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Third Quarter numbers: Slowing down?
Posted by: McQ on Friday, October 27, 2006

Andrew Samwick at Vox Baby points to the latest Bureau of Economic Analysis (BEA) growth numbers for the third quarter:
The BEA's advance estimate of third quarter GDP growth came in at a 1.6 percent rate. Blessedly not the start of a recession but not a good omen, considering the declines in housing have accelerated and this number was bolstered by temporary increases in vehicle sales that are unlikely to persist.
We've heard the predictions about the bursting housing bubble for months and months, but it appears that market is indeed starting to cool (and it is certainly reflected in reports of housing resale prices falling). Are raw material increases, such and fuel and the like, finally starting to have a cooling effect? It's probably a little early to talk recession, but if the numbers hold (and fair warning they normally are revised ... so watch for which direction the revision takes), it could certainly signal an economic downturn of sorts.

More good news for Republicans heading into '08.
 
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More good news for Republicans heading into ’08
You are presuming the Dems take the House, not a sure thing.

Yours, TDP, ml, msl, & pfpp
 
Written By: Tom Perkins
URL: http://
Except that the BEA routinely adjust these numbers upwards several months after the official publishing. Least, that’s what I’ve been seeing in the last 4 years.

Of course, the upward corrections never make as much of a splash as the original news, or downward corrections.
 
Written By: Keith_Indy
URL: http://
You are presuming the Dems take the House, not a sure thing.
Uh, no ... I’m assuming George Bush will still be president then, and as politics work today, will be blamed (along with the Republicans) for the recession.

That’s certainly the way it has happened in the past and there’s no reason to believe this time will be different.
 
Written By: McQ
URL: http://www.qando.net/blog
Goodness knows I’m neither an economist nor a politician, but why isn’t the cooling of housing prices a *good* thing? As long as housing prices are not in freefall, and the decline mostly confined to those cities where the housing speculators were banking on continued huge increases in equity, lower prices will mean more people will be enticed into the housing market. I haven’t seen any recent breakdown of the areas in which the decline in housing prices have been larger than the average, but the last time I saw data, the vast majority of area were experiencing declines in value of 1%-4% (IIRC). Not great, but probably just a blip in a long-term moderate upward trend in those same markets. 18 months from now, I’m betting that housing prices in the vast majority of markets will be headed back up, driving other economic indicators up. Also, I’m not sure that new starts and housing prices will affect the great majority of people. The greatest number of people are already in houses or not planning to buy in the near future, so they are not going to be affected. Also, as I said, lower prices may entice more people into the market, especially in pre-existing homes, as people look to buying houses closer to workplaces, in more localized communities, etc. Finally, those people who choose to remain in their houses instead of selling aren’t going to putting their money under a mattress - it will find it’s way into the market in other ways. Unless the GDP growth turns negative for two quarters in a row, I’m not going to worry over economic issues in 08. Now whether market-friendly politicians and parties continue to commit electoral hari-kari is another question for another time.
 
Written By: Michael
URL: http://
The slowdown in the economy might actually slow the drop in housing sales and prices. The fed is likely to lower interest rates (or at least keep them from going up), which would tend to keep mortgage rates the same or lower. It’s undeniable that a good portion of the slowdown in housing we’re seeing is due to the fact that interest rates are much higher than they were 2 years ago.
 
Written By: steverino
URL: http://steverino.journalspace.com/
Goodness knows I’m neither an economist nor a politician, but why isn’t the cooling of housing prices a *good* thing? As long as housing prices are not in freefall, and the decline mostly confined to those cities where the housing speculators were banking on continued huge increases in equity, lower prices will mean more people will be enticed into the housing market.
Because it is slowing starts as well. While prices are coming down on houses, they’re certainly not coming down on building materials.
 
Written By: McQ
URL: http://www.qando.net/blog
If housing starts are that big an influence on building material prices, one would expect that a slowdown in starts will lead to lower input prices, but occurring after the starts slow. Once the input price drops, buyers will come back into the market, chasing lower-prices houses. Also, it seems to me that an interesting statistic would be whether a decline in starts as a percentage of price point intervals are the same across the price points or are concentrated in particular price point groups. Stated another way, are buyers shifting from higher prices goods to lower priced goods? MCMansion starts in my area have been softening for awhile, but I don’t know if there has been a concomitant decline is smaller or more modest houses. It seems to me that there is a dissertation in there somewhere.
 
Written By: Michael
URL: http://
I have to agree with Micheal, the economy is very hot right now and a small slowdown in the rate of growth is keeping in historical results. Especially when you consider we are near maximum employment right now.

Also, real estate needed a correction, and if it is not in free fall, as Mike says then that is a good thing.

Nothing to worry about, if the high energy prices of this year did not kill consumer confidence, then it is not likely to be collapsing any time soon.
 
Written By: kyle N
URL: http://impudent.blognation.us/blog
Also, real estate needed a correction, and if it is not in free fall, as Mike says then that is a good thing.
Housing sure seems overpriced, at least here in So Cal. I happen to think a housing bubble is a bad thing, best for it to correct slowly.
 
Written By: Don
URL: http://
Larry A. Mizel, MDC’s chairman and chief executive officer, stated, "The challenges experienced by the homebuilding industry during the first half of 2006 remained prevalent during the third quarter, as the operating environment in most markets became increasingly competitive in the face of continued expansion of unsold new and existing home inventories.
http://clearstation.etrade.com/cgi-bin/bbs?post_id=7704468&Refer=

the Census Bureau’s tabulation of sales of newly built residences has shown three consecutive months of surprising gains. We suspect that some of this upside is attributable to a quirk in the data — specifically, new home sales are tallied at the time of contract signing and there is no adjustment for subsequent cancellations. Since there are widespread indications of buyers walking away from deals as the market has softened, the new home sales figures should be viewed with some caution.
http://www.morganstanley.com/GEFdata/digests/20060724-mon.html

The first quote is symptomatic of the homebuilders I follow.Not all bad news but nothing to crow about and some to be concerned about.Inventory growth as well as land positions are concerns for homebuilders due to carry costs.
Toll Brothers noted that while prices have been maintained,builders are using incentives to get contracts which keep sales up but trim margins.
The Census Bureau notation is just a caution when looking at new home sales.Existing home sales are reported at closing,new homes are not.
 
Written By: TJM
URL: http://

 
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