“So maybe we’ve got another few years to party.”

From the Philly Inquirer:

Head-spinning data shift for investors, policymakers

Freeze, thaw. Freeze, thaw. This daily back-and-forth is becoming quite a headache.

And the weather’s not so great, either.

It’s hard to recall a time when the economic outlook shifted this often. Just when it looks as if we’re in for faster growth, some new statistic points toward a slowdown, or maybe even a recession on the horizon.

It’s a quandary, particularly for investors and economic policymakers, who have to make bets on where things are headed.

That’s a much easier task when you’re near the top or bottom of a cycle. In 2003, say, it was pretty clear that interest rates had nowhere to go but up.

By the same token, you could be reasonably certain back in 1999 that the soaring stock market was in for what Wall Street calls a “correction.”

But now? The last recession ended in November 2001, which means the U.S. economy has been in a period of expansion for more than five years – 63 months to be precise.

To put that in context, since World War II, the average length of a U.S. economic expansion – the time between recessions – has been 57 months.

You might conclude that we’re six months overdue for a recession – except that the last expansion lasted a full 10 years, from 1991 to 2001. And the one before that went 92 months, from 1982 to 1990.

So maybe we’ve got another few years to party.

The truth is, there’s no textbook answer to how long an economic expansion should last. So a lot of eyes are focused right now on any sign that might point clearly in one direction or another.

Will that be the case this time? Unknown. But it’s a fair bet that whatever happens will depend very largely on housing.

The residential real estate boom – or bubble, if you prefer – peaked in 2005. Sales of new homes have fallen more than 25 percent since then, and existing-home resales are down about 15 percent.

Prices are more difficult to track than sales, but they seem to have fallen as well – by about 3 percent nationwide, and substantially more in some formerly overheated markets.

But housing doesn’t have to crash, the way stocks do, to have a broad and deep impact on the wider economy.

A sustained fall in new-home sales can mean sharp losses for builders; witness Toll Bros.’ announcement yesterday that its profit fell 67 percent in the company’s first quarter.

But that’s only the beginning. New-home sales affect sales of construction material, appliances and furnishings – and sure enough, makers of all those things are feeling pinched.

As those ripples spread, the entire economy is expected to grow more slowly in 2007 than it did in 2006.

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3 Responses to “So maybe we’ve got another few years to party.”

  1. Will The Housing Bubble Burst in 2007?
    Thursday, Feb. 22, 2007 By BILL TANCER

    Since early 2000, economists have been sounding the housing bubble alarm with increasing urgency. And while many markets around the country have seen prices drop in the last year, the dire, across-the-board correction that many predicted has yet to materialize.

    There are several factors that could cause a real estate bubble to burst, but the most important factor, one that is sometimes overlooked, is buyer and seller sentiment-how we feel about what’s likely to be the biggest windfall, or biggest purchase, of our lives.

    Our real estate search and browsing patterns provide a window into the minds of buyers and sellers and offer more than a glimpse of their feelings about the current market. Take for example the simple search for “housing bubble.” As bad news continues to build around the housing market, you would expect that “housing bubble” searches would be nearing a crescendo. Actually, the opposite is true.

    As of the week ending February 17th 2007, searches for “housing bubble” have reached a two year low, only 4.4% of the searches on the same subject that occurred during the second week of June 2005. A media frenzy around a pending correction occurred that very same week, which demonstrates just how suggestible we are, as well as how short our attention spans can be.

    But while the bubble seems not to be a major concern, there is a growing game of chicken between buyers and sellers. In the past, searches for “homes for sale” have outnumbered “homes for rent” by nearly 3 to 1. As of last week that margin was cut nearly in half as online domicile searchers indicated their willingness to at least explore renting pending a drop in home prices.

    On the supply side, bad real estate news is met with increased visits to websites that calculate home values based on comparable sales, such as http://www.housevalues.com and http://www.zillow.com. During bad news days, sellers apparently feel the need for a comforting pat on the shoulder, checking-in on home sales in their neighborhood to estimate the current value of what’s likely their biggest investment. What’s notably absent though is increased search activity around sellers listing their properties or lowering their asking price, signaling that sellers, like buyers, are willing to wait-out the current unsettled market.

    Despite the impasse that the data is painting, in the depths of the search tables for this last week are a few terms to keep an eye on, such as “sell my house fast,” and “how to stop a foreclosure.” If those reach significant volume, signaling an urgency to sell, the housing bubble alarm might finally ring true.

  2. bergenbubbleburst says:

    And that is already happening, Seeing lots of Stop Foreclosure now signs on telephone poles and strret lamps.

  3. anon says:

    I just talked to my brother who is a cop in Monmouth county and he said the same. signs are everywhere and btw illegal. I wonder if these are individuals or big co. w/ a lot of backing$$

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