Political Crossfire Forums

[beachbum bob]

as housing goes so does the US economy....the latest warnings...on the "new ghost towns" where subdivisions are 80% unoccupied


http://www.frbsf.org/news/speeches/2006/1016.html

Fed's Yellen: Housing and new "ghost towns" of the West
From Federal Reserve Bank of San Francisco President Janet Yellen: Prospects for the U.S. Economy. This speech is basically a repeat of Dr. Yellen's Oct 9th speech. But I missed this paragraph:

According to some of our contacts elsewhere in this Federal Reserve District, data like these are actually "behind the curve," and they're willing to bet that things will get worse before they get better. For example, a major home builder has told me that the share of unsold homes has topped 80 percent in some of the new subdivisions around Phoenix and Las Vegas, which he labeled the new "ghost towns" of the West. Though the situation isn't that bad everywhere, a significant buildup of home inventory implies that permits and starts may continue to fall and the market may not recover for several years. While builders remain hesitant to cut prices so far, and instead offer sales incentives, price cuts at some point in the future seem almost inevitable

[ChuckBerry]

Well, these are new subdivisions that were likely planned when housing prices were still sky rocketing and people could not buy second (or third or fourth) homes fast enough. Now, capital is shifting away from residential properties to commercial properties, as the speech you linked suggests:

The factors working to support growth include ongoing strength in business demand, fueling relatively rapid growth in spending on business investment in equipment and software, including the important high-tech industries. Moreover, spending for the construction of nonresidential structures has advanced smartly so far this year, and promises to remain strong for a while longer. For example, outlays on drilling and mining structures have continued to increase in response to oil prices that are still high and expected to remain so. Furthermore, fundamentals in commercial real estate markets continued to improve this year, increasing demand for commercial space from office parks to warehouses. Going forward, even at a more moderate pace of economic expansion, private forecasters expect the positive trends in commercial real estate in both California and the nation to continue but to moderate next year as capacity comes online.

Capital is clearly shifting, and this will impact consumer spending. How much this augurs for a weaker economy remains to be seen, but it appears that fundamentals in the economy are still strong.

[Gus]

No opinion.