Archive for the 'Housing Bubble' Category
The PMI Mortgage Insurance Company has published its Summer 2007 Economic Real Estate Trends. For Sacramento area home owners, the news is not good.
While PMI’s previous model was tuned for the rapid appreciation of the first half of the decade, the revised model gives more weight to current price trends, area volatility, and the increased use of unfriendly variable interest rate products. While the inputs have been updated, the output is the same:
“…a risk index that predicts the likelihood that home prices in a given metropolitan statistical area will be lower in two years.”
How does Sacramento stack up? How about 9th among the top 50 MSA’s in the nation, and a 56% probability of lower prices in 2009.
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I’ll apologize in advance for the length of this article. But it will enlighten you if you have the patience to finish.
Despite the bursting housing bubble and a fall in housing starts of over 30%, unemployment remains very low. How can that be? Home builders downsize crews, shrink their land acquisition and development departments, and put the brakes on construction.
Yet the employment statistics remain strong. Don’t get me wrong. I’m happy, but puzzled. So I’ve been poking around trying to understand this phenomenon since the real estate downturn got its full head of steam last year.
Recently I was talking with Jim Bayless of Treasure Homes, who shed first light on this for me. He explained to me that much of the construction labor employed by sub-contractors consists of undocumented workers. Since these folks are never officially on the employment rolls to begin with, they don’t show up in the unemployment numbers when the work dries up. That’s pretty nice for us, an extra big shock absorber on the plane’s landing gear so we get that “soft landing” everybody’s talking about.
But where do those folks go? Well they go on home, or they move on to someplace where there is work.
THE HIDDEN WORK FORCE
Then I ran across an article by Nouriel Roubini entitled: Falling Remittances from the U.S. to Latin America as Evidence of the Housing Slump which references a recent Wall Street Journal story and research by Walter Molano at BCP Securities, who writes: