|发表于: 星期五 三月 25, 2011 9:05 pm 发表主题: Housing is dead; it can’t hurt the economy
March 25, 2011, 12:01 a.m. EDT
Housing is dead; it can’t hurt the economy
Commentary: We’ve already lost everything we had to lose
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) – Housing is dead. There is no doubt about that. Housing is as dead as a door nail.
Someday, the housing market will live again. Carpenters, plumbers, painters and electricians will build houses again, which will be sold to young families who want to own a part of the American dream. However, that someday is still years away.
Some people will tell you that housing isn’t quite dead, that it’s a zombie that has the power to destroy the economy yet again. For example, here’s what economist Beth Ann Bovino of Standard & Poor’s says about the big drop in new-home sales in February: “If we see this extended into basically the spring season, then we’re going to see a real hit to the economy.” Read “Dismal home-sales data tell us nothing new.”
Don’t believe it.
Housing is just too small to do any real damage to the economy any more. How small is it?
New construction is at the lowest level since World War II.
Residential investment has fallen to a 2.2% of gross domestic product, compared with the long-run average of nearly 5%. The record low was reached in 1933 at 1.1%. Residential construction employment has fallen from 2.5% of all jobs to 1.6%. Housing has little direct impact on the economy.
True, another downturn in home building or sales would undoubtedly lead to more job losses among construction workers. It could lead to lower prices, which could mean more foreclosures and more losses in home-equity wealth.
As tragic as those outcomes would be to individuals, they wouldn’t push the economy into a recession, as they did in 2007. In terms of housing’s impact on the economy, we just don’t have that much left to lose. We’ve already lost $8.3 trillion in wealth.
Will world events heat U.S. inflation?
Recent events in Japan and the Middle East could lead to higher inflation in the U.S.
It was very painful, and it was very slow, but the market is adjusting to the shock of the bursting of the housing bubble. Supply is adjusting, so are prices.
New supply is about as low as it can go. The number of single-family homes under construction has fallen by 70% to 424,000, the lowest on record and about 600,000 less than the pre-bubble average. Economists at Goldman Sachs figure that in the long run, the country needs to build about 1 million to 1.2 million new housing units a year to meet the demand from the formation of new households and the loss of old housing that was demolished.
Household formation slowed sharply during the recession, but is now accelerating as hiring picks up. Economist Joe LaVorgna of Deutsche Bank figures job growth of 225,000 per month this year would bring household formation back to a normal trend.
The faster new households form, the faster the inventory of surplus housing can be worked down.
There are still plenty of older houses available, of course. The Census Bureau figures there are 6 million vacant units that owners would be happy to sell or rent, about 1.6 million more than the pre-bubble level. That’s the inventory that must be eliminated before new construction can really come back.
Most analysts expect it will take several more years before the excess supply is eliminated.
But what about falling prices? If homes are still overvalued, homeowners could lose more of their wealth, which would mean more foreclosures, more financial pain and weaker consumption spending.
Goldman Sachs predicts prices will fall another 5% this year on top of the 31% decline we’ve already experienced. Others think prices have much further to drop. Two economists who saw the housing bubble the clearest — Robert Shiller and Dean Baker — think prices will drop another 10% or more, implying the destruction of another $2 trillion in housing wealth and putting millions of families underwater in their mortgages. Read Dean Baker’s Housing Market Monitor.
No matter who’s right, further price declines would squeeze middle-class families hard.
But unfortunately, the financial health of middle-class families hardly matters any more. If this recession has proven anything, it’s that corporate profits don’t depend on spending by the poor or the working class. If the middle class mattered, we’d be doing something about the 20 million people who can’t find the job they need and something about the foreclosure epidemic.
Rex Nutting is Washington bureau chief of MarketWatch.