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Why Housing Is The Economy's Last Best Hope

Tyler Durden's picture





 

The housing market 'recovery' has provided substantial support to the U.S. economic growth. The housing-related activities, which Guggenheim's Scott Minerd defines as private residential investment, personal expenditures on household durable goods, and utilities, as well as consumption wealth effect from home price appreciation, have positively contributed to real GDP growth for five consecutive quarters. In the first quarter of 2013, housing-related activities contributed more than half of the growth in the real GDP. That seems a significant burden to be carrying for a sector now seeing data disappointing already expectations, mortgage applications plunging, furniture sales plunging, and REIT IPOs being pulled.

 

 


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Wed, 06/19/2013 - 08:45 | Link to Comment francis_sawyer
francis_sawyer's picture

If the title of the article is correct, I'm going long real estate rental specs under interstate overpasses...

Wed, 06/19/2013 - 09:00 | Link to Comment Buckaroo Banzai
Buckaroo Banzai's picture

What a fucking retarded economy we have.

Wed, 06/19/2013 - 09:32 | Link to Comment NotApplicable
NotApplicable's picture

Twenty-First Century Beanie Babies.

Wed, 06/19/2013 - 09:38 | Link to Comment negative rates
negative rates's picture

And the fed is the most retarded of them all.

Wed, 06/19/2013 - 10:01 | Link to Comment game theory
game theory's picture

I don't like the word "economy" since it implies "free market" to most people.  The US has adopted China's central planning model. The gov't apparently can pay it's employees whatever it wants forever regardless of debt levels thanks to the Fed. The banks and bankers know money will flow through their hands no matter what the economy does...so their pay goes up as well.   And the rest of us get Krugman telling everyone the gov't should spend even *more* (to further inflate the housing bubble in DC and Virginia?). This isn't an economy. This is a farce. If you don't work for the gov't, banks, or facebook, inflation is likely going to turn you into a "domestic terrorist". Good times.

Wed, 06/19/2013 - 10:42 | Link to Comment Ying-Yang
Ying-Yang's picture

Looks seasonal to me..... and headed for the crapper when interest rates rise more.

Wed, 06/19/2013 - 09:02 | Link to Comment TruthInSunshine
TruthInSunshine's picture

FFS!!!!!!

This is probably the 100th article I've read by "guest authors" (Haver Analystics, in this particular case) here and elsewhere where housing is presented as the egg in the chicken-and-egg dynamic, and whereby housing is presented as a core industry that is part and parcel of a self-sustaining economy.

Let me repeat, for the umpteenth time, that HOUSING IS NO SUCH THING, bitchez, and anyone who claims otherwise has their head up their ass.

Housing is an industry that gets its legs from and is an offshoot and derivative industry of the creation of real, permament jobs that are created by far less cyclical businesses and industries.

The housing industry inherently depends on secure jobs generated elsewhere in the economy in order to provide a willing and able supply of buyers of its wares. The housing industry IS NOT AND NEVER WILL BE THE EGG THAT HATCHES A SUSTAINABLE ECONOMIC RECOVERY, but will always be a tag-a-long beneficiary of those industries that do create real and sustainable jobs.

TO WHOMEVER KEEPS SPEWING FORTH THIS QUITE FLAWED BULLSHIT REGARDING THE PROPER ROLE AND PLACE OF HOUSING IN THE FOOD CHAIN OF MODERN ECONOMIES, PLEASE STOP...JUST STOP.

Wed, 06/19/2013 - 09:02 | Link to Comment Bobbyrib
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"The housing industry inherently depends on secure jobs generated elsewhere in the economy in order to provide a willing and able supply of buyers of its wares.."

 

Either that or the Fed could allow housing prices to bottom.

Wed, 06/19/2013 - 09:06 | Link to Comment fonzannoon
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The yahoo financialization with a side of international man of mystery bs has seeped in. It's undeniable.

Wed, 06/19/2013 - 09:40 | Link to Comment negative rates
negative rates's picture

I wouldn't listen to one of those backwoods country yahoo's if you paid me in gold.

Wed, 06/19/2013 - 09:28 | Link to Comment NotApplicable
NotApplicable's picture

Sustainable demand??? What's that got to do with an economy?

Wed, 06/19/2013 - 09:55 | Link to Comment duo
duo's picture

Couldn't have said it better.  Unless you have a sweatshop making tennis shoes in the basement, a house is not a productive asset and shouldn't be bought using debt.  Housing is a sink of capital, energy, water, trees, and other irreplacable things.

Wed, 06/19/2013 - 10:29 | Link to Comment Oldwood
Oldwood's picture

Housing like much of the rest of the economy that is touted as "growing" is a derivative of the credit industry. If people could not borrow to buy houses, cars and probably phones, they wouldn't be selling any, therfor demand only exists based on credit. Credit that is funded by "created" funds. An organic economy is one that is sustainable. This economy is anything BUT organic. It is fueled by industrial fertilizers, grow lights and artificial climate control that costs more than it produces, while also destroying the soil for any future growth. I see an economic "dust bowl" coming.

Wed, 06/19/2013 - 14:13 | Link to Comment Clark Bent
Clark Bent's picture

Now there is the effective use of metaphor. Impressive Sir, impressive. 

Wed, 06/19/2013 - 10:35 | Link to Comment PT
PT's picture

TIS re "FFS ..."

+1000

Every time I see any suggestion of "housing" and "recovery",  I feel sick and I want to puke.  My take:

After all these years of "technological progress", why is housing such a huge ball and chain on the populace?  Take a step back and look at a picture bigger than "the economy".  When people only work one day per week for food, housing, clothing etc I'll believe the economy is "recovering".  "Oh we can't have that" they sez, "If you want a house then you have to work your guts out for the rest of your life, and then stay in debt and pay some more."  Why?  We build machines that let one man do the work of a hundred!  What did all that technology do for us?  Where did all the productivity gains go? 

When 80% of the economy is made up of people indulging in their hobbies, be it playing music, carving statues, drag racing, flying, painting, building crap in their back yard, electronics, exploring, looking for medical cures for fun, that is when I will believe we have "progress".  An economy built on houses might be an "economy", but it is also a "nightmare of the living dead", because if all you do is work for the sake of a fucking house, and if you don't create, explore or discover, then you are not living, you are fucking DEAD!

How many homeless in the US today?  How many empty homes in the US?  How many foreclosures and "should be foreclosed but aren't"?  How fucking strange.  You guys could afford to build all them fancy houses but no-one could afford to buy them.  How fucking strange.  Perhaps we really do need to have a good, hard, fucking look at the way we analyze the world around us because I don't remember learning how we could afford to build stuff that no-one could afford to buy but it will sort itself out if we build more of the same stuff!  We'll all be rich if we take on a bucket load of debt and buy ten houses and rent 9 out and don't do anything but build and buy houses!  Fucking bullshit!  We'll all be rich if we build the technology that allows us more time with which to create, explore and discover.  An economy based on housing, even if it could be somehow "sustainable", is just a slave camp.  The only economy worth knowing is one with minimal overheads and is mostly based on people's hobbies.

Wed, 06/19/2013 - 08:45 | Link to Comment Tsar Pointless
Tsar Pointless's picture

A new low for ZH.

Seriously - do the people who run this site get paid by the post? Otherwise, I can't think of a single good reason for this one to exist.

Wed, 06/19/2013 - 08:50 | Link to Comment fonzannoon
fonzannoon's picture

This one stands out to you? Why this one?

Wed, 06/19/2013 - 08:54 | Link to Comment Tsar Pointless
Tsar Pointless's picture

It just does. Anytime I see the words "housing" and "recovery" in the same sentence, I get just as irked as when I see the words "jobless" and "recovery" in the same sentence.

Wed, 06/19/2013 - 08:51 | Link to Comment Schmuck Raker
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In ZH's defense, the word recovery was finger-quoted.

Wed, 06/19/2013 - 09:26 | Link to Comment Yes_Questions
Yes_Questions's picture

 

 

Its compare and contrast for me.  ZH reminds us of Mainstream thinking and why on a long enough timeline...

 

C'mon now.  If every post guest or otherwise here preached to us choir, then it would just be FOX NEWS.

Wed, 06/19/2013 - 12:40 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Charles Hugh Smith gets this whole dymanic backwards constantly, also, as do many of the fuckwads on the likes of cnBSc, BloombergTerminalMediaNewYorkCityFinancialScapeIsCenterOfUniverseVision and FauxBizNews.

Textbook Example of the ORDER of the Dynamic:

Honda has a large assembly facility in Marysville, Ohio. It is surrounded by a large ring of suppliers who design and/or fabricate the components used in the assembly of motor vehicles produced in Marysville. The persons employed at the Honda assembly plant in Marysville and the suppliers surrounding it spend money on things like food, clothing, furniture, swimming pools, electronics, and yes, housing.

Hence, housing was and is constructed, as well as renovated, to match the demand of those persons employed in Marysville and the surrounding businesses that flow from the operation of the Marysville assembly plant operated by Honda.

Without the existence of the Honda Marysville facility, and the permanent businesses - with actual J-O-B-S - it created in a wide swatch of geography around it, that housing would not have been required to have been built.

The Honda facility, and the suppliers, restaurants, stores, etc. it spawned, was the egg, not the housing.

These asswipes on the Main&QuiteLameStream Financial Media Channels who expressly or implicitly state the converse have their heads implanted firmly up their assholes.

Wed, 06/19/2013 - 13:04 | Link to Comment PT
PT's picture

TIS re Honda:
+1000 000

Very well said.  Not that we need another example, but anyway: Example #2:
Did Detroit fall over due to a lack of car manufacturing or due to a lack of house manufacturing?

 

Wed, 06/19/2013 - 09:42 | Link to Comment negative rates
negative rates's picture

Oh so your long benny bucks real estate.

Wed, 06/19/2013 - 08:48 | Link to Comment BeetleBailey
BeetleBailey's picture

Housing.....HA!

 

Please....Housing is THE Great Googly Moogly of this whole shambled affair.....recovery....asinine....even with quotations

Wed, 06/19/2013 - 09:08 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

At this rate we're gonna have to sell our houses to afford health insurance.

We don't have to own houses, but we do have to have health insurance.....it's the law.

Wed, 06/19/2013 - 09:29 | Link to Comment Yes_Questions
Yes_Questions's picture

 

 

The Beast hasn't diverted enough of our wealth yet.

 

 

Duh.

 

 

Wed, 06/19/2013 - 09:43 | Link to Comment negative rates
negative rates's picture

With proper education, you don't even need health insurance. Need more proof that utopia is not here yet, and what it will take to reverse course?

Wed, 06/19/2013 - 08:51 | Link to Comment loonyleft
loonyleft's picture

'real' GDP 'growth' - too funny. 

Wed, 06/19/2013 - 08:52 | Link to Comment Midasking
Midasking's picture

If housing is what we are going to hang our hat on... May God Help Us All...http://tinyurl.com/mem7o7x

Wed, 06/19/2013 - 08:54 | Link to Comment giggler123
giggler123's picture

My mate feels this is very true and that housing is recovering so much he's buying bricks of silver.  That's to make a house you know.

Wed, 06/19/2013 - 08:55 | Link to Comment saveUSsavers
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Anything this twitchy-faced arsewhole says is worth used toilet paper, imho, part of the Perpetual Shill Parade.

Wed, 06/19/2013 - 08:59 | Link to Comment bullmarket
bullmarket's picture

5 consecutive quarters - 1st "positive" recognition and everyone jumps all over it. 

I guess it's all been almost 5 consecutive years of stock market growth with no recognition.

Go Gold. I hope it tastes good.

 

Wed, 06/19/2013 - 09:03 | Link to Comment Monedas
Monedas's picture

There is a boom in plush detention centers for illegal aliens .... salad bar, clean sheets and hot showers .... while you await your hearings !  It is now possible to go from illegal immigrant .... to fully benefited parasite .... without ever doing a days work .... what a deal !

Wed, 06/19/2013 - 09:00 | Link to Comment NoWayJose
NoWayJose's picture

Housing is the economy's last best hope... I agree, IF the Fed would have let home prices fall to a level where new home buyers could actually afford them. Instead, the Fed tried to support prices (for the banks benefit), and have kept rates low to try unsuccessfully to stimulate sales. Housing WILL be the economy's last best hope -- but only AFTER the Fed bubble pops and home and land prices fall back to economic reality. It would have been messy to let this happen in 2009, but instead we will now have to endure a global depression before we see any recovery.

Wed, 06/19/2013 - 10:33 | Link to Comment Oldwood
Oldwood's picture

If we could "afford" them there would be no need to borrow so much money. Thats just crazy talk. Its not about houses or jobs or even the economy. Its about credit. Its about debt. That is the grease that keeps this man eating machine turning.

Wed, 06/19/2013 - 09:02 | Link to Comment Dr. No
Dr. No's picture

Hope for what?  Hope that all the debt incurred by bureaucrats will be paid to the wall street mad men?  Actually, I hope for the opposite.

Wed, 06/19/2013 - 09:03 | Link to Comment the not so migh...
the not so mighty maximiza's picture

yeah stealth inventory is a sign of a healthy sector.

Wed, 06/19/2013 - 09:07 | Link to Comment Bastiat
Bastiat's picture

Then it's hopeless.

Wed, 06/19/2013 - 09:21 | Link to Comment Seasmoke
Seasmoke's picture

The people already own their houses. The note has been paid. The mortgage is void. They just do not know it........ YET !

Wed, 06/19/2013 - 09:29 | Link to Comment ejmoosa
ejmoosa's picture

Housing is not the end all for the US economy.

 

Production of goods and services people desire are.  Remove the shackles that keep American busineses restrained, and the rest would take care of themselves.

 

Continue the relentless assault of rules and regulations and there is no last, best hope for the US economy.

Wed, 06/19/2013 - 09:45 | Link to Comment apberusdisvet
apberusdisvet's picture

If the median household income is $49k, then the median new home should be no more than $122k, using the quite appropriate 2.5X income rule that sustained US GDP for over 40 years.  All other things being equal, that would be enough to start a recovery.  But WAIT!!!!  Obamacare will take a significant portion of discretionary income (for those who are productive), in many cases in an amount that would exceed an annual mortgage payment.  And the amount of student debt in the 25-40 age bracket precludes too many from even qualifying for a mortgage loan.

The universe of qualified home buyers is actually very small.

Wed, 06/19/2013 - 09:56 | Link to Comment slimething
slimething's picture

As December 31, 2013 approaches, the reality of Obamacare will begin to take effect on businesses and individuals. After 30 years of working with good company provided healthcare coverage with minimal out of pocket employee expense, I suspect that will all change.

My cousin lives in Ohio and says his rates are going way up. He already pays $400/mo.

I think the economy is going to tank by years end based on Obamacare alone.

Wed, 06/19/2013 - 09:46 | Link to Comment slimething
slimething's picture

The idea was for consumer confidence to increase as their home values go up, thereby instilling the urge to go out and spend more money, go into more debt etc. so the economy can "grow" since 70% of the economy relies on consumer spending. 

 

At least that's what I get out of it.

Wed, 06/19/2013 - 09:53 | Link to Comment adr
adr's picture

The last housing bubble destroyed the US economy forever. Had home prices been allowed to bottom, we could have recovered. Yes the mega publicly traded builders probably would have gone bankrupt, sure we would have lost a few megabanks. Is that really a bad thing?

In many areas the average home price went from the low $120s in 2000 to the mid $250s by 2006. Sure it was great for people who bought in 2000 or before, but it lead to the house as an ATM mindset that destabilized the whole thing.

You can't afford a $250k house on $60k in household income. Not with the food, energy, and health care costs of today. So where does that leave housing for the 200 million people in this country that exist on less that $30k a year?

I've seen the future America in some cities now. There will be the gated community of 5000sq ft homes for the wealthy and the formerly middle class homes you can't even sell for $50k because there isn't anybody willing to buy.

Wed, 06/19/2013 - 09:54 | Link to Comment thunderchief
thunderchief's picture

Many moons ago, when houses were not so complicated, a young brave ran into his fathers tent full of such confusion. Prices were rising and times were changing. He did not have a job either.
He say: "Father, tell me about my warrior brother who has won so many battles and now lives with the spirits?"
Chief say: "When he entered this world a great bear ran past this very tent. Running Bear"
And older sister?
"When she came to us, a geat Eagle perched itself on top of this very tent. Sceaming Eagle. They were proud times."
The young brave seemed confused, and his great father, weary of the times and fearful of his sons stupidity, shook his head and said.
"And why, Two Dogs Fucking, do you ask such things?

Wed, 06/19/2013 - 10:02 | Link to Comment combatsnoopy
combatsnoopy's picture

So when is china going to remove it's ban against hte US financial sector?

Wed, 06/19/2013 - 13:35 | Link to Comment GMadScientist
GMadScientist's picture

Just after they receive a bill of sale.

Wed, 06/19/2013 - 10:18 | Link to Comment 10mm
10mm's picture

Over priced roofs.

Wed, 06/19/2013 - 11:45 | Link to Comment involuntarilybirthed
involuntarilybirthed's picture

35% of all houses in the US are "tear downs".  They are water/sewer/elec/foundation/structure/insulation/window nightmares for the buyers.  Some of these sells should be illegal (whatever that means these days).  And that will bite us soon, separate from other housing economic problems.

Wed, 06/19/2013 - 13:34 | Link to Comment GMadScientist
GMadScientist's picture

When your neighbor's tree pops a sewer main, it's everyone's problem.

Wed, 06/19/2013 - 12:04 | Link to Comment orangegeek
orangegeek's picture

2 hours to go for the FOMC statement - 1 hour, 45 minutes for GS and JPM.

 

Housing?  Well the Philly Housing Index - a measure of housing vendors has topped and turned.

 

http://bullandbearmash.com/chart/weekly-philly-housing-index-recovering-...

 

 

Wed, 06/19/2013 - 13:37 | Link to Comment GMadScientist
GMadScientist's picture

There's a term for Bernanke's actions vis a vis the "wealth effect"...what is it?

Oh, yes, 'FLUFFER'.

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