From Salon:
Housing dominoes continue to fall
USA Today is reporting that “dozens of sawmills around the country are laying off workers, shutting down temporarily or trimming hours, as a steep drop in home building hits demand and prices.” (Thanks to the Housing Bubble Blog for the link.
This, ladies and gentlemen, is your housing bust spreading into the wider economy. How far it will go and whether it will tip the U.S. into recession is as yet unknown, but this latest tidbit (along with the news that a California mortgage lender has shut down operations completely, laying off 800 employees) is another reminder that focusing simply on what happens to home prices or sales isn’t sufficient to gauge the true impact of the end of the boom.
Every time I write about the housing bust, a reader castigates me for being too doomy gloomy, and reminds me that, hey, lower prices are great for people who have been priced out of the market by speculators looking to flip their way to riches. That’s a valid point: There is a definitely a silver lining in the end of the bubble.
But not if you happen to be in the construction business, or in any of the other downstream industries that have benefited from the long boom (and that includes, I will reiterate, the entire global economy that has been living off the largesse of American consumers using their home equity as an unending fountain of ready cash); for them the silver gets tarnished pretty quickly. What good is being able to buy a new home if you lose your job right after completing escrow?
The layoffs are the start of the serious downturn. This past year sales dropped from exhaustion, they had just been running so hard for so long that they needed to stop.
The stopping though, combined with other factors will feed the decline, something which had to happen, because as has been quite evident, prices have not yet corrected much.
Everyone of the economists and housing pundits always inserts the caveat, “as long as the economy remains strong.”
That’s ass-covering and that’s all. There is going to be a downturn because there is always a downturn. And rest assured, while every sector loves to wear the mantle of leader when things are on the way up, no one is ever at the heart of the problem on the way down (that’s usually expressed as success has many fathers, failure is an orphan).
While prudent decisions by the fed can mitigate the distance between the peaks and troughs, imprudent ones ultimately have the opposite effect. That is where we are at right now.
As the economy begins its trek down the hill, housing which got to ride in the front on the way up can’t just get off because the train is on it’s way down.
We’ve got a long way to go and the ride isn’t going to be smooth. Buckle up.