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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Beachside Bill who wrote (58804)8/1/2006 9:24:55 PM
From: CalculatedRiskRead Replies (2) of 306849
 
Speculation in housing peaked late last summer - not two years ago. The impact from the housing slowdown is just starting to be felt in the general economy - there are lags in the system - as an example:

1) New Homes Sales peaked in July through Oct 2005.

2) Residential construction spending peaked in March 2006.

3) Construction employment hasn't start to fall yet (history shows employment starts falling about a year after housing peaks) - so sometime in the 2nd half of '06 construction employment should start to fall.

4) Median nominal prices will probably start to fall nationwide late this year or early in 2007. From the following article:

Jan Hatzius, economist at Goldman Sachs, said: “The risk is rising that nominal US home prices may be headed for an outright decline in 2007. It would be the first decline in national home prices ever recorded, at least in nominal terms.”
thebusinessonline.com

NOTE: I chatted with Dr. Hatzius and reviewed some of his numbers - I think he is correct.

5) Although consumer spending appears to already be slowing (see PI report today), households are still extracting significant equity from their homes to maintain their lifestyles. When house prices start to fall (they are already falling in certain areas), the negative wealth effect will impact consumer spending.

Be patient. It's a slow motion train wreck.
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