells me that they not only have second homes (for vacations and *not* investment), but *third* homes, too!

But even still, the *average* savings rate is still close to zero. The *average* debt to after-tax income ratio is 14%.

Unless a large percentage of people in the US are able to hide income and assets (and skewing the stats) there are a lot of people living way beyond their means.

Bill Gates walks into a bar and the *average* income, savings rate, and DTI goes up but it doesn't help the guy at the bar pay his bills next week.

I'd love it if you had stats on the percentiles for DTI, savings rates, etc. I'm not sure the data is available.
Kicker | 03.18.08 - 12:47 pm | #

Average Joe writes:
Any success by the homebuilders can only be seen as their response to the market through price drops.

Anyone coming off the fence is doing so because of two reasons:

1) They can now afford something they want....i.e. the price has dropped.

2) They can now buy it as an investment and recoup the mortgage payment through rent....i.e price drops.

This is not good news for the economy.

Most know that the economy is in deep trouble not because of the low activity levels of HB's, (since they are only 5% of GDP..uh huh...anyway),
But because a deflationary drop in house prices is hugely destablizing to current homeowners going forward.

It is price drops that is causing forclosures to occur rather than sales.

It is price drops that is eliminating MEW.

It is price drops that is putting pressure on level three assets.

It is price drops that are the problem that the FED seeks to avoid.

Ironically it is price drops that is the cure.

Just like the cure for Nasdaq 5000 was Nasdaq 1700.

Look for good news be bad, and bad news to be good.
Average Joe | 03.18.08 - 12:48 pm | #

CalculatedRisk writes:
All, I'll have more on inventory later this month - including the impact of cancellations. This is just a baby step in the right direction - we still have a long way to go - especially with the existing home inventory.

FT Woods, I'll try to add permits to the graph when I get a chance.

Best to all.
CalculatedRisk | Homepage | 03.18.08 - 12:49 pm | #

Rob Dawg writes:
Elvis writes:
I cannot believe how many people I meet who own 3 to 10 houses as "investments."

"Own" is becoming an increasingly slippery word. 31% own in the formal sense but I'd settle for <75% LTV on a path to eventual ownership as a casual usage of the term. I'd be willing to bet near most of the people you've met have interests in those properties far below any reasonable interpretation of "own."
Rob Dawg | Homepage | 03.18.08 - 12:50 pm | #

homedad43 writes:
Part of the crowd my daughter runs with is a lot more well-to-do than I thought. She tells me that they not only have second homes (for vacations and *not* investment), but *third* homes, too!

IMO, there's a *lot* more money floating around out there than can be deduced from the MSM delinquency and foreclosure stories. It may be concentrated among the upper-income levels, but it's there.

Sebastian
-------------------------------

What your daughter relates to you doesn't surprise me and yes, there is money floating around out there.

But it's unfortunately tied up in the hands of a small minority of folks and in non-productive assets.

Some lived large in the '30s as well.

But most didn't.
homedad43 | 03.18.08 - 12:51 pm | #

Shnaps writes:
Don't forgot about the Lumberjills, Elvis! If Erin LaVoie loses her Stihl sponsorship because of this, it's all Bob Toll's fault.

CR - Love the charts and all, but would it be too much to ask to seasonally adjust that first one? The seasonality makes it look like an EKG, only busier.
Shnaps | Homepage | 03.18.08 - 12:51 pm | #

Elvis writes:
"She tells me that they not only have second homes (for vacations and *not* investment), but *third* homes, too!" -Seb.

I'm not sure if you are saying this in jest or not, but any home purchase after a primary residence is essentially an investment. If people think home prices would continue falling, they would generally stay in hotels instead of buying second or third homes. That is unless they have enough money where it doesn't matter and buying is just a lifestyle/convenience decision.
Elvis | 03.18.08 - 12:53 pm | #

Anonymous writes:
Marcus, do u work in DC?
Anonymous | 03.18.08 - 12:54 pm | #

ac writes:

Now if the credit markets start to unstick I think that a bottom for housing would be in sight. Much to the chagrin of the doom camp here.

Agreed. If people would just start making $500,000 loans to people with no income, everything would be fine again.

ac | 03.18.08 - 12:56 pm | #

Elvis writes:
I prefer to call them lumberpats.
Elvis | 03.18.08 - 12:57 pm | #

Sebastian writes:
Kicker said: "I'd love it if you had stats on the percentiles for DTI, savings rates, etc. I'm not sure the data is available."

I've got a theory about that: The most-worthwhile information is never available.:)

Seriously, though, unless one is a paranoid conspiracy theorist there's got to be a real-world resolution of the conflict between the neutral-to-positive broad economic numbers and the negative-to-more-negative housing-specific numbers.

Sebastian
Sebastian | 03.18.08 - 12:58 pm | #

Average Joe writes:
I went into a sales office two days ago.

Houses that were selling for low $700's were now priced in the high $500's. They would also do a new trick of featuring a "home of the week" that would be priced to sell (presumably to hide the true price of homes selling today as a "sales" price).

I asked if the current homeowners of the community who paid the original price (without incentives) were upset. The sales woman said that they were but that "they understand that they wouldn't even have been able to buy those houses today with all the new restrictions".
Average Joe | 03.18.08 - 1:00 pm | #

homedad43 writes:
O/T but a situation to the cynics in this bunch. Would appreciate your comments as to what it might show.

About half hour ago, had a door-to-door "meat delivery" guy show up at the house. Stated that had a botched delivery in the neighborhood and would I be like to buy some meat? Truck was late model GM Pickup - unmarked - but there was a large freezer w/company name secured by bungee cords to bed. I declined and he drove off.

Yesterday, two other guys showed up in a late model pickup - this one had company name/logo on doors - and stated that due to botched neighborhood delivery, they had extra meat and would I like to purchase some? Declined that one and they drove off. Thought nothing of it otherwise 'til other guy showed up.

Suspect that all of the meat is hot...
homedad43 | 03.18.08 - 1:00 pm | #

Shnaps writes:
Thanks to Bear's collapse, at least some of Sebastietta's BFF's daddy's "weekend homes" are going on the market.

See the paragraph beginning with "My life has been flushed down the drain".
Shnaps | Homepage | 03.18.08 - 1:01 pm | #

homedad43 writes:
Or else the folks aren't able to pay.
homedad43 | 03.18.08 - 1:01 pm | #

Elvis writes:
homedad,
That trick has been used for years. Not hot meat, just a sales tactic. People think they are getting a great deal, so they buy. I've seen it work. BTW, it is not really a good deal, but people tell me the meat still tastes good.
Elvis | 03.18.08 - 1:04 pm | #

ipodius writes:
Agreed. If people would just start making $500,000 loans to people with no income, everything would be fine again.

(Price drops + fewer new houses built + decreasing inventory) + rising demand * credit normality = equilibrium. Which implies a bottom.

I don't know about you but I bought my first property in 1989 with 5% down. That can't happen now, but a return to "normal" implies it will. Even if interest rates hover around 6.5% they will be cheap by historic standards.

And what everyone forgets is that time only builds pent-up demand. A lot of people are on the sidelines sitting it out until things stabilize. And there are a lot of people out there that price reductions won't hurt (there are more people out there like me that either own outright or bought before the bubble and aren't HELOC'd to death). Add in new buyers too.

You don't have to buy at the bottom, just close to it. And you don't have to sell at the top, just close to it. So I'm looking for the signs. And, frankly, this is a sign. You can choose to ignore it just like the bubble people did on the way up.
ipodius | 03.18.08 - 1:04 pm | #

Sebastian writes:
Elvis said: "That is unless they have enough money where it doesn't matter and buying is just a lifestyle/convenience decision."

That's just my point: They do, and it's not like they're uber-wealthy plutocrats.

S.
Sebastian | 03.18.08 - 1:04 pm | #

ipodius writes:
Suspect that all of the meat is hot...

either that homedad or someone just canceled (or went under leaving) a really big order and they are trying to unload it.

i'd have been stocking my freezer as an inflation hedge. beats buying cases of toilet paper ;)
ipodius | 03.18.08 - 1:07 pm | #

homedad43 writes:
Elvis:

Makes sense.

We tried that route years ago when the eldest two were in diapers and my mobility was highly limited. They're right, the meat was excellent, but it didn't pay vs decent shopping habits.
homedad43 | 03.18.08 - 1:07 pm | #

George writes:
Historically when inventory is less than 6 months prices rise when inventory is more than 9 - 12 months prices fall. Basic supply and demand. You must also factor in soros theories of reflexivity

http://thevolatilitysoma.blogspo...ll-and- tmf.html
George | Homepage | 03.18.08 - 1:08 pm | #

Elvis writes:
"That's just my point: They do, and it's not like they're uber-wealthy plutocrats." - Seb.

They do until the value of their homes collapse, and then maybe they don't.

"You don't have to buy at the bottom, just close to it." - Ipodius

That is the problem, though. Although housing might bottom in a couple of years, prices will likely be flat until about 2014. Buy now and you may be closer to the bottom, but, with maintenance and taxes, you lose money. Start buying in 2013 and maybe you'll be golden.
Elvis | 03.18.08 - 1:09 pm | #

homedad43 writes:
ipodius:

Already stocked the freezer and my better half demands that we be able to survive nuclear winter with clean backsides. I'm moving on to canned fruit...
homedad43 | 03.18.08 - 1:09 pm | #

mal writes:
awww boo hoo hoo! unemployed bankers wondering if they can afford their houses!

cry. me. a river.
mal | 03.18.08 - 1:09 pm | #

cd writes:
Ipodius-
Really? You would buy now? Out in the bay area, Ca, the knife is falling faster than a skydiver without a chute..

To pump up the RE market right now is well..laughable..

91-95 was a walk in the park compared to what this is going to be..
cd | 03.18.08 - 1:10 pm | #

12th Percentile writes:

That's just my point: They do, and it's not like they're uber-wealthy plutocrats.

Anyone want to take a guess at how much you need to make to own three homes, maintain three homes and pay taxes on three homes AND have some savings?

As someone who owns two buildings (and subsequently would never buy a vacation home because the idea of owning where I vacation is unappealing) I would say that unless these people are buying their third homes in rural West VA that you would need an income in the $300-$450K range.

Or, you are so highly leveraged that it won't end well.
12th Percentile | 03.18.08 - 1:12 pm | #

anony-1797 writes:
homedad; one of the most commonly stolen items in grocery stores is meat (I think second most is other people's wallets/purses). However, in Ontario I've seen a number of trucks like you described selling "seafood." They'll park out on one strip of road for a week, and move to another road/parking lot. Because of their regularity, I assume that they're mostly legit, so it could be a decent business.

Plus, if you tell people that they're getting a deal, even if the prices aren't good, they might think they are. By the time that they might realize that they paid a lousy price you've got the cash and are long gone.

If they come again tomorrow, find out what their prices are.
anony-1797 | 03.18.08 - 1:14 pm | #

Average Joe writes:
Affordability, Affordability, Affordability.

Reducing the supply is irrelevant if the prices are unaffected.

Would it matter to you if the Ferrari dealer had 1 Ferrari or a thousand for sale? Not unless having a thousand for sale means the price drops to where you can afford it.

Increased inventory is dropping prices as it should. Any reduction in inventory is not likely to stop the fall of prices because prices were artifically high due to easy lending standards and a belief that housing is a great short term investment. Those two ideas are gone now. Prices are dropping not to meet a lower demand but to meet the true affordability level.

Price drops are what the FED fears. Price drops are what the home builder needs.

As a Ferrari salesman, lower supply will not fill your wallet, lower prices will. As a Ferrari manufacturer lower prices is a death warrant if you can't make a profit. You need increased affordability, i.e. more people who can afford your expensive Ferrari.

The banking system is at risk, not because HB's aren't surviving, but because current homeowners can't afford their product and are defaulting. Price drops may look like good news, but may kill the HB's and the financials.

A real pickle with no easy solution. Pain by some is unavoidable. That is why bubbles need to be avoided, not mopped up.
Average Joe | 03.18.08 - 1:17 pm | #

Elvis writes:
"one of the most commonly stolen items in grocery stores is meat."

Excuse me sir, is that a leg of lamb in your pants or are you just happy to see me?
Elvis | 03.18.08 - 1:18 pm | #

ipodius writes:
Out in the bay area, Ca, the knife is falling faster than a skydiver without a chute..

Speaking as an actual skydiver, you can fall pretty fast WITH the chute! Boston area has been in decline now for over 2 years. Inflation-adjusted SFH prices are around 21% off the peak. In Boston proper though, most prices have not rolled back much, especially on condos in the more desirable places.

I have two friends that are both in RE and have been for many years. They report tons of pent-up demand...people who keep looking but are waiting for some sign that the decreases are close to over. I'll go out on a limb and say that things will stabilize in the next couple of quarters or when the decline will be near to 30% off peak, inflation adjusted.
ipodius | 03.18.08 - 1:20 pm | #

Elvis writes:
"The banking system is at risk, not because HB's aren't surviving, but because current homeowners can't afford their product and are defaulting."

O-Joe,
Oh, Joe!? Much of the problem is that they can afford their product, but are defaulting nevertheless, because they are underwater. Bankers knew this would happen as it is rational, although they deny it, because they were caught up in the extraordinary fees and euphoria.
Elvis | 03.18.08 - 1:22 pm | #

Anonymous writes:
While picking up lunch in a small rural diner, I just heard my first discussion on the fact that we need to incentivize to get off oil.
Anonymous | 03.18.08 - 1:23 pm | #

ipodius writes:
Anyone want to take a guess at how much you need to make to own three homes, maintain three homes and pay taxes on three homes AND have some savings?

Yes 12th. I own three properties...my primary, a vacation home, and a 3 family rental property. I am NOT an uber-wealthy plutocrat. OK, maybe a plutocrat :) I am single too. So it depends on the situation.

I expect that the people being discussed, however, didn't do this over a period of almost 20 years though. They're f&^#ed if prices decline 30%. Me, not at all.
ipodius | 03.18.08 - 1:25 pm | #

Anonymous writes:
Yes all the realtors I run into keep claiming they are having a solid year despite the slow down.
Anonymous | 03.18.08 - 1:25 pm | #

energyecon writes:
Seb,

*data* on income distribution

US Census
Income

Race and Hispanic Origin (Race data refer to people reporting a single race only)

Real median household income of white households rose 1.1 percent between 2005 and 2006 (from $50,100 to $50,700), the first real increase in annual household income for this group since 1999. Asian households had the highest median income at $64,200, followed by non-Hispanic white ($52,400), Hispanic ($37,800) and black ($32,000) households. Income levels remained statistically unchanged between 2005 and 2006 for each of these groups.

Regions

Between 2005 and 2006, real median incomes of households in the nation’s four regions were statistically unchanged. In 2006, the Northeast and West had the highest household incomes at $52,100 and $52,200, respectively, followed by the Midwest ($47,800) and South ($43,900). (The apparent difference between household incomes of the Northeast and West was not statistically significant.)

[snip]

US Census Income Distribution in 2006
Income Lower Limit
1st Quintile = $0
2nd Quintile = $23,032
3rd Quintile = $37,771
4th Quintile = $60,000
Fifth Quintile = $97,030
Top 5% = $174,000

[snip]
energyecon | 03.18.08 - 1:26 pm | #

rich writes:
>ATLANTA - Delta Air Lines said Tuesday it will offer voluntary severance payouts to roughly 30,000 employees — more than half its work force — and cut domestic capacity by an extra 5 percent this year as part of an overhaul of its business plan to deal with soaring fuel prices.

This is why it's lunacy for the Fed to keep cutting rates and jacking up oil prices. High oil erodes job opportunities -- in airlines, tourism, trucking, manufacturing of vehicles and boats, sales, and ultimately retail and restaurants.

Some of those jobs don't come back when oil prices go down.
rich | 03.18.08 - 1:27 pm | #

Anonymous writes:
Depreciation on rental property is the biggest tax shelter on the planet.
Anonymous | 03.18.08 - 1:27 pm | #

Ceilingfan writes:
Well, the fact that bottom calling is even being discussed is a cheerful sign.
Ceilingfan | 03.18.08 - 1:30 pm | #

Barley writes:
CR writes: "builders are finally starting fewer homes than they are selling"

What I have seen and are seeing is a good deal of less construction not by a simple idea that they cant sell them for a reasonable price or in a reasonable time; but rather builders are cash strapped, and going bust, and walking away.

This is an involuntary adjustment to inventories.
Barley | 03.18.08 - 1:30 pm | #

AKA Correspondent writes:
"Suspect that all of the meat is hot..."

I suspect most of the meat comes from unusual animals.
AKA Correspondent | 03.18.08 - 1:31 pm | #

Elvis writes:
"but rather builders are cash strapped, and going bust, and walking away. This is an involuntary adjustment to inventories."

This is a market adjustment to inventories.
Elvis | 03.18.08 - 1:31 pm | #

blackhat writes:
Rich,

Good points. Another nice point is that export driven manufacturing that is now more competitive (falling dollar) is also getting more expensive, both because energy intensive production costs more with rising energy prices, and because shipping is sensitive to those same prices...and the underlying raw materials (commodities) are also pricing up...so we are going to break even at some point and lose competitive advantage (for those widgets that other's can make)...
blackhat | Homepage | 03.18.08 - 1:33 pm | #

James Bednar writes:
Yes all the realtors I run into keep claiming they are having a solid year despite the slow down.

Survivorship bias.
James Bednar | Homepage | 03.18.08 - 1:33 pm | #

Anonymous writes:
Energycon,

Doesn't that just blow your mind.

75% of Americans live on less than 90K (and most much less) but they vote like their in the top 5%.
Anonymous | 03.18.08 - 1:33 pm | #

James Bednar writes:
And I'm a Realtor.
James Bednar | Homepage | 03.18.08 - 1:33 pm | #

homedad43 writes:
I expect that the people being discussed, however, didn't do this over a period of almost 20 years though. They're f&^#ed if prices decline 30%. Me, not at all.
ipodius | 03.18.08 - 1:25 pm

----------------------------

ipodius:

Share the love, baby.
homedad43 | 03.18.08 - 1:33 pm | #

halpmeh writes:
i've bought the meat before...usually it's beef and seafood, haven't seen any chicken or pork from the guys that come by...

it's not typically lower quality than your neighborhood grocery store and the price is decent, but not amazing...i talked the guy down another 12% or so from what i remember (was about 3 or 4 yrs ago)...i wouldn't buy it again though as some of the cuts were not something i'd regularly eat...
halpmeh | 03.18.08 - 1:34 pm | #

Anonymous writes:
Got Mad Cow? Denny Crane
Anonymous | 03.18.08 - 1:35 pm | #

ipodius writes:
energycon, 15.73% have incomes 100k and over, and 10.93% have incomes from 75k to 100k. 18.27% have incomes from 50k to 75k. So 44.93% have incomes 50k and higher.

That all said (and your post considered) those numbers don't tell me anything unless I know where the salaries are located. In the Northeast, there is a BIG difference between one salary living in Concord MA and the same one living in Concord NH. Also the median price in Jamaica Plain is certainly much different from the median in Mattapan 5 miles away.
ipodius | 03.18.08 - 1:37 pm | #

Alec writes:
"Some of those jobs don't come back when oil prices go down.
rich | 03.18.08 - 1:27 pm | #"

What it means for Delta is that Northwest is buying them out in the "merger".
Alec | 03.18.08 - 1:38 pm | #

Mars writes:
Homedad43

My cousin used to run that meat racket in SF. He mostly sold in bars, implying heavily that it was hot to the customers. It wasn't. Just a way to sell it.

Also this AM in the newspaper I saw that you can get a free BMW convertable if you buy a condo in Atlantic City.
Mars | 03.18.08 - 1:39 pm | #

TH writes:
Sebastian says: "Seriously, though, unless one is a paranoid conspiracy theorist there's got to be a real-world resolution of the conflict between the neutral-to-positive broad economic numbers and the negative-to-more-negative housing-specific numbers."

And negative-to-more-negative credit problems. Somehow, GDP estimates remain above zero as if unprecedented asset deflation and credit tightening really don't matter much. Or they matter a huge amount in California, and matter not at all in a vast swath of fly-over country doing well on exports. Is the US uncoupling from itself?
TH | 03.18.08 - 1:41 pm | #

Elvis writes:
Question: If you own a boat and the boat don't float, is it still a boat? Likewise, if you buy a house with no money down are you buying a house?
Elvis | 03.18.08 - 1:41 pm | #

energyecon writes:
ipodius,

income x 3 = affordable home price

you play with the map
energyecon | 03.18.08 - 1:43 pm | #

Matthew writes:
"Right now we have enough inventory for a few years simply from vacant inventory and foreclosures coming to market."

So when a family forecloses and has to leave the house they "owned" do they usually end up in a tent? Or do they instantly die?

Or do they move into a rental house? After all, if you're in an area where there are lots of foreclosures there is likely to be lots of rentals coming online. Investors are out there buying these foreclosures and renting them out.

Houses don't just disappear when there is a foreclosure, and neither do the people that used to live in those houses.
Matthew | 03.18.08 - 1:44 pm | #

Cobradriver writes:
A quick post on why this won't end well...

Here is a empty gulf access lot in Port Charlotte,Fl.

12/1990 VACANT $100
11/1995 VACANT $2,800
11/2003 VACANT $65,000
5 /2004 VACANT $108,000
7 /2005 VACANT $220,000

Current ask on the MLS? 275k.

There are 550 PAGES of lot listings.

Houses are worse.

We are a small county.

Chris
Cobradriver | 03.18.08 - 1:48 pm | #

Sebastian writes:
TH said: "And negative-to-more-negative credit problems."

Exactly, and whatever the other additional knock-on effects are. How big does this thing have to get and how long does it have go on before it finally does some *real* economic damage?

And if that hasn't happened long before now, what's been offsetting that damage? Hopes, dreams and other illusions just aren't substantial enough to account for it, there's got to be a real-world answer.

S.
Sebastian | 03.18.08 - 1:49 pm | #

Anonymous writes:
Never fear that nice man with the beard will be flying in his in helicopter with his crack pipe to make it all better soon.
Anonymous | 03.18.08 - 1:50 pm | #

fattyk writes:
Even if housing starts come down, the current overhang, plus the fact that there are now about 40% less potential buyers is the market because they don't qualify and the ones that do qualify have 40% less purchasing power than last year. All of that has to be factored into home prices which means homes will have to drop a minimum 30-50% peak to trough (depending on the area).
fattyk | 03.18.08 - 1:50 pm | #

Yal writes:
Here is anoher proof that the media does not know anything.

Media: Cheap loans era gone.

reality: Fed lowers interest rate .

oh wait, what is 30 years mortgage rate and where was it a year ago?
Yal | 03.18.08 - 1:50 pm | #

12th Percentile writes:
"Yes all the realtors I run into keep claiming they are having a solid year despite the slow down."

My wife is a realtor. Last year was a record year and she was one of the top in the area. No sales yet this year. And we aren't in CA, FL, AZ or NV.

buyers are patient (we actually just rented an apartment to some of her buyers who were looking the past 6 months). Sellers are still way too optimistic on pricing. Simple supply and demand at work.

I've been planning on this for at least two years. It will be good to thin out the realtor herd. Those who survive will have a good run on the other side.
12th Percentile | 03.18.08 - 1:56 pm | #

Sebastian writes:
energyecon said: "*data* on income distribution"

Thank-you, sir, nice contribution.

I'd guess that in my area we're in the Fifth Quintile and above, with housing prices locally in the $275k-$450k range, reasonably-priced for the income levels by comparison with the "bubble" areas.

S.
Sebastian | 03.18.08 - 1:57 pm | #

Jas Jain writes:
--
"What is the total inventory now?"

The most inventory problem is New Homes Completed For Sale. It is hovering around the all-time of 195K. Previous cycle high was 125K. This despite builders doing auctions and all kinds of incentives.

No, CR, the inventory is not being worked off. At best, it is changing hands. How come the Vacant Units, Year Round, keep going up? You need to learn to reconcile all data.

Jas
Jas Jain | 03.18.08 - 1:59 pm | #

Misean writes:
Yal,

Try this.

http://www.mortgage-x.com/ genera...rical_rates.asp

Cheers,
Misean | 03.18.08 - 1:59 pm | #

fattyk writes:
Matthew,

Any smart investor looking to rent will need to purchase the house at 30-40% discount of the peak market value to be cash flow postive on the rental. If home prices decline 30%, we are looking at armageddon. The reality...home prices have to come down atleast 30%. It's very simple fundamental cash flow economics. People can only afford homes that are 3-4x income. Most people are leveraged twice that in their current homes. This leverage needs to reduce before this ends.
fattyk | 03.18.08 - 1:59 pm | #

puravidavid writes:
OT - How far will the Fed follow the market down this time?
puravidavid | Homepage | 03.18.08 - 2:01 pm | #

barely writes:
Get ready for the biggest on-air climax of all time as Ms Bartiromo shrieks after Ben's serves up his record setting rate cut. The Fed's largesse will be celebratedon the street today!

I mean, what's a mere 1/2% jump in PPI. After all, inflation is set to moderate as the cuts permeate. Isn't that how it works?

Sheesh.
barely | 03.18.08 - 2:04 pm | #

Yoringe writes:
hugely OT but well enjoy :-))

http://www.huffingtonpost.com/20...- w_n_92049.html
Yoringe | 03.18.08 - 2:04 pm | #

cd writes:
? for all the smart people here-
Has the market priced in the 1% rate already this morning and yesterday?
I get a feeling that 1% is overly optimistic..They pulled a rabbit out of the hat yesterday. With ppi at .5 it wouuld be wise to go 1/2 pt..
cd | 03.18.08 - 2:04 pm | #

puravidavid writes:
Is the top of the countertrend rally in place?
puravidavid | Homepage | 03.18.08 - 2:06 pm | #

sdtfs writes:
Misean- sorry I missed your B-day yesterday, always suspected you were a leprechaun with a pot of gold.

And for you meat buyers out there- there's always someone selling "studio" speakers out of a van- some nightclub refused them- and look for the "art" that some high class hotel over bought,...though I can't think of why anyone would want "hotel quality art",...
sdtfs | 03.18.08 - 2:08 pm | #

Misean writes:
sdtfs,

ROFL.

Cheers,
Misean | 03.18.08 - 2:09 pm | #

tg writes:
@Matthew,
I'm not sure all the foreclosures are getting sold yet. 'Investors' have to qualify for the new guidelines on loans. Income has to be stated and a down payment is required.
For a rental income or investment property to work to work, the property must be priced so the rent can at least meet the mortgage payment. Prices aren't meeting this investor rental formula in many cases.
You don't want to buy a property and have to feed it with cash out of pocket every month. I think a lot of RE is still not moving even in foreclosures. Investors probably need at least a ballpark 50% off for it to be a good investment. Any data on this?
tg | 03.18.08 - 2:09 pm | #

12th Percentile writes:
I can't imagine how bad the economy would have to be for me to consider buying meat from some random person knocking on the door.
12th Percentile | 03.18.08 - 2:12 pm | #

safe_as_apartments writes:
MarketWatch: Fed raises 0.5% to 3.5%
MarketWatch: Fed tells market to "screw itself"
MarketWatch: Fed Funds Target at 3.5%

:P
safe_as_apartments | 03.18.08 - 2:13 pm | #

MarktoMarket writes:
OT but is BSG looking like a short opp here? at $8 wtf????
MarktoMarket | 03.18.08 - 2:14 pm | #

Jas Jain writes:
--
It is not just the housing demand that is low so is the auto demand -- lowest since 1994 according to JD Powers.

Americans have been burdened with TMD (too much debt) by BFNYC and with the help of the Fed and the USG. Crooks have done the dirty deed to the American People. The question is: What will, or can!, American People do to the Crooks?

Jas
Jas Jain | 03.18.08 - 2:15 pm | #

tj & the bear writes:
This talk of a housing bottom cracks me up. Everthing is still moving *against* housing, not for it.
tj & the bear | 03.18.08 - 2:16 pm | #

homedad43 writes:
I've been planning on this for at least two years. It will be good to thin out the realtor herd. Those who survive will have a good run on the other side.
12th Percentile | 03.18.08 - 1:56 pm

----------------------------------

How hard is it to get a license and when is the season?
homedad43 | 03.18.08 - 2:16 pm | #

fattyk writes:
MarktoMarket,

BSG is going up because of short covering. The shorts have to sell to cover their positions and that's driving up the price it seems.
fattyk | 03.18.08 - 2:18 pm | #

tj & the bear writes:
FED CUT 75 BASIS POINTS!!!
tj & the bear | 03.18.08 - 2:20 pm | #

ipodius writes:
Everthing is still moving *against* housing, not for it.

All moving objects come to rest tj. How fast are they moving? If the rate is slowing, you can get an answer. But the rate will be different in different places.
ipodius | 03.18.08 - 2:20 pm | #

tj & the bear writes:
Futures are dumping...
tj & the bear | 03.18.08 - 2:20 pm | #

TCA writes:
tj & the bear writes:
FED CUT 75 BASIS POINTS!!!

Watch the collapse!
TCA | 03.18.08 - 2:20 pm | #

safe_as_apartments writes:
tj & the bear:

Ouch, the markets aren't going to like that if they were all in for 100.
safe_as_apartments | 03.18.08 - 2:20 pm | #

energyecon writes:
I can haz pony now? ;-)
energyecon | 03.18.08 - 2:21 pm | #

Crispy&Cole writes:
2 dissenters.
Crispy&Cole | Homepage | 03.18.08 - 2:21 pm | #

energyecon writes:
Think the ability to borrow by IB's will temper the decline from the days top?
energyecon | 03.18.08 - 2:21 pm | #

tj & the bear writes:
C&C,

Dissented which way?

tj & the bear | 03.18.08 - 2:23 pm | #

energyecon writes:
Let's see how hard they have to pull on the yen to keep up the pump now...
energyecon | 03.18.08 - 2:25 pm | #

ipodius writes:
income x 3 = affordable home price
you play with the map

That's specious, as i pointed out. You just can't take the numbers and say "play with the map" because income distribution varies wildly even in tight geographic areas.

The crux of the issue isn't income, it's when the income doesn't support the buy in the desired area. So the city with the most 1M+ houses in the state is Cambridge. Parts of it are very, very lower and lower-middle class. What does the income tell you? Nothing. Neither does median price in Cambridge. But if those with insufficient incomes are buying in higher-priced areas they cannot afford, it tells you a lot.

3x can mean different things even in the same zip code.
ipodius | 03.18.08 - 2:26 pm | #

RayOnTheFarm writes:
It appears from the Census Bureau's Housing Starts report released this morning that the home builders are finally starting fewer homes than they are selling.

Where do these sales numbers come from ?

I see housing starts and I see housing completions, but I don't see anything in the Census data that says the house actually sold. I presume that most did, but not necessarily all were sold upon completion.

Ever since the triage of the Athens, OH numbers, I've been rather skeptical about believing any sales numbers. I would like to see sales numbers that are sanitized with respect to FC sales and multiple sales of the same property (within some minimal period, say 12 months). Then I might start to believe that the numbers aren't being fudged to make a bad situation appear better.
RayOnTheFarm | 03.18.08 - 2:26 pm | #

energyecon writes:
ipodius,

Parse it however you need to, housing prices in many areas remain unsustainably high - macro trend is of interest here - not whether you are underwater on house 1, 2 or 3 and what your resale prospects are like...

The income tells you plenty, particularly since the genesis was Seb's 'not a plutocrat' reference to a parent of his child's friend - you seem kind of put out - what has your panties wadded up? The numbers are what they are.
energyecon | 03.18.08 - 2:31 pm | #

john M. writes:
Financial Sector a 'Drag,' Says Vanguard Founder

http://www.cnbc.com/id/23688576
john M. | 03.18.08 - 3:10 pm | #

Tom writes:
Only indicators you need to look at for now are foreclosures and lending standards, then sales and inventories, then permits and starts...
Tom | Homepage | 03.18.08 - 3:44 pm | #

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