Housing Slows, Taking Big Toll on the Economy
The NY Times headline today is what I have been saying for months... not that it took a genius to know this was going to happen.
Well, let's see. The Federal Reserve didn't seem to think this was a problem. Most economists didn't seem to think this was a problem. Well, maybe it did take a genius. Okay, just kidding.
“Housing is going from being far and away the most important contributor to growth to being a measurable drag, and it’s happening gracefully so far,” said Mark Zandi, chief economist of Moody’s Economy.com, a research company. “But there’s now a growing and measurable risk that things don’t go according to plan.”
The biggest risk, economists say, is that the optimism that fed the real-estate boom will reverse dramatically. The number of homes for sale has surged in recent months, particularly in once-hot markets, like the Northeast, Florida, California and parts of the Southwest. As builders delay land acquisition and construction it could reduce employment and spending in the coming months.
For much of the last five years, housing — along with health care — was also one of the only reliable generators of jobs. From the start of 2001, when the Fed began cutting its benchmark rate to steady a faltering economy, until early last year, the housing sector added 1.1 million jobs.
The rest of economy lost 1.2 million jobs over the same period, according to an analysis by Moody’s Economy.com.
Here's what is not being said: the existing home market is far worse than the new home market. People who have lost some of those 1.2 million jobs can't sell their homes and can't pay for them. Watch for an avalance of repossessions and then see what happens to the housing market.
Once again - Ben Bernanke, you have screwed the pooch!