Monday, December 04, 2006

Housing Slowdown - Effects on Holiday Spending?

From the Palm Beach Post, some insight on the housing/consumer spending relationship:

'Ask Nancy Bagley about the relationship between the housing slowdown and her net worth, and the Delray Beach homeowner is emphatic.

"Absolutely, I feel less wealthy," says Bagley, who works as a business consultant.

It's a sentiment shared by many homeowners in Palm Beach County and the Treasure Coast as the once-sizzling real estate market cools.

The median price of a single-family home in Palm Beach County fell 12 percent from October 2005 to October 2006, the Florida Association of Realtors said last week, while national home prices dropped a record 3.5 percent for the year. An increasing number of home sellers are getting less than they paid for houses bought last year or earlier this year, according to Palm Beach County property records.'


And for the US...

'As the U.S. economy enters the crucial holiday spending season, retailers and economists are struggling to make sense of how the end of the historic housing boom will affect the annual buying binge.

The consensus: The housing slump won't help holiday spending, but Americans will continue to consume as they always do.

"We should see some effect, but not a big one," says Christopher Carroll, an economist at Johns Hopkins University.

Carroll is one of the few economists to put a number on how changes in home equity affect spending. In a recent study, Carroll and two other economists conclude that for each $1,000 of increase in a home's value, the owner will spend an extra $20 in the short term and $90 over several years.

And as home prices decline, consumers will cut spending by the same amounts. So big drops in housing wealth would "substantially" hurt consumer spending, Carroll says.'

And what about our big retaillers?

'A week into the holiday shopping season, the signals are mixed. Stores were slammed on Thanksgiving weekend, although 5 million fewer Americans braved long lines and crowded parking lots this year than last, according to the National Retail Federation.

Wal-Mart Stores Inc. spooked investors when it reported November sales were worse than expected, and Gap Inc. and Abercrombie & Fitch also reported sales declines for the month. But Target Corp., Costco Wholesale Corp. and Federated Department Stores Inc. all posted healthy sales gains for November.

Mixed signals aside, economists agree that retailers can expect another year of frenzied holiday shopping, although some warn that the housing slowdown will eat into consumers' ability to spend.'

Personally, I continue to wonder how the "concrete-feet" effect of screwed sellers and amateur spec-u-vestors is having on the shopping season. I know of several "For Sale" properties in my area that are owned by persons who really can't afford the carrying costs, and are barely getting by. As such, I will be keeping tabs on the final sales numbers for the 2006 holiday season, because it should be a very good barometer for the 2007 economy.

'But now that home values are slipping, is there a reverse wealth effect that threatens to silence cash registers? Tough to tell, says Bill Hampel, chief economist at the Credit Union National Association.

"We've asked consumers that numerous times, and we don't really get much," Hampel says. "I'm not a big believer that these fringe items (such as the wealth effect) have much of a role in holiday spending."

Yet Hampel says the housing slump means homeowners will have to start saving the old-fashioned way, rather than continuing to spend more than they earn.

"Our houses have been doing our saving for us for most of this decade, and that is ending," he says. "But most people's net worth is so far above what they expected it to be that they don't feel they have to start saving. It's sort of like easy come, easy go."'

Full Article

36 comments:

AnalysisGuy said...

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thebubblebuster.com
or
Daily Home Price Analysis

CRAZY G said...

The American consumer is a dead man walking....carrying a baggage of DEBT....
His resilence to carry more, and more, is just astounding to nearly everybody....
National figures show debt to income at something like 132%...

""""HIGHEST SINCE 1932""""

Can he keep on carrying more????

YAH!!! If you keep on dropping the interest rates, and lower the standards of debt!!!
The National Savings rate is -1.5%...meaning Joe Six-pack, is spending 1.5% more than he's earning.....Can he keep on doing that??? Yah!!! For awhile!!!!

How will this Christmas be???

Fair to mid-land!!!!

Joe is going to spend, because Wally-World is going to entice him with all the cool stuff!!!

The doldrums are going to set in after Christmas....
UNEMPLOYMENT IS GOING UP IN THE CONSTRUCTION INDUSTRY....
This will hit a home run, sometime in Q1'07....

GMIPoll said...

This holiday survey discovered the American consumer is spending strong overall, but the American consumer is being frugal.

CRAZY G said...

TRUE STORY;

Just got finished talking to the neighbor, while the moving truck is loading him up....
Seems he had put his house up for sale, 5 mos.ago, and he has "NOT HAD ONE SINGLE SHOWING".....
What's up you say????
He got a job out of state, with a major company, and they are buying his house, from him, so...he says he has purchased another house in Conn., and got a 5 5/8% mortgage....
I congradulated him on his marvelous feat, and wished him all the luck in the world......

????? Then again with a guy like that, he's already had all, the luck he ever needs ???

CRAZY G said...

Well!!! It's offical..

I got it from the Daytona Beach Area Assoc. Realtors [DBAAR] new website!!!!

'Residential listing' for Oct'06 were 6377 vs. 3129 last year....
Closed Sales were 284 for 10/'06 vs. 414 last yr....
Months supply were 22.4 mos for 10/'06 vs 7.5 last year....

On Balance you could say that sales have fallen off some [-32%], but listings/inventory has more than doubled [+104%]....
Bottom line, is months of supply has tripled!!!! [22.4 vs 7.5]

The new website looks just great!!!!
We can all thank our local realtor here for that?????
HUUHH!!! Did I just say that????

CRAZY G said...

The GMI poll is a crock!!!

They 'interviewed' 14/m people in 15 countries, mind you....

1000 in the U.S.

And asked them what they were going to do????
64% said they were buying discount vs 6% buying luxury.....

SSSOOO!!!! ""IF"" your buying discount, what does that mean....
CRAZY buys """ALL"" his discount stuff at Goodwill, and Salvation Army...
The best part of shopping in places like that, is the SMELL....
It's got that MUSKY odor, that get's may glands churning!!!!

SSOO!! If your looking to get more for less, shop Goodwill/Salvation Army

CRAZY G said...

THE HOUSING CARRY TRADE IS ""OVER""

What does this mean, you ask.....

It's really very simple arithmetic...

You could borrow money at less cost than the houses were appreciating.....
eg] You could get an ARM/Interest only loan for say 4%, while the house was appreciating at say 10%..

Nice spread differential....then you could double up on your investments, [eg] by buying several houses, and 'voila', your NOW a multi-millionarie....

The caveat, is that interest rates rose to the point, where it met price appreciaton, and SUDDENLY the game was "OVER"......
Yes!!! The music stopped, and somebody pulled out the last chair, and the 'flippers' were the ones left standing....

NOW!!! That's all that has to happen, is the rug, has to be pulled out from them, and we can all go home to our Florida Paradise Found!!!!

FL - Paradise Lost said...

I stopped by the Pinellas Park (extremely blue-collar and retired blue-collar town set between St. Pete/Clearwater) Wal-Mart yesterday. The place was so packed that I couldn't find a parking spot.

Drove a mile away to the new Target - no parking problem whatsoever. Once inside, there were only a couple registers open, yet the lines were short.

This (to me) is a clear indicator of the current economic situation on the lower end of the wage/retirement scale.

CRAZY G said...

Well!!! Somebody did the arithmetic, and came up with a figure that Wally-World, and Home Dumpo, TOGETHER, added up to nearly 5% of the US economy GDP...

The Ole' saying, "that if Wal-Mart ain't got it, YOU PROBABLY DON"T NEED IT"...is pretty much true...

BUT, even they are supposedly forecasting FLAT numbers...and Dumpo, is NOW looking scared about their numbers....

SO! If the US econmy can squeak thru, [which I think it will], we may have a glorius send-off to a craash in the new year!!!!

CRAZY G said...

John Hussman, from the Hussman Funds, has forecasted a 79% chance of a recession in 6 mos, and 92% chance in 12 mos...."BUT", he says "there's NO CERTAINTY".....

Well!! Crazy ain't crazy just yet!!! BUT, 92% seems ""ALMOST"" certain....

What are the odds your going to give me on a 92% chance, anyway????

sandi said...

I don't know what's going on with Wally-World - I've noticed that they are not carrying some things like they used to.

2 things that I went there to purchase that (according to the floor persons that I asked) they no longer carry:

- Window Alarms
- Candle-Making Kit

Is is liability (aka, "lawyer-disease"), or the desire to put higher-margin/better-selling items on their shelves (aka, "bean-counter-disease")? And does this relate to their falling numbers, because people can no longer "find it all" at Wal-Mart?

Note: As most people in Florida, I've been going to Wal-Mart for 20+ years, and this is the very first time I've encountered a situation where they've decided to discontinue carrying fairly common items .

Anonymous said...

"Home Dumpo"?!!!

hahahahahaha!

Thatz great!

CRAZY G said...

I've noted that the foreclosures are "UP", like in Colorado, etc, etc....

>>>""" BUT """<<<<

THAT STILL DOES NOT ANSWER THE ||||ULTIMATE QUESTION |||||

WHAT'S GOING TO HAPPEN TO ALL THE EMPTY HOUSES??????

Sure!!! The bank can take them back.....THEN WHAT????

It just may have been empty before, it was foreclosed on....
and it'll be empty after!!!!

PEOPLES BRAINS ARE EMPTY, IF THEY CAN'T SEE INTO THE ||| BLACK HOLE |||

Builders are sitting on +550,000 houses.... """EMPTY"""

And who knows how many condos, and spec. houses are empty....
Some estimates were for 30-40% of all houses built/sold in the last 2-3 yrs, were to 2nd homes, and speculators.....
I fear MOST of those are still empty....

And then we worry that Wally-world doesn't have a candle kit, for a buck 39???? YAH!!! right....

CRAZY G said...

>>> EMPTY HOUSES <<<
Commentary by Don Stott, a Colorado Businessman, on a Denver Post article:

From the November 26th Denver Post comes the enormous front page headline, which reads, "SHUTTERED HOMES, BLIGHTED BLOCKS." The story goes into an examination of two Denver neighborhoods which are certainly not inner city slums. (As a matter of fact, inner city Denver is undergoing a resurgence and restoration). These two neighborhoods are full of ranch style homes on tree lined streets, the dream of most Americans. The lawns are manicured, and well landscaped. The homes are all less than 20 years old. One in ten have been foreclosed upon, and for sale signs are everywhere. When some haven't sold, and the "owners" (who don't really own anything, but owed more than they were worth), burned them to collect insurance, which money went to the mortgage holder. Do arsoned homes collect insurance? I don't know, but these two neighborhoods are perfect illustrations of what went wrong. No money down, inflated appraisals, ARM mortgages and job losses, all have ruined these two neighborhoods, and the blight is spreading.

All over America, the real estate bubble is bursting, and there is no way to stop it till it reaches the bottom. When will that be? How many millions of ruined credit ratings will there be? How many foreclosures, arsons, ruined neighborhoods, fleeing homeowners, and bankruptcies will there be? I haven't the slightest idea, but real estate will undoubtedly return to four times its 1980 prices, just to make it even with the rest of the nation. That level will be a lot lower than it is now.
===================================

Just one man's opinion of what is happening!!!!

CRAZY G said...

Citizens Insurance Debacle:

So, last year legislators passed a law increasing the capital requirements of Citizens, to 'insure' they would have enough money, to pay all the claims, to the manyed new policy holders......"""RIGHT""....

So NOW, the legislators don't want Citizens to increase the premiums, that are necessary to fulfill, the previous requirements....

The deficts of more than $2 BILLION, are being paid for by a surcharge levy, to all homeowner policies....

SSOOO!! Crazy's question is????

"IF", they're still in debt now, where are they going to get the money from to pay for the 'next' hurricane that brewing in the Atlantic now for 2007-8-9-10, etc....

CRAZY G said...

CONVENTIONAL WISDOM ISN'T SMART!!!!

Conventional wisdom, has it that 'build it', and they will come.....

Ask any realtor, and they will tell you the same thing....real estate is going up, because it always has......
Build a house and some one will buy it....

It begs the question, of who is going to buy it with what money???

And the next question is....what 'if' some one doesn't doesn't buy it with money they don't have, cuz they spent it somewhere else....

Those concrete edifices, in 1000 years maybe archaeological digs, to some paleontologist

Anonymous said...

Real estate is full of MYTHS.

Looking forward to watching the bunch of them beg for a job.the greed was excessive.

CRAZY G said...

“The U.S. consumers will, as always, overspend during the month of December keeping growth and confidence up. But when the bills start rolling in during the first quarter of 2007, these same consumers will have to tighten up; a slowdown is inevitable.”
by Chris Gaffney
===================================

Q1'07 & Q2'07...Will be the demarcation in economic history!!!!
P.S. No my name is not Chris Gaffney

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