Reed Construction Data Chief Economist Jim Haughey discusses how current developments in the US economic environment will bring opportunities and challenges for designers, contractors, and materials and services providers.
communities « market insights « notes from jim haughey
Construction and macroeconomic data reports are hard to interpret properly at any time but they are potentially more misleading in the neighborhood of a cyclical turning point such as we are now experiencing as the broad economy settles into a slowdown/recession and later, probably late this year, transitions back to another period of accelerating growth. This is unfortunate because....
January’s 1.7% fall in construction spending was accompanied by revisions for December and November totaling 2.0%. Construction spending declined..
The rate for 30-year fixed rate mortgages jumped from 5.5% to 6.2% in February while 1-year Treasury bill rates fell from 2.3% to 2.1% and then dipped below 2.0% in early March.
As the courts struggle to sort out who pays for the subprime mortgage mess there is a risk that overzealous punishment of of clearly predatory lenders may reward predatory borrowers causing leners for conforming mortgages to boost the risk premium they charge for fear the courts may excuse their customers from repayment.
Southwest Forida housing market will remain depresed after the rest of the country recovers
The federal government made the subprime mortgage mess inevitable when it imposed social engineering rules on private mortgage contracts. The long process began with the 1975 Home Mortgage Disclosure Act (HMDA), the 1977 Community Reinvestment Act (CRA) and the regulatory bureaucracy that these two legislative acts required.
My earlier post on the tax rebate plan being debated in Congress drew several reader comments challenging that rebates would be positive for home buying and that the rebates in the House version of the plan were titled to the low end of the income scale.
The probability of a recession this year is now more than 50%. The last straw was the latest weak jobs and construction spending reports. Both were the weakest since 2003 and both were accompanied by downward revisions for recent months.
The construction industry will get a boost at midyear from the $150 billion economic stimulus package that Congress is now debating, if the stimulus package is enacted. It will include accelerated depreciation for capital investment, possibly tax loss carry backs for unprofitable firms to recoup earlier income tax payments from the boom years and personal “tax rebate” checks in the late spring and summer that could be as high as several thousand dollars for working families with several children.
The credit crunch has reappeared again and has already forced the Federal Reserve Board to make an emergency 0.75% cut in the federal funds rate. Other central banks will likely take similar action. This was done to keep credit available for normal business loans, including construction financing. This round of the financial crisis was set off by two inevitable events.
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