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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (52574)	2/4/2006 1:00:06 AM
From: shades	Respond to of 110194

Dallas News: Danielle DiMartino: Housing's slide will have ripple effect 07:48 AM CST on Thursday, February 2, 2006 After last week's existing-home sales report, National Association of Realtors chief economist David Lereah declared that the speculators were 'pulling out.' The question for the broader economy is: Will the flight crew be limited to the speculators? Last spring, Asha Bangalore, an economist with Northern Trust Co., startled the investment community by attaching a number to the housing boom's impact on the U.S. job market. The number has been widely quoted: From November 2001 to April 2005, housing contributed 43 percent of new jobs created. As it turns out, last spring marked the heyday in housing. In the final three months of last year, sales of existing homes declined at a 17 percent annual rate, the biggest slide since the second quarter of 1994. And housing starts and permits entered 2006 on a much weaker note than expected. With housing slowing, job creation will follow, unless another industry takes up the slack. Recent months' data on payrolls confirm job creation has faltered. Payroll growth averaged 114,000 in the last four months of 2005, down from a 197,000 pace in the 18 months prior. Numbers check These first signs of a slowdown mesh with Ms. Bangalore's most recent figures. By October of last year, the percentage of jobs created that were tied to housing had slipped to 36 percent. As for evidence of housing's impact on specific sectors of the job market, in December, construction hiring fell 9,000, the first contraction in nearly two years. The construction industry created nearly 250,000 jobs last year, 11.4 percent of the total. Two-thirds were tied to residential housing. 'I think what we're seeing is the beginning of the impact of cool-down in the housing market,' Ms. Bangalore said. And construction is just one sector of the housing market. In its recent long-term economic outlook, the Mortgage Bankers Association forecast total residential mortgage production would fall 20 percent in 2006. A major contributor: refinancing activity, which is forecast for a 40 percent slump this year. Of course, these declines will come off housing's hottest year on record. Residential debt, in its various forms, now constitutes more than 60 percent of the loans on banks' books, a record. This tsunami of underwriting has employed masses of people who will be hurt, as will those toiling in the real estate, home improvement and related industries. Other sectors But what about sectors not directly associated with housing? Ms. Bangalore noted that it wasn't happenstance that housing's weakest quarter in more than a decade coincided with a near 40 percent annualized decline in auto sales. 'This does not speak well of the status of the U.S. economy. The ripple effects of the slowdown in housing will be significant.'