October 15, 2006

Here come the massive (and unreported) REIC layoffs: "It's going to be painful - I'm surprised at how steep it is"

Here's the getting-desperate view from one county in California. Multiply this by thousands of counties nationwide, and you have the millions who will lose their jobs during this downturn. And all those jobs created the past few years? Poof. Realtors, builders, mortgage brokers, Home Depot salesmen, appraisers, you name it. In Phoenix they say 40% of all jobs are associated in some way with homebuilding. Could Phoenix see 40% unemployment?

Bottom line, there's your "mass job losses" that David Lereah says is needed to cause a housing crash. His own industry crashing his own industry - how's that for circular.

"Well, you know, it takes a perfect storm for a local market to have price softening, where prices actually turn down, not up. You need to have some serious job losses in a local marketplace" - the corrupt David Lereah

I see realtors from around the country quoting "millions will move here in the next 10 years" etc as they talk about the great prospects for their towns, using outdated pre-bubble stats and predictions. Western boom towns like Vegas and Phoenix especially.

Well guess what - you'll actually see population losses in those towns as their only significant industry - building homes - dries up and people scatter elsewhere (somewhere with real jobs) to go find work.

And when you see the "official" unemployment numbers come out, don't be fooled - millions will be out of work due to the housing collapse, but not counted.

How? Start with the millions of illegal Mexican homebuilders, as it's estimated 2.5 million of the illegals are employed in construction. Then add in the millions of self-employed REIC members who will not be counted in the "official" government numbers either - realtors, appraisers, mortgage brokers etc.

So just like true house prices, the true deficit and true inflation, we'll never know the real number. Even though we see the effects of the real number every day with our own eyes.

The housing industry, which propelled Sonoma County out of recession three years ago, is now shedding jobs as builders, mortgage brokers and real estate companies feel the impact of the slowdown.

The sector, which employs one in six workers in Sonoma County, lost 1,300 jobs in the three-month period ending June 30, according to a new study.It could lose 2,000 more jobs before the shakeout is expected to end next year, reducing employment to 28,700, the study forecasted.

The job losses - the largest since the housing market was in retreat in early 1990s - have been deeper than anticipated, even in an industry accustomed to employment swings as housing cycles run hot and cold.

The effect on the economy will be magnified because many of these workers earned $60,000 to $70,000 or more a year during the housing boom, far more than the typical worker in the county.

"It's going to be painful," said Steve Cochrane, an analyst with Moody's Economy.com, which prepared the study on employment in the county's housing sector. "I'm surprised at how steep it is. You don't want to read too much into any one single quarter. But these numbers are really following the trend in housing," he said. Home sales have tumbled 25 percent over the past year, while housing starts have plunged 38 percent.


BubbleShanker said...

"When the shakeout ends next year"

Why will it end next year? History shows these shakeouts last 6-15 years. In fact trillions of arms will come due next year, more like the beginning than the end.

keith said...

humans are such optimists, thus the "we've hit bottom" predictions of the NAR and Greenspan, and the predictions that it'll all turn around next year

Oh, how wrong we can be sometimes

David in JAX said...

I believe the numbers may ring true over the next couple of years in NE Florida. I obviously don't have the statistics on illegal allien workers on construction sites here in Florida, but my perception from driving around looking at many new home site is that the majority of the workers in this area are legal Americans. With massive layoffs in home construction, I believe the area will see a large bump in unemployment claims. The realors, mortgage brokers and appraisers won't show up in the numbers though, but they will affect the unemployment numbers by competing with other people for limited jobs.

Real Estate 101 said...

Real estate Agents don't get laid off! They "get out" of the business, sort of like escaping from a prison. Our market loses 33% of Agents every year due to attrition. Only the strong survive! Maybe 07 will have a 50% drop in Agents.
It's bad out there, but remember it's never as bad or as good as the MSM would have us believe. I currently see no slowdown in Buyer's buying here. But, Builder inventory is very over built. The average new construction is 25% higher than a similar exsisting home. The historical normal is a 8% spread. What do you think will happen? That's correct and it IS happening. Builders are dropping prices 10% and paying closing cost.

Anonymous said...

I like this comment:

The effect on the economy will be magnified because many of these workers earned $60,000 to $70,000 or more a year during the housing boom, far more than the typical worker in the county.

I live in Chicago, not a hot bed bubble town you think. I made 65,000 last year and my wife made 71,000. "More than the typical," Keith says. And I STILL can't buy a house here! No no that is not acurate. I *could* *buy* a house, i just wouldn't be able to *eat*!

Anonymous said...

The realors, mortgage brokers and appraisers won't show up in the numbers though, but they will affect the unemployment numbers by competing with other people for limited jobs.

Sunday, October 15, 2006 1:21:00 PM

Most of these people will go back to whatever job field they were in before the gold rush.

Anonymous said...

I can already see the depression in the faces of my RE friends. One of them has been trying to sell his $1 million plus mansion for the last 6 months. No bites! He was a high flying salesman, but he saw the down turn, but didn't pull the rip cord fast enough!
I can feel their pain. However, I have one friend who has gone out and bought 4 houses with interest only loans, and called me a "chicken" because I didn't listen to his advise to buy! I told him the bubble would blow up one day and to take profit. He thought he was a "Donald" type. He walked around with this smug and cocky attitude, bragging that he was a millionaire. That attitude has been replaced with fear and anxiety. Yesterday he told me that he should have listened to my advise.
I have seen 2 massive down turns in California, and this fall will be the worst. I have already seen massive lay offs from the big builders in the area. One of them told all the subcontractors to get off their property (in Spanish of course), and they tore down all their foundation forms. Then they laid off 25 of 30 of their office staff. The regional manager is applying for other jobs because he sees the handwriting on the walls.

Anonymous said...

it was all low ante, low keep, till the big shits came aroumd, make methaneol out of them

Anonymous said...

i just want to buy a F ing house !
to live in.....i'm tired of being priced out of the market.
i am long cash and gold and will stand by as long as necessary.

Anonymous said...

The funny part is this: The sellers will be chasing a falling market. They'll cut prices 10k when only 20k cuts will sell, cut 100k when 150k will be necessary, all the way to the bottom.

Forclosures be rampant because people will not be able to confront selling at a loss. Most Southern California neighborhoods will look like ghost towns with overgrown lawns and tumbleweeds.

Ok, maybe not tumbleweeds.