From the Philadelphia Inquirer:
The housing bubble has popped, but most need not worry
Local boosters can call it a lull, or a pause, or anything else that sounds soothing. The fact remains that the Great Housing Boom of the early 21st century is over.
Yesterday’s release of construction data by the Commerce Department just confirmed what major national home builders such as Toll Bros. have been saying for weeks.
Housing starts fell to the lowest level in three years. The number of new homes surprised even pessimistic analysts by falling 6 percent from July to August alone. Building permits fell for the seventh straight month, to a four-year low.
This isn’t simply a local phenomenon, and it’s not confined to a few formerly “hot” markets on the coasts. The biggest drop last month took place in the Midwest, where housing starts fell a full 12.2 percent. Who knew there was a bubble in Toledo?
“The recession in housing activity is a nationwide development and will significantly depress growth,” Richard Berner of Morgan Stanley wrote in a recent report.
He expects employment to shrink in construction, mortgage lending and real estate sales, subtracting roughly 10,000 jobs per month and perhaps $10 billion a year in wages and salaries from overall U.S. growth.
There are lots of other ways the housing bust (or lull, if you prefer) can affect the larger economy. Besides the lost construction, sales and financing jobs, sales of appliances and furniture could slow as fewer people change residences.
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How big a deal is this? It’s huge, of course, if it’s your family facing higher mortgage payments or the chance of foreclosure.But keep it in context: With 300 million people and annual output worth $13 trillion, the United States can absorb a lot of housing-related pain and keep on sailing.
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