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News for Product Manufacturers from Hanley Wood CEO Frank Anton
Fear of Foreclosures
Are you more worried about housing starts falling or foreclosures rising? Well, even though in October the rate of annual housing starts dropped to the lowest level ever—708,000 units—since the end of World War II, I'm still more worried about foreclosures. And I'll tell you why: until the rate of foreclosures drops dramatically, housing starts will not and cannot begin to increase in a meaningful way. Some 1.6 million Americans will lose their houses this year, and almost half of those foreclosure filings occurred in the third quarter, during which time the rate of foreclosures was 75 percent higher than it was during the same period last year. To make matters worse, Mark Zandi, chief economist for Moody's Economy.com, estimates that as many as 2 million more Americans will lose their houses next year. And, to make matters even worse, the Center for Responsible Lending calculates that more than 40 million homes will lose value because they're in neighborhoods where foreclosures are clustered.
It's that sort of housing price deflation that paralyzes all but the bravest home buyers. Why buy now, most others figure, after they read reports of overall housing prices declining by as much as 20 percent this year. Those same reports generally anticipate an additional decline of 10 to 20 percent next year, and foreclosures will be a big factor in those further declines.
In other words, foreclosures either cause or act as a powerful catalyst to deflation. Deflation in turn flattens housing demand. With demand decreasing, supply—that is, housing starts—has nowhere to go but down.
The housing industry is now waiting in line behind the auto industry for help from Washington. The nation's biggest builders, along with many building product manufacturers, are calling for a housing rescue plan that would try to trigger housing activity by offering home buyers a big tax credit. (For more information on the builders' plan, go to fixhousingfirst.com.) That might work to drive demand; a similar plan did work in the 1970s. But foreclosures and deflation weren't problems then. Now they are. So, if housing gets a handout (and frankly I hope it does), I think a plan to stem the tide of foreclosures would pack more bang for the buck and bring relief not only to the housing industry but to 2 million or more American households in danger of losing their homes.
Send e-mail to Frank Anton |
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News and Trends from Hanley Wood Magazines
Living the Vision
BUILDER’s newest show home, being built on the exhibit floor at IBS ’09, combines affordable construction, quality design, and sustainability. (BUILDER, November 2008)
The Hook to Recovery
Industry consultant Dana Barton suggests that to spark recovery, big builders should form a
consortium to buy green materials. (BIG BUILDER, November 2008)
Special Report: MASONRY CONSTRUCTION's Project of the Year
The magazine's annual salute to the best of the best in masonry design, artistry, and craftsmanship. (MASONRY CONSTRUCTION, November/December 2008)
2008 MFE Awards
From Philadelphia's first residential high-rise in 20 years to a former insane
asylum to a one-of-a-kind compensation program for leasing associates, the 2008
MFE Awards prove that, when it comes to the multifamily industry, no project,
building, or program is beyond reach. (MULTIFAMILY EXECUTIVE, November 2008)
Special Report: Cracking the Code
A spotlight on what's selling and who's making it happen. (BIG BUILDER, November 2008)
BIM Streamlines, and Blurs Lines
The future of Building Information Modeling -- and what it means for architects, contractors, and product manufacturers alike. (ARCHITECT, November 2008)
2008 CC Roundtable Discussion
This wide-ranging discussion from CONCRETE CONSTRUCTION's 2008 Industry Roundtable examines the issues impacting today's contractor. (CONCRETE CONSTRUCTION)
The Big Payback?
Siding replacement can be a great opportunity to improve a home’s energy performance. (REMODELING, November 2008)
Focus on the Housing Crisis
Keeping on top of the news regarding the housing crisis is key to business strategy. Hanley Wood's HousingCrisis.com helps you do just that, with news, data, analysis, and conversation about your smartest options. (HousingCrisis.com) |
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Housing Statistics and Analysis from Hanley Wood Market Intelligence
- Containing the Foreclosure Flood: A shift in strategy for the government’s bail-out package has brought up concerns about whether financial institutions are stable enough to forgo the shedding of their troubled assets, and if putting the funds to work elsewhere is the best use of government money. After the commitment to shell out $250 billion to directly purchase preferred stock as part of the TARP’s Capital Purchase Program, the government has decided not to focus on purchasing these toxic mortgage assets from banks, which was once the foundation of their bailout strategy. Other than ensuring a stable financial system, Treasury Secretary Hank Paulson stated that his other two top priorities were to support important markets for securitizing credit outside of the banking system like credit cards, auto loans, and student loans, and to find methods to reduce foreclosures.
- Major banks have now taken the initiative to curb further damage in the housing market by implementing moratoriums on foreclosures and taking a proactive stance by reaching out to potentially at-risk borrowers to renegotiate terms. Efforts like these, which have recently been announced by Citi, JP Morgan Chase, and Bank of America, are a key step to helping stop the bleeding. This may help the housing markets to stabilize, and in turn will lead to a quicker recovery for the U.S. economy. FDIC Chairman Sheila Bair described the plans as a step in the right direction, but falling short of what is needed to impact market fundamentals in a broad manner.
More from Hanley Wood Market Intelligence |
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