Home Sales: Back to the 60’s
[Guest post by DRJ]
From Ed Morrissey at Hot Air, New Home Sales Collapse in May:
“I was born in 1963, a year in which the US sold 300,000 new homes. Forty-six years later, we may be back to the same pace, thanks to ill-advised government intervention that sapped the demand for new homes. The annualized rate of new-home sales fell to a 46-year low in May, which had a 33% drop from April’s figures.”
The drop was, of course, unexpected.
I have the feeling most people in the Obama Administration don’t really understand why America needs vibrant home construction and offshore oil drilling industries. After all, they have homes and all the gas they need.
— DRJ
You can’t afford a new home working at a $7.00/hr “service job”. You need a factory job, with a decent rate of pay. Except that our factories have become lofts and the Chinese with the factory jobs don’t want the commmute.
nk (db4a41) — 6/23/2010 @ 12:10 pmFWIW – Now is a great time to build, there are some great savings to be had.
JD (23a165) — 6/23/2010 @ 12:26 pmPlus add in the fact that the government has not reauthorized the flood insurance program.
With out flood insurance, homes (and business) cannot be sold/transactions completed, especially in states like mine, FL.
There are great arguments against the Fed supplying flood insurance, but so long as they are the only game in town, (no one can compete with the fed flood insurance program) not having it will stall a huge amount of transactions.
Boca Condo King (7c1ef0) — 6/23/2010 @ 12:27 pm“I have the feeling most people in the Obama Administration don’t really understand why America needs vibrant home construction and offshore oil drilling industries. After all, they have homes and all the gas they need.”
DRJ – Plus they’re getting some good government pay and outstanding benefits. Most of them have tenured jobs waiting for them when they return to academia, the law firms they left or the Wall St. firms from which they took a leave of absence. They are not like you and I, but they know what is best for us.
daleyrocks (1d0d98) — 6/23/2010 @ 12:35 pmdaley – They would not last a month in the private sector. The only place they could thrive is government or academia.
JD (23a165) — 6/23/2010 @ 12:36 pmTo quote my father’s derisive terms to describe Liberals and other Societal Parasites ….
HeavenSent (a9126d) — 6/23/2010 @ 12:52 pm“Yo comi, comio Madrid.”
What did they expect would happen? Oh. Well, the real world is different than that.
htom (412a17) — 6/23/2010 @ 12:55 pm“daley – They would not last a month in the private sector.”
JD – If you look at the stats, very few of them came from the private sector and that is a big part of the problem. Thinking great thoughts in an atmosphere divorced from reality may be a great occupation, but when you start doing things that really impact the lives of people, it’s a whole ‘nother ballgame. “My model said this wouldn’t happen” doesn’t cut it in the real world.
daleyrocks (1d0d98) — 6/23/2010 @ 1:02 pm“After all, they have homes and all the gas they need.”
Jim,MtnViewCA,USA (5c9d97) — 6/23/2010 @ 1:03 pmYeah, and don’t forget food. These people think food comes from Whole Foods, not farms. So, let’s screw up agriculture too.
daley – What you said was the long version of what I was trying to say 😉
JD (23a165) — 6/23/2010 @ 1:05 pmnk @ 1 — Our benevolent host here works a “service job,” as do many of the commentators here. Service jobs aren’t limited to minimum wage employment, they include things like Medical Doctors, Lawyers, Stock Brokers, Authors, Film Directors, Architects, Psychiatrists, Computer Programmers, Video Game Designers, Journalists, Bankers, Managers.
There is nothing wrong with being a service economy so long as the world continues to need information based jobs.
The problem lies not with the flight of manufacturing jobs, which had priced themselves out of any reasonable rates due to legacy union benefits that are dragging our economy down even as the jobs themselves have vanished, rather the problem lies with the flight of information jobs.
Information jobs replaced the fleeing manufacturing jobs, but nothing exists to replace the fleeing information jobs.
Things like Obama Care that will artificially force down service job wages, for Doctors, while simultaneously causing medical technologies to flee due to the increased tax burden placed on the companies, are more worrisome than the loss of the automobile industry.
Christian (3290f5) — 6/23/2010 @ 1:10 pmIt is unexpected that they find these stats unexpected. That’s what you get when you believe rainbows and unicorns fly out of the ass of your candidate.
Oh, I mean that sea levels will stop rising, the earth stops warming and cats and dogs live in peace and harmony together because they were the ones they were waiting for.
Vivian Louise (eeeb3a) — 6/23/2010 @ 1:10 pmHey, you guys seen the price of Arugula lately? Wow.
Dmac (cfe27e) — 6/23/2010 @ 1:13 pmChristian,
I was thinking of Archie Bunker or if you prefer Hank Hill. Not in a derogatory way. Ordinary people, without degrees, who only know how to give an honest day’s work for an honest day’s pay. My parents were like that. They were Teamsters. The factory assigned them a rate of production. If they fulfilled it, they got their contract pay — if they exceeded it they got a bonus. They saved their money for a down payment and showed their W-2s for a mortgage loan. The bank knew that they had job security because they were solid workers in a solid business.
Those days are gone.
nk (db4a41) — 6/23/2010 @ 1:19 pmNothing to see here, folks. Move along…
Frank Drebbin (8096f2) — 6/23/2010 @ 1:39 pm“Those days are gone.”
nk – You should ask yourself why.
daleyrocks (1d0d98) — 6/23/2010 @ 1:40 pmGood news for selling an older home though. You know it’s an ill wind that does no one any good. Maybe this will stabilize home prices?
BTW McChrstal just got his a$$ handed to him.
Good news is Petraeus will take over in Afghanistan.
jakee308 (ace517) — 6/23/2010 @ 1:41 pmYou don’t necessarily need or want a consistent rise in new home construction. You only want enough to make the supply of homes increase at a rate that corresponds to the rate at which the population increases. Otherwise you get a lot of empty homes, either newly built ones waiting for buyers to move in, or old homes waiting to be sold by owners who have moved on to other homes.
And right now, there is still a glut in some areas of new homes that were built but never sold during the real estate boom, homes being sold out of or in advance of foreclosure, etc. The market is still shaking itself out.
kishnevi (9ee373) — 6/23/2010 @ 1:56 pm“You don’t necessarily need or want a consistent rise in new home construction.”
kishnevi – Home builders are not fond of constructing homes that sit unsold. The larger one spend a lot of money attempting to forecast consumer demand, geographically and by type of home. They inventory unbuilt lots. Personally, I would like to see a plot of U.S. population trends versus interest rates versus new home sales to see which track closest.
daleyrocks (1d0d98) — 6/23/2010 @ 2:25 pmRemember also, that every new home that sits empty means so many rooms of furniture unsold, so much landscaping supplies unsold, etc.
But then, that means we have a trickle-down economy, and we can’t admit that.
AD - RtR/OS! (6f143b) — 6/23/2010 @ 2:36 pmI mean, that would be “Voo-Doo Economics”!
daleyrocks,
I know you want me to say that it was the unions who made American factories unaffordable. Maybe it’s true to some extent, but there’s also the owners’ commmitment to their workers and communities. And there was none. It was to their quarterly reports. And no consumer loyalty. There’s lots of blame to go around.
nk (db4a41) — 6/23/2010 @ 2:39 pmYou can have all the commitment to your workers and community in the world, but if you ignore that bottom line, nobody has a job – including you.
AD - RtR/OS! (6f143b) — 6/23/2010 @ 2:42 pmNo.
Harley Davidson is the perfect argument against all this global economy theory. Loyal workers, loyal owners, loyal buyers. But you need a CEO who looks at more than splotches of ink on a piece of paper.
nk (db4a41) — 6/23/2010 @ 2:46 pmI think that’s the Japanese model, too. Take care of your workers, insure quality of product, don’t look quarterly — look down the road in three years, and consumers will beat a path to your door.
nk (db4a41) — 6/23/2010 @ 2:53 pmYes, but you have to do what you feel will allow the company to survive, and the Davidson family had a ready example of what not-to-do with the way that AMF ran the company.
AD - RtR/OS! (6f143b) — 6/23/2010 @ 3:05 pmThen, you have GM, which (when I was growing up) was notorious for bringing to market designs that had not been vetted, expecting their customers to do their R&D for them. You can sell a lot of exciting cars that way….Once!
It is very difficult to develope brand loyalty when your customers spend too much of their time at the shop for repairs to design/production faults that should have never made it out the factory door. And, a lot of those faults were due to too restrictive work rules.
GM had some notable successes in that period, but they were due to having dynamic, take-no-prisoners types running specific shops that literally drove their product to, if not excellence, at least acceptability. They had a goal in mind, and did not allow themselves and their teams to be distracted by the Corporate Culture.
So we agree one more time but are saying it in different words?
nk (db4a41) — 6/23/2010 @ 3:07 pmIt is a fact, though, that the rat riders kept Harley alive through the AMF years.
nk (db4a41) — 6/23/2010 @ 3:09 pmWell, there are those Harley riders who have more money than brains (Rubbies), and then there are the hold-outs, who fried their braincells long ago.
AD - RtR/OS! (6f143b) — 6/23/2010 @ 3:15 pmDisclaimer: Started riding M/C’s as a teen-ager in the Fifties (had a bike before a car) and have two in the garage right now, and have never ridden a Hog. But, about four months ago I thought real hard about buying a 2003-100th Anno Sportster that had a For-Sale sign on it. The price was right, but….
(had a bike before a car)
Me too.
nk (db4a41) — 6/23/2010 @ 3:21 pmYour home starts should be around 2% of existing stock since it is about the rate you need to replenish old construction.
HeavenSent (a9126d) — 6/23/2010 @ 4:16 pm“There’s lots of blame to go around.”
nk – That’s all you needed to say, plus as AD said, acknowledge that you have to make money to stay in business.
daleyrocks (1d0d98) — 6/23/2010 @ 4:42 pmit doesn’t matter how much you take care of the customers, etc, if you are a public company: if you don’t drive the stock value up, the shareholders will get rid of you for someone that will.
redc1c4 (fb8750) — 6/23/2010 @ 4:47 pmI believe that Amazon lost money for its first three years.
nk (92df48) — 6/23/2010 @ 4:55 pmDriving the stock value up was what Enron did. And you know what happened after.
nk (92df48) — 6/23/2010 @ 4:59 pmWell, they were engaged in fraud to drive that value up, and the result gave us Sar-Box, which is causing more and more companies to either “go private”, or not “go public” at all.
AD - RtR/OS! (6f143b) — 6/23/2010 @ 5:02 pmCapitalization.
nk (92df48) — 6/23/2010 @ 5:04 pmAccording to the Commerce Department, between 2001 and 2007, single family home starts varied from a high of 1.716 units in 2005 to a low of 1.046 in 2007.
daleyrocks (1d0d98) — 6/23/2010 @ 5:04 pmI’m out of internet up here, due to a thunderstorm. Terseness.
nk (92df48) — 6/23/2010 @ 5:06 pmThunderstorms???
AD - RtR/OS! (6f143b) — 6/23/2010 @ 5:09 pmProbably Daley reading your posts.
Chicken, corn, and Blackberry.
nk (92df48) — 6/23/2010 @ 5:13 pmhaiku say expect
ColonelHaiku (c2b11b) — 6/23/2010 @ 5:14 pmthe unexpected way past
average shelf life
“I believe that Amazon lost money for its first three years.”
Start ups usually build that into their business models.
daleyrocks (1d0d98) — 6/23/2010 @ 5:20 pm“Driving the stock value up was what Enron did.”
Correction – Driving the stock value up using illegal accounting methods and transactions was what some members of Enron management did.
daleyrocks (1d0d98) — 6/23/2010 @ 5:23 pm“America needs vibrant home construction” No, we don’t at this time. We have a glut of houses due to the credit bubble. At the same time, per-unit occupancy is going up, because folks are tapped out and moving in together to economize.
It would be wonderful if we could have the jobs and associated economic activity of s robust construction sector, but the demand generally ain’t there, at this time.
The prosperity we enjoyed the first decade of this century was created mostly out of wild debt. This is unsustainable. Hard times a’comin.
gp (3f5b43) — 6/23/2010 @ 5:32 pmthere’s a graph here with links and excel spreadsheets
http://www.nahb.org/generic.aspx?genericContentID=45409
This is single family units, so it does not include condos, rental apartments, and rental apartments that were originally planned as condos before the boom bust (of which there are several in my area).
If I read it correctly, the actual high was in 2006, and the low to date was last year, with a bounceback in this year.
But notice the side column, which reports that housing starts have gone down by 10% and building permits by almost 6%
kishnevi (eb3a13) — 6/23/2010 @ 5:46 pmOff topic for this post, but you may remember this guy. Someone’s been minding his business for him, apparently.
kishnevi (eb3a13) — 6/23/2010 @ 5:47 pmhttp://www.kansascity.com/2010/06/21/2033746/party-of-parasites-author-took.html#ixzz0rX9hoiNn
I bet there were more than a few rig workers what already bought a little plot of land and were just about ready to start laying a foundation.
But the president threw them out of work onto the welfare now. Probably lose the plot when they can’t pay the taxes.
This is life in America today.
happyfeet (19c1da) — 6/23/2010 @ 5:53 pmMeanwhile, at least the employment picture is improving. Thanks in large part to hiring over the past several months by the…US Census Bureau.
Mark (411533) — 6/23/2010 @ 8:46 pm