by Calculated Risk on 2/06/2007 03:56:00 PM

Rex Nutting at MarketWatch writes: Many layoffs coming in housing, economists say

The home-building industry collapsed in 2006, but surprisingly few workers lost their jobs, revised government data show. That could change this year, economists said.

Between December 2005 and December 2006, the number of building permits for new homes plunged 23.5%, while spending on residential construction projects fell by 12.4%. But over that time, employment in residential construction fell by just 1.4% from 3.38 million to 3.34 million. ...

Click on graph for larger image.

This graph shows residential construction employment vs. completions and starts (Starts are shifted 6 months into the future). Part of my Housing 2007 forecast concerned the loss of 400K to 600K residential construction jobs over the first 6 months of 2007.

"What it means is that we have a steeper cliff to fall off from," wrote David Rosenberg, chief North American economist for Merrill Lynch ...

"We are doubtful, however, the gross job losses tied to the housing cycle are any more than one-third complete," [Steven Wieting, an economist for Citigroup] wrote. He's looking for losses to "easily exceed a half million."

Rosenberg estimates that employment in residential construction will fall about 20% in 2007, or about 600,000 jobs. In essence, the number of jobs in home-building will return to 2002 levels as the pace of home building does.

In addition, of some 3 million manufacturing jobs tied directly to housing, about 10% will disappear, Rosenberg estimated.

All told, that's about 900,000 jobs likely to be lost this year, and it doesn't include a large number of threatened jobs in real estate, mortgage banking and other housing-related fields.

by Calculated Risk on 2/06/2007 12:47:00 AM

Our net sales orders for the month ended January 31, 2007 decreased as compared to the same period in 2006 at a greater rate than the 23% decrease we experienced in our most recent quarter. Our cancellation rate for the month ended January 31, 2007 was similar to our cancellation rate during our most recent quarter.
D.R. Horton, 10-Q filing with SEC, Feb 5, 2007

by Calculated Risk on 2/05/2007 03:06:00 PM

The Hartford Courant reports: Mortgage Lenders Network Files For Bankruptcy

Middletown-based Mortgage Lenders Network, which once promoted itself as a model for building financial services employment in Connecticut, filed for bankruptcy protection today.

by Calculated Risk on 2/05/2007 12:53:00 PM

From the MBA: The Residential Mortgage Market and Its Economic Context in 2007

Some interesting data and comments. The MBA is fairly optimistic:

Click on graph for larger image.

The housing market is nearly back to normal. The housing market will regain its footing by mid-to-late 2007, depending on what measure is used. Home sales and starts will likely begin to increase in mid-2007, but, given the large inventory overhang, prices are unlikely to show any significant increase until late 2007 or early 2008.

On the trade deficit:

The primary reason for the relatively low level of long-term interest rates is the massive inflows of global capital into U.S. fixed income markets. These capital inflows are the flip side of the historically large U.S. trade deficit.

On mortgages:

Interest only (IO) loans, with both adjustable- and fixed-rates, and payment option loans that allow negative amortization, have become a very important part of the market. In the second half of 2005 and the first half of 2006, IOs accounted for about 25 percent of the dollar volume of originations. In addition to their use as affordability products, these products offer homeowners an innovative and flexible means to more actively manage their home equity.
...
Much of the stock of outstanding loans has been originated in the past three years. This has implications for mortgage delinquencies and foreclosures, as loans tend to hit their peak delinquency rates three to five years after origination. We estimate that more than 80 percent of outstanding loans have been originated since 2002.

by Calculated Risk on 2/05/2007 11:13:00 AM

"We are concerned that there could be downward pressure on [housing] prices for awhile."
J.P. Morgan economist Haseeb Ahmed, Feb 5, 2007

From the WSJ: Vacant Homes For Sale Cloud Economic Hopes

... the overhang of vacant housing stock could erode existing home values as sellers slash prices to move their vacant properties. Economists fear that many vacant homes are owned by speculators who are stuck with investment properties that they can't sell and may be under increasing pressure to drop their prices. "We are concerned that there could be downward pressure on prices for awhile," Mr. Ahmed says.

Such worries could cloud hopes for a swift housing rebound. ...

The homeowner vacancy-rate increase "does temper your outlook" for new construction, says David Seiders, chief economist at the National Association of Home Builders in Washington. Mr. Seiders is forecasting largely flat housing sales this year followed by a strong rebound in housing starts in 2008. "There clearly are uncertainties about how this is going to work its way out," says Mr. Seiders. "I keep preaching to builders it's not time to ramp up production."
...
The recent vacancy data may be a useful measure of speculative activity and its fallout.

"I think a persuasive case can be made that the reason we are seeing such extraordinarily excessive vacancy is because of the heavy investor demand over the past few years," said Richard DeKaser, chief economist at National City Corp.

What's troubling is that speculators may not act like typical home sellers. When they sell their vacant home in a down market, they don't necessarily purchase another home. By contrast, people selling the homes they live in will most often buy another house -- thus fueling a healthy market of buying and selling.
...
"This whole thing has been new," says Mr. Seiders, the National Association of Home Builders' economist. "We've never seen this kind of investor activity and we've never seen this kind of [vacancy] resale. It's an extra complication moving forward."