Business Insider.com: The Housing Vs. Unemployment Chart That Should Make You Rethink Everything

[OmahaBlueDog]

Housing construction began a brutal plunge starting at the end of 2005. And yet, the huge uptick in unemployment didn't really begin until early 2008. That's a huge gap you wouldn't expect to see if the high unemployment rate were just a function of the end of the housing/construction economy.

Again, it argues against the idea that with the collapse in housing, the economy went through this huge structural shift that we can't hope to dig our way out of.

Read more: http://www.businessinsider.com/new-home-construction-vs-unemployment-2011-10#ixzz1bXlb0mTP

[banned from Kos]

1. Consider the resets on adjustable rate mortgages take 3 years in general

good chart though.

Lots to interpret here.

[OmahaBlueDog]

3. Agreed. Next year, the 7-year ARMs adjust on the 2005 mortgages

That was pretty much the peak of housing prices in Florida.

I think, generally, we'll be looking at an existing-home glut for the next 10 - 15 years out. As the Baby Boomers who bought homes in the 70s and 80s downsize and die off, those homes will either enter the sale market, enter the rental market, or change hands within families (i.e. be given to their kids or grandkids).

[Rex]

2. The high unemployment rate is a result of the 2000 & 2004 elections.

For 8 years, GWB did not add a single job to the rolls. The housing market falling apart is because we entered into a depression after the second Bush term.

[former9thward]

7. Not that simple.

The Department of Labor disagrees with your numbers. According to their figures employment was at 132.5 million at the beginning of his term in 2001 and 135.5 million at the end in 2009. An increase of about 3 million. http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/. Housing was in a bubble from the 90s on and popped in 2005.

[Rex]

9. You might be right, he has the worst record in history.

Which is different. That according to the WSJ.

[barb162]

4. Some argue that the housing industry has a huge influence on the economy

And it does, but not as much as some people would like to think. I think money for new mortgages started drying up around 2007 and things were already over-built by then. There were lots of speculative new houses being built with no buyers in 2006 simply because the market was already over-built and people were already realizing they couldn't pay off their ARMS with no down payments.

[Hosnon]

5. Lagging indicator.

I worked for a firm that did a lot of construction law. It took a while after the crash for it to be felt by us.

[quaker bill]

6. What I do for a living

involves a fair ration of sifting through the debris of the real estate bubble at least a couple of days a week. The data is very clear that the smart money began bailing on this market in late 2005 to early 2006, however, the stupid money kept pouring in until late 2007 to early 2008.

Smart money made profits and sat on them. It is now slowly wandering back into the market picking out choice bits of the debris for way less than construction costs.

There is one guy here who made the news. He created a many story tall water front condo project, basically leveraged a few million of other people's money into creating a project that he sold for 25 million at the peak in early 2006. He just bought it back through bankruptcy auction for cash for less money than he spent in concrete building it. The once marketed at 0.5 to 1 million dollar condos can now be had from between 100 to 200K, in short, less than it cost to build them, and he will still make another mint selling them.

The problem wasn't the actual decline in demand, it was massive quantities of stupid speculative money that kept inflating the prices well beyond what declining real demand could support, then came the margin call.

[Liberal_in_LA]

10. Agreed. Speculation caused the collapse of the housing market. Now the speculators are back

[quaker bill]

11. Not what I am seeing

People who actually build stuff are back, just not very many of them yet. The speculators just got their lunch money taken again, this time in precious metals. Land prices here are still declining slightly, suggesting a bottom may have been reached or is near. The guys I am seeing are picking up the choice bits, near town, for 20 cents on the dollar or less. They are the same guys I was working with before they sold out of the business during the bubble, the old money, not speculators.

Some of the worst speculators are in jail, most of the rest could not get a loan bigger than a payday advance.

[FarCenter]

8. New housing was being built mostly in the South and West

The Midwest and East regions in the housing report show far fewer starts in the '00s. So it took awhile for the bust in CA, AZ, NV, and FL to work its way back into the other parts of the country in terms of lower building supplies manufacture, and lower demand for goods of all kinds coming from the South and West.

Demand before the boom was a lot less than the 2 million peak. Part of the peak was people buying multiple houses on speculation. They had watched too many Carlton Sheets "make big money in real estate with no money down" tapes.

http://en.wikipedia.org/wiki/Carleton_H._Sheets