<b>Working on the housing boom</b>
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Working on the housing boom
The sector is cooling, finally. Now, a debate is raging over whether the employment market will prevent a implosion.
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NEW YORK (CNNMoney.com) - Those looking to glimpse the future of the housing market may want to start watching help-wanted ads rather than the real estate section.
Experts who say the housing market is cooling, but won't implode, argue that solid job growth should be enough to prevent a collapse in home prices. But others who see a housing "bubble" ready to pop say a developing slowdown in home building itself could hurt job growth enough to put a big dent in housing.
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"We've been building too many homes in a market maintained by speculation. And job growth is not going sustain that."
Recent government figures show that about 1.5 million homes were vacant in the first quarter, most of those presumably up for sale, a 17 percent increase from a year earlier. The 2.1 percent vacancy rate was the highest on record since the government began tracking it in 1994. It was also the fourth straight quarterly increase.
"When you see it increasing quarter after quarter, there seems to be something going on here," Baker said. "We're building more homes than are being filled."
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Nearly three out of four builders reported more homes on the market in their areas and about one in five reported a jump in new home orders being cancelled. About three-quarters also reported a drop in purchases by people buying homes as investments.
There's more. Late Monday, Hovnanian Enterprises (Research), a builder with big operations in California and Florida, cut its guidance and St. Joe's (Research), a smaller builder, reported surprisingly weak results Tuesday as the firms struggle with a faster-than-expected drop in the housing market. The stocks of both companies tumbled Tuesday.
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"Our experience says prices do not go down when there's job creation in the local economy," said Yun. "In local markets where they are flat on jobs, they could see prices decline. But we're projecting 2.3 million new jobs this year. The job market is providing a buffer. It's a counter force to rising rates."
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But the experts who see a possible meltdown say strong employment isn't enough to support an overinflated housing market.
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"You have to look at how much more inventory has been put on the market and what impact that could have on pricing," said John Tomlinson, analyst with Majestic Research, an independent research firm. "To get sales going, people are going to have start pulling in their expectations."
Tomlinson sees new home prices flat or edging lower this year with existing home prices flat to slightly higher "at best." He points to reports showing big increases in the number of homes on the market.
Past housing downturns have seen builders slash their work forces by up to 40 percent, said Baker, the housing market bear, and with an estimated 3.5 million people working in residential construction, the loss of more than 1 million jobs would obviously cause problems for the labor market.
Add job losses at mortgage firms, building supply retailers and real estate agencies and the downturn in home building could itself further weaken one of the key supports for real estate.
One of those worried about just that is James McShirley, owner of Sulphur Lumber near Indianapolis. He's already laying off staff and not filling open positions due to a slowdown in orders from his builder clients.
"We're holding off as much as we can because qualified people are hard to find," he said. "But there will come a point where we have to face that (more layoffs) and it could be soon."
McShirley said when he sees his clients cutting staff, and a local mortgage broker with 100 employees go out of business, he grows more worried.
"Those people losing their jobs are the classic home owners. This could be a vicious circle," he said.
http://money.cnn.com/2006/05/02/news/economy/housing_jobs/index.htm
The sector is cooling, finally. Now, a debate is raging over whether the employment market will prevent a implosion.
.....
NEW YORK (CNNMoney.com) - Those looking to glimpse the future of the housing market may want to start watching help-wanted ads rather than the real estate section.
Experts who say the housing market is cooling, but won't implode, argue that solid job growth should be enough to prevent a collapse in home prices. But others who see a housing "bubble" ready to pop say a developing slowdown in home building itself could hurt job growth enough to put a big dent in housing.
.....
"We've been building too many homes in a market maintained by speculation. And job growth is not going sustain that."
Recent government figures show that about 1.5 million homes were vacant in the first quarter, most of those presumably up for sale, a 17 percent increase from a year earlier. The 2.1 percent vacancy rate was the highest on record since the government began tracking it in 1994. It was also the fourth straight quarterly increase.
"When you see it increasing quarter after quarter, there seems to be something going on here," Baker said. "We're building more homes than are being filled."
.....
Nearly three out of four builders reported more homes on the market in their areas and about one in five reported a jump in new home orders being cancelled. About three-quarters also reported a drop in purchases by people buying homes as investments.
There's more. Late Monday, Hovnanian Enterprises (Research), a builder with big operations in California and Florida, cut its guidance and St. Joe's (Research), a smaller builder, reported surprisingly weak results Tuesday as the firms struggle with a faster-than-expected drop in the housing market. The stocks of both companies tumbled Tuesday.
.....
"Our experience says prices do not go down when there's job creation in the local economy," said Yun. "In local markets where they are flat on jobs, they could see prices decline. But we're projecting 2.3 million new jobs this year. The job market is providing a buffer. It's a counter force to rising rates."
.....
But the experts who see a possible meltdown say strong employment isn't enough to support an overinflated housing market.
.....
"You have to look at how much more inventory has been put on the market and what impact that could have on pricing," said John Tomlinson, analyst with Majestic Research, an independent research firm. "To get sales going, people are going to have start pulling in their expectations."
Tomlinson sees new home prices flat or edging lower this year with existing home prices flat to slightly higher "at best." He points to reports showing big increases in the number of homes on the market.
Past housing downturns have seen builders slash their work forces by up to 40 percent, said Baker, the housing market bear, and with an estimated 3.5 million people working in residential construction, the loss of more than 1 million jobs would obviously cause problems for the labor market.
Add job losses at mortgage firms, building supply retailers and real estate agencies and the downturn in home building could itself further weaken one of the key supports for real estate.
One of those worried about just that is James McShirley, owner of Sulphur Lumber near Indianapolis. He's already laying off staff and not filling open positions due to a slowdown in orders from his builder clients.
"We're holding off as much as we can because qualified people are hard to find," he said. "But there will come a point where we have to face that (more layoffs) and it could be soon."
McShirley said when he sees his clients cutting staff, and a local mortgage broker with 100 employees go out of business, he grows more worried.
"Those people losing their jobs are the classic home owners. This could be a vicious circle," he said.
http://money.cnn.com/2006/05/02/news/economy/housing_jobs/index.htm
작성일2006-05-03 00:10
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