Housing Starts will show weakness like never seen before since February 2003 - a recession eminent?
Fred Day
Oct. 15, 2006

On October 18th, around 8.30 AM the housing starts number will be in. While some economists are expecting a surprise from the builders on the positive side, the number most likely will show slump. Housing Starts will show weakness like never seen before since February 2003. Builders most likely broke grounds for 1.61 million units last month, down 1.6 percent from August. It will be the lowest since February 2003.

The builders are nervous. Like in the start of every long term bear market; they refuse to lower the prices. Instead they are providing more incentives. According to experts, it is typical of any bear market. The sentiment is so bullish that the eventual collapse in price is ahead and will come very slowly. A sharp fall will signify a correction and possible resumption of bull market.

Economists are divided in two camps. Normally the camp with largest numbers is wrong. While the majority of these economists from investment banks, real estate firms and other financial institutions are totally convinced of a soft landing, some are starting to get signal of a collapse in real estate.

A recession may be in the corner as consumers cut back as they realize the little relief in gas station are not enough to balance their ruin in home equity bank. The problem is not with real estate market as such. The problem will be with staggering number of real estate investors filing for bankruptcy. Unfortunately, common people never owned real estate investments like this before. They bought every condo, town homes and single-family residential units they could with a hope of quick flipping and making fast profit. They are now stuck and their zero percent rates are just making them poorer every day.

This will trigger the recession. The stock market will realize these facts later and will add fuel to the fire later.

The builders are on the ‘high’. They just cannot understand why the residential real estate market is on the verge of the collapse. The prices will initially collapse 30 to 40% and then slowly normalize back to 1991 level. The real test will start at that time. Federal Reserve in later part of 2007 will try to jump in and re-ignite the economy.

The problem at that time will come from the long bond market. The rates will refuse to go down in spite of deflation because heavy debt and international issues.

Housing Starts will show weakness like never seen before since February 2003 - a recession eminent?
Fred Day
While some economists are expecting a surprise from the builders on the positive side, the number most likely will show slump. Housing Starts will show weakness like never seen before since February 2003.
READ MORE>>

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