by Calculated Risk on 10/10/2005 12:13:00 AM

Note: my most recent post is up on Angry Bear: Thinking Short Term

KLAS-TV reports: "Record Number of Homes for Sale"

There may be signs the housing boom is finally cooling off in Las Vegas. Real estate agents say there are now more homes for sale than ever.

There are currently 16,000 homes listed for sale. That's 6,000 more than last year.

And the NY Times reported:

A real estate slowdown that began in a handful of cities this summer has spread to almost every hot housing market in the country, including New York.

Inventory, inventory, inventory. That is the current housing story.

by Calculated Risk on 10/09/2005 02:55:00 PM

An ever growing chorus of pundits are expressing concern about the economy. Robert Samuelson writes in Newsweek: So Long to the Wealth Effect? and Marshall Loeb for MarketWatch: How the boom of 2006 ended

Marshall Loeb expresses concern about the current economic situation. Loeb writes from a future prespective (2007) and observes:

"We should have seen it coming.

We were living beyond our means, saving absolutely nothing, spending more than we were earning -- like there was no tomorrow.

Most Americans were doing that. Worse, the government was doing it -- piling deficit upon deficit. ... But, as it always does, profligacy caught up with us. And the economy, which had been growing at a comfortable 3 to 4% rate for many years, came crashing down last year, in 2006."

He compares Bush to LBJ:

Historians know that, for example, Lyndon Johnson brought the economy to perdition in the 1960s and 1970s by not leveling with the American people about the true total cost of the Vietnam war (about $121 billion). Reason: LBJ wanted to pursue both his war and his costly Great Society domestic programs at the same time.

So, too, George Bush tried to pursue his war in Iraq (total cost: more than $200 billion by the end of 2005) and simultaneously to spend $150 billion or more to rebuild the Gulf Coast after the catastrophes of Hurricanes Katrina and Rita.

Unfortunately, Loeb overlooks the deleterious impact of Bush' tax shifts that are the primary cause of the significant Federal General Fund budget deficits.

The Samuelson piece is a reasonable summary of the asset based economy. Others, like Roach, Krugman and Volcker have expressed similar concerns. Dr. Thoma provides this postscript:

"The potential solutions to the global and domestic imbalance problems have been discussed extensively here and elsewhere, so I won't try and recount them all again, but one way to summarize them is that with smart monetary and fiscal policy and gradual adjustment in the U.S. and elsewhere, we have a chance of a soft landing. But if current policies continue, the chance of a more difficult adjustment period will rise." (emphasis added)

If we keep doing what we are doing, a hard landing is likely. Unfortunately, as Koeb demonstrated, many observers can't agree on what "smart" monetary, fiscal and public policy should be.

by Calculated Risk on 10/08/2005 09:04:00 PM

The Observer quotes economist Roger Bootle on housing:

'The signs that it's become a bubble in the States are blatant. It has entered the culture to an extent that mirrors, and even exceeds, the equity bubble.'

Some excerpts:

As [Bootle] says in the book ["Money for Nothing"]: 'We are entering a world in which every sort of knowledge - whether it is an idea, a piece of music, a chemical compound, a design for a dress, the plans for a building, a photographic image, a great novel, or the assembled wisdom of the ages - not only cannot be lost, but is instantaneously accessible by everyone in the world, whenever they want, always.'

Before we can reap the full benefits, though, we have to shrug off the damaging legacy of the bubble. The painful lesson he encourages the reader to learn is that it's an illusion to think we can have 'money for nothing' simply by buying and selling shares - or houses - from each other. Day-trading in equities, or dashing up the property ladder, has winners and losers - it doesn't make society, or the world, richer 'any more than taking in each other's washing'.

Genuine increases in wealth come from fresh knowledge, gains in productivity, and an expansion in the size of the market - all the things Bootle believes the next few decades will bring in spades. Meanwhile, the consequences of the dotcom years are still biting. Britain's share of the post-bubble hangover is the housing market boom, which has begun to deflate, taking consumer spending with it, and plunging GDP growth to its slowest pace for 12 years.

'For some time I have been forecasting that there would be some consumer slowdown here. I hadn't expected it to happen quite when it did, so suddenly. But I am concerned that it could go quite a bit further. If consumers should start to want to save rather more - and classically this is what they do when the housing market slows - then in that case, this economy could come perilously close to recession.'
...
He is profoundly worried about the unprecedented housing market boom on the other side of the Atlantic, pumped up, as in Britain, by the ultra-low interest rates of the post-bubble years. 'The signs that it's become a bubble in the States are blatant. It has entered the culture to an extent that mirrors, and even exceeds, the equity bubble.'

by Calculated Risk on 10/08/2005 05:33:00 PM

Click on photo for larger image.

From a brochure I picked up this afternoon:

Reduced! Anxious! Submit!

The brochure was from the "Calahan" listing shown here.

There are five For Sale signs in a row at this local condominium complex: two are turned the other way - the first one (dark purple) and the fourth one (white). The third sign reads "Sold".


Compare the above photo to this one taken on August 21st: Signs of the Times

The "Calahan" listing is now anxious. The "Trider" listing is now Sold. Two more units are now for sale.


Everywhere I looked, there are more listings now than in August.

by Calculated Risk on 10/07/2005 12:24:00 PM

Reuters reports: San Diego economy flat as housing market cools

An index that tracks economic activity in San Diego, California slipped in August from July, weighed down in part by fewer permits issued for building new homes, according to a report issued on Thursday.

San Diego County's housing market is one of the most closely watched in California because home prices, sales and building activity there had increased in advance of a statewide housing boom.

Many analysts believe California's broad housing market mirrors the San Diego market and expect the state's torrid market is poised to cool, with home prices that have more than doubled since late 2001 flattening and home building and sales slowing as they have in San Diego in recent months.

San Diego's homes market is "correcting," said Alan Gin, the University of San Diego professor who wrote the index report.

"It's going to take longer to sell houses and the number of sales overall will slow," said Gin, noting the university' economic index for San Diego County fell 0.1 percent in August from July, reversing an 0.1 percent rise in July from June.

The index has been essentially flat in recent months, pointing to "continued modest growth through the end of the year and into the first half of 2006" for the local economy, according to Gin.

The San Diego economy might be showing the early effects of a slowing housing market. If San Diego follows the UK experience, the next step will be less equity extraction and lower retail sales, followed by lost jobs in the construction and retail fields.