Housing Slows, Taking Big Toll on the Economy

[Herman Munster]

The housing industry — which largely carried the American economy through the tribulations of the 2000 stock-market crash, a recession and climbing oil prices — has lost its vigor in recent months and now has begun to bog down the broader economy, which slowed to a modest 2.5 percent growth rate this spring.

That was a sharp comedown from the 5.6 percent growth rate of the first quarter, the Commerce Department reported yesterday, caused in part by the third consecutive quarterly decline in spending on houses and apartment buildings, after several years of rapid growth.

“It hasn’t slowed down a little bit — it has slowed down a lot,” said Doug McCraw, a developer who has scrapped his plans for a 205-unit condominium tower in a neighborhood just north of downtown Fort Lauderdale, Fla. “Anybody who did not have a shovel in the dirt has chosen to wait till the market settles.”

The housing slowdown is perhaps the clearest effect of the Federal Reserve’s two-year campaign of raising interest rates in a bid to tap the brakes on the economy and reduce inflation. That campaign has been largely successful, with the decline happening gradually while other parts of the economy, mainly the corporate sector, pick up much of the slack.

http://www.nytimes.com/2006/07/29/business/29housing.html?ei=5094&en=860c2effed19ae22&hp=&ex=1154232000&adxnnl=1&partner=homepage&adxnnlx=1154151480-BjGHIShjvQWn1Pd/y77Svw

[The Straight Story]

1. Only a matter of time - things tend to go in cycles

Housing goes up and down, cannot always go up :)

[smtpgirl]

2. Was that a surprise?

I feel sorry for the people who had ARM's.

THEY ARE DUST.

Who can afford a $4000 mortgage when you have an annual salary of $80,00 a year???

[nealmhughes]

3. Several of my friends are in real estate, as are my sister and brother-

in-law. They are all saying it is a buyer's market right now if one has the cash to cover the mortgage. My sister and b-in-law are negotiating to buy a 4 family apt. bldg. with a commercial space on the ground floor right now. The price is ridiculously low. Lower than most single family McMansions in the area!

I wonder if some of the McMansion peeps will be living in their new apt. bldg. next month after they get foreclosed?

It is sad, but anyone who follows real estate realizes how outrageous the prices have been for a few years. I remember what happened on Long Island, out on the East End of Suffolk County in the 80s. It was considered too far to commute to the City, and "the stix" only good for beach going and getting some "country air" and gawk at the farmers... Houses were actually as low as $45K. Now they are at least five times that to even look at them. A lot of retirees went to Florida, laughing all the way to the bank as the new residents drove an hour to Ronkonkoma or Patchogue for an hour long train ride to Penn Station. However, Long Islanders have come to expect that commute and prices are still inflated...

[displacedtexan]

4. Some great links...

Bubble Meter

More great links in the sidebar.

[EvolveOrConvolve]

5. Real Estate losing it's "pop" is not a bad thing

It keeps mortgages sane, it allows investors to pick up properties at normal values, and it allows the average "first-timer" into the market. The bubble popped 2 years ago, it's just taken this long for the MSM to actually pick it up.

There are Democratic real estate speculators out there (I'm one), and it's not the end of the world. Real Estate is something that really never loses value.

[BeachBuckeye]

6. In S.W. Florida things are getting bad

I live in the Naples, Ft. Myers area where we were hardly touched during any of the hurricanes. Our property insurance (if you can even get it now) has doubled and in many cases tripled and quadrupled. Example: The Condo association across from where I live charged a $300 per month maintainence fee for yard care, water, sewer, and exterior insurance. State Farm canceled their policy and EACH owner is being forced to pay an additional $3600 per year insurance with the state-backed Citizens Insurance Plan. Add that to their maintaince fee and it becomes $600 per month. Most of the people living there don't pay that much for their mortgate. It is forcing those on fixed incomes to flee the area and this is causing the price of real-estate to drop. Who is going to pay $200,000 for a condo and then shell out $600 per month for a maintaince fee? Then add on real-estate taxes and you've got a damned poor value for anyone seeking to locate to this part of the country. It will soon reach crisis proportions. I'm thinking of bailing myself.

[KoKo]

7. What about the McMansion resort areas those WCI Communities?

The news ones outside of Naples. They were hot about a year ago with lots of flipping. My brother-in-law looked there but bought an older house abover Tampa and renovated it ...now he's complaining that everything has crashed from Tampa north.