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Fed says foreclosures undermine Western recovery
October 22nd, 2009, 2:00 am · 36 Comments · posted by Jon Lansner
The Fed’s San Francisco unit notes foreclosure’s drag on the economy in the West in its 7th 2009 “Beige Book,” a Federal Reserve Board report on regional economic conditions that’s done eight times a year. We note no mention of foreclosures in the September Beige Book!
- The Fed’s latest take on Western real estate (Full report HERE!) …
Reports suggested that demand for housing continued to improve slowly, while demand for commercial real estate eroded further. The pace of home sales picked up further in parts of the District, accompanied by rising prices in some cases. However, the momentum for recovery has been undermined by ongoing increases in foreclosure rates, which have slowed the decline in the inventory of available homes. As a result, new home construction continued at a very slow pace throughout the District, and industry contacts noted little or no prospect for a significant pickup in the near term. Conditions continued to deteriorate in the commercial real estate market: demand for office and industrial space fell further, and financing for new development and purchases reportedly remained “frozen.”
- The Fed’s September view (Full report HERE!) …
Housing market activity in the District remained weak but showed continued signs of improvement, while demand for commercial real estate eroded further. The pace of home sales in many areas of the District, though still at relatively low levels, continued to edge up, spurred by price declines and low mortgage rates. However, contacts in some areas, including lower-cost areas such as Idaho and Utah, noted that steep rates on nonconforming “jumbo” loans and a scarcity of lenders willing to offer them have restricted sales of higher-priced homes. Moreover, new home construction remained at very low levels throughout the District. Conditions continued to deteriorate in the commercial real estate market, with vacancy rates for office and industrial space increasing in many parts of the District and rent concessions rising in frequency. Contacts reported that limited availability of financing continued to sharply curtail construction activity and investment transactions for commercial properties.
Previously in 2009 …
- July: “Conditions in District housing markets remained very weak but showed further signs of improvement, while demand for commercial real estate continued to erode. Sales prices for new and existing homes fell further in most parts of the District, and home construction activity remained at very low levels. Combined with low mortgage rates, however, price declines have propelled a sustained pickup in the pace of home sales in many areas.”
- June: “Remained very weak but showed some signs of improvement, while demand for commercial real estate slid lower. Elevated rates of home foreclosures, ongoing price declines, and low mortgage interest rates have combined to support a sustained pickup in the pace of home sales in many areas. However, the pace of home construction remained very slow.”
- April: “Remained very weak on net despite sustained sales gains in some areas, and demand for commercial real estate fell further from already low levels. Substantial ongoing declines in home prices spurred in part by high rates of foreclosures have combined with low mortgage rates to increase affordability and cause a significant pickup in the pace of home sales in some areas. However, the overall level of new and existing home sales remained very low in most areas, as did construction activity for new homes.”
- March: “Remained mired at very low levels, and considerable demand declines were reported for commercial real estate. The pace of home sales stayed very slow in most areas, despite some pickup in recent months as price declines have increased affordability, and construction of new homes was limited.”
- January: “Remained feeble during the survey period, and demand for commercial real estate fell further. Despite some pickup in recent months, the pace of home sales continued to be quite slow in most parts of the District; home prices continued to fall, with the pace of decline quickening in some areas.”
Big real estate woes:
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Waiting for the Next McMansion to Drop
October 22, 2009
http://online.wsj.com/article/SB10001424052748703816204574487240805281318.html?mod=WSJ_hpp_sections_realestate
Of course foreclosures are a drag on the economy… but it is all part of the necessary adjustment process. Further intervention and interference with the natural correction to the excesses will only delay the economic recovery.
http://www.beyondthemargin.net/search/label/Economics%20and%20Finance
An artifical market undermines the economy. Which is precicily what happened. Worthless stock, or false home values.
Exactly right. well said.
short and to the point.
was it ever not an artificial market? There is always some sort of gov involvement in everything.
Which is the primary problem
This is the primary problem. What causes the booms and busts is the inefficient capital allocation due to governemnt manipulation in the markets.
Burb expansion has been the driver for Calif’s economy for the last 30 years and its over built and bloated with expensive inventory. Calif’s and the West will experience decades of little or no growth without a economic replacement for the construction industry.
These statements deserve a solid “whuh”?
Chant with me now:
“What do we want?” - “patch the bubble”
“when do we want it?” - ” Now! “
It’s the Feds that are undermining the recovery
Well, that’s appropriate, in that the “Feds” created this mess with a quarter century of creeping deregulation.
Also, the “recovery” is over the horizon yet.
Construction has been a major driver of the California economy for years. We fail to diversify our economy.
We continually have artificial inflated balloon industries that boom/bust.
Until we diversify and stop the artificial inflated boom industries we will continue to boom/bust.
It’s called the business cycle.
Not sure I agree with that. Where’s the increase in the manufacturing sectors? All we have now are service, financial, healthcare and technology. Jobs from healthcare and tech are going overseas, insurance companies are actually allowing people to travel for expensive hospital stays to cheaper locations and we are outsourcing more technology everyday. With job growth the service sector is next to whither and we’ve seen what happend to financials. Lastly, our education system is a mess and getting worse. Add on top of all of this, the massive gov’t debt and there will be no cycle. Our economy is like a rubber ball that bounce in each boom less higher than the last time and the only boost it gets is a nudge from fraudulent schemes like derivative markets, dotcoms and housing bubbles. God help the USA.
I actually agree with Liar Loan. No matter how diversified a capitalistic (to some degree) society is, there will always be over-investment that will inevitably lead to a correction. However, the degree of diversity can determine the severity of the correction.
Since the U.S. has done little to replace the jobs lost to globalization, the correction should be expected to be quite severe. The government is only prolonging the agony.
Most of the construction jobs do not go to US citizens.
Most of those jobs are done by Ilegal guys being pick-up at the laguna Canyon spots
.
I didn’t know that !
our myopic politicians– who failed miserably to plan long term– are at
the root of the problems- we are a nation in decline– burdened by
an unsustainable debt that will drag on the economy like a gigantic
boat anchor for years–
How did they get there? :( We the people elected them.
Quite correct. We cast more votes on American Idol than we do in November.
It’s time to acknowledge all the wealth that has been sucked out by Wall Street. They got cash in pocket from their fees, bonuses and commissions selling useless products while everybody else got left holding debt and worthless paper. Even better, when their gambles failed, they got everybody else to bail them out and are making great money again doing more of the same while the rest of us suffer.
How about a bailout for the homeowners instead of asking the banks to help those in need?
How about a bailout for those who can afford their monthly payments but, the value of the property has decreased to where it would be better for them to walk away? So, a short-refi where the banks would be forced to write off the loss value of the loan.
yeah, YEAH !
How about more free stuff so I don’t have to get off this couch ! YEAH ! ! !
I want my Obama Bucks YEAH - bailout for mainstreet !
(oh, what were we talking about?)
Let’s legislate a “cash for losers” program, rewarding irresponsible behavior across the board !
For years those elected politicians make you believed we were all millonaires, And everyone were talking “Big” walking-toll” like what was happening was normal. With out even stop for a second to think (this is too good to be true)
Hey 30 years went by with the same music. So now here we are suffering the effects of that orgy of Champagne, and Pizza.
So now put the blames on Reagan’s Free-Enterprise/Globalization
To Clinton’s mastery of illussions, To the incompetence of the Bush’s family and their “Tax-Cuts” for corporations-gansters.
And finally blame those who voted them.
Yeah, but what about Jimmy Carter?
Just an observation:
As the Chinese government, being a communist country, is slowly letting go control of their business entities, the U.S. government is quickly taking control of our business entities (GM, bankings, healthcare, etc…). Huummmm.
The Chinese have no alternatives that become capitalist, they couldn’t efford to keep themselves Insolates for the rest of their lives.
And regarding your note about those corporations. They all had been abusing the system, and they destroyed the system.
And now as I type. They are trying to run the government (which they did it for 30 years) other wise why such strong lobbying (Legal-Bribes) this is not capitalism, this is plain and simple. Gansterism.
So hey If you are happy with your healthcare, and your Insurer. Keep it. But allow those who can not efford it to have the option.
The existing healthcare is for veterinarians. I say that because I did live in others Countries with goverment-run healthcare, and is much better than in usa.
Yes I know what most of you are thinking…Taxesss!!! of coarse we all we have to pay some more, and the rich should pay accordingly with their incomes.
But I do prefer pay my taxes to my government, before being reap-off by a bunch of corporations-gansters. and corrupted senators.
If the reversal roles keep going the way they are; 30 years from now, the Chinese Capitalist Govt. will have to figure out how to deal with a rogued U.S. communist country… Far fetched, but… Hey, it could happen. In 2004 - 2006, only crazy people would believe that housing would actually be reduced in value a few years later.
Well I believe that we had been living in a very “Sophisticated-Communist” Country for the last 30 years.
When the gaps between social level widens, and mid-class fading away. is quite alarming.
Just take a look where the wealth of the country is…The 1% keeps the wealth, and 95% is blending into poverty.
So if that is not a well orquestrated-Sophisticated-Corporate-Communism. Tell what it is.
You do know that words have definitions, right? From Wikipedia:
Communism is a socioeconomic structure and political ideology that promotes the establishment of an egalitarian, classless, stateless society based on common ownership and control of the means of production and property in general. We do not live in a communist country.
An oligarchy is a form of government in which power effectively rests with a small elite segment of society. Plutocracy is rule by the wealthy, or power provided by wealth. The combination of both plutocracy and oligarchy is called plutarchy.
It’s more accurate to say we live in a Plutarchy.
The web can be a learning tool. Use it
No, rational people who understand bubbles understood that values would be reduced in a few years.. It was the screaming mob and those who were profiting from the bubble who labeled them crazy, but mobs are almost always stupid and listening to those who have a vested interest can get expensive.
Agreed. And it’s the current taxpayer-funded froth preservation that’s particularly aggravating. I’m lucky enough to have come of home-ownership age right when the bust should be providing me with plenty of opportunities. Instead, wall street welfare programs are instituted to artificially bolster the value of bank repossessions to keep those very zombie banks from having to mark them to market.
Zombies should die, and those who lost should eat their losses.
It’s fine, really. My down payment does nothing but grow.
The Greatful FED
FED HEADS!