Friday, March 07, 2008

Job Losses

http://biz.yahoo.com/ap/080307/economy.html

WASHINGTON (AP) -- Employers slashed 63,000 jobs in February, the most in five years and the starkest sign yet that the country is heading dangerously toward recession or is in one already.

Oil is up a penny as I type. If the Fed doesn't stop the weak dollar policy, it will break the economy when oil goes over $120/bbl. Our trade deficit is what is breaking the back of the economy and oil is 2/3rds of that. Since we wouldn't impliment oil conservation policies, the "invisible hand" is doing it for us. The only car companies to do well are those that offer really fuel efficient vehicles: Honda 'Fit' sales leaped up last month.

We're in a recession. The time to pretend it isn't happening is over. Home prices haven't even dropped to the level of previous peaks when normalized for wages or rents. With job losses, that means J6P will move back in with mom and dad.

There will be quite the buying opportunity in a few years. But the investment emotions have to run their course. We won't even see the peak national discounting until 2009 when we get into capitualation.

I'm amused how the Realtors (tm) are starting to use reverse phycology. "The market has dropped so much you have to buy before it rebounds." Guess what, that 'rebound' isn't scheduled until 2012 to 2014 and will take until ~2017 to return to peak bubble prices. In too many areas, buyers just cannot qualify to buy a home with other people's money, so it doesn't matter what the used home salespeople say. Prices will correct to what the local economies can support. We built up far too many salespeople after 9/11 and now its time to purge those jobs out of the system.

When it gets cheaper to buy than rent, its ok to buy. Just understand you're locked in place until ~2015. Can you afford to wait that long? The longer you wait to buy, the shorter the time you will be locked in. For example, someone who buys in 2011 will probably be able to get out by 2013.

But I'm not as gloomy as others. I see companies moving jobs to economies that will continue to grow through even the worst downturn. e.g., Bangalore. I'm talking US citizens to manage new R&D centers. A quick way to see how quickly a region can grow as look at its transportation surplus. Bangalore and Hyderabad get brand new airports this month. Very few US cities are expanding: DEN, IAD, IAH, and a bunch of the Florida airports are our major growth. Very few of our cities are building rail or modern bus terminals. So we're going to be stuck. Cest la vie.

Got Popcorn?
Neil

5 comments:

lady.luck said...

hello neil and all,

well just had some concerns: i am a 23 year old and have been saving for a year now, my husband and I live off his paycheck. we save ALL my biweekly(yes i know... biweekly) measly net $1500. So will hopefully have a hefty down payment. I am just in awe at some agents out there. I am a licensed agent and I do not at all currently work in the industry, but still amazed. I overheard my acquaintance agent telling our J6P friend that right now is the best time to buy, take advantage of the interest rate because it will soon go up.etc.etc (of course he's still in the industry)...and says it's a great time for real estate right now...lol. We live in San Bernardino county (rancho cucamonga), which has already experienced major drops, but I still believe it will go through some more. I try to educate myself the best possible with economy and actual history and trends, but at times I still doubt myself. Being the age that I am makes some people not believe or trust my word. I just feel weird sometimes because I seem to be the only not encouraging my friends to buy. I think every situation varies of course, but most of my friends are paying cheap rent and can afford to save, so I tell them it won't hurt them to save some more and hold on. Sorry for the long story :(. Our acquaintance /friend was an agent whom I thought highly of and it felt horrible to hear him say all those things to our J6P friend; and only 1 month earlier he told us he moved into his parents because he wants to save and not buy until at least a year. Yet, it is the best time to buy now? I am not going to try to convince anyone anymore. After all no one listened to me anyway 2 years ago and now they are losing their homes.

lady.luck said...

well no need for a comment any further...you've answered all my questions on this blog. :) I just didn't realize you had posted it when I was ventilating away.

tj & the bear said...

But I'm not as gloomy as others.

Yet. ;-)

bearmaster said...

Hi Neil!

It looks like some housing bubble bloggers are getting hooked in like a moth to the flame and taking the plunge in real estate.

http://sacrealstats.blogspot.com/2008/03/ive-taken-plunge.html

It actually makes sense psychologically. Sort of like hanging around a used car lot, and hanging around, and hanging around...

And it looks like bubble readers are coming out and saying they are taking or are considering taking the plunge. Guess they aren't bearish enough! :)

I'm still expecting a bounce this spring, after the current gloom has been shook off. But no enduring recovery. People seemed happier today when we did our usual Saturday errands - the warmth of the sun might have something to do with it...

Are we gonna get together and celebrate spring selling season?

wannabuy said...

I'm still expecting a bounce this spring, after the current gloom has been shook off. But no enduring recovery. People seemed happier today when we did our usual Saturday errands - the warmth of the sun might have something to do with it...

Are we gonna get together and celebrate spring selling season?


I'm wondering if we'll have the bear trap bounce this spring too...

As to getting together and celebrating, I'm going to have to ask someone else to organize. My life is so crazy right now I cannot tell you where I'll be 72 hours in advance. Believe it or not, its a good thing; but its part of the position I'm working.

Lady luck, go with your conscience. But this isn't the bottom. Too many foreclosures are plugging the pipeline. Unfortunately, the next big wave is going to be bank and other financial institution layoffs.

Got Popcorn?
Neil