The bad news:
Confidence among U.S. homebuilders in November dropped to the lowest level since record-keeping began in 1985, a sign that the deepening credit crisis is preventing prospective buyers from purchasing new homes.
The good news:
The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 9, lower than forecast, from 14 in October, the Washington-based association said [yesterday]. A reading less than 50 means most respondents view conditions as poor.
How’s that the good news? It can only fall another nine points…
∙ Homebuilder Confidence in U.S. Drops to Record Low [Bloomberg]
Sad sad sad for all these great home-building jobs. That’s one segment of the population that will be struggling during a downturn. The pay was good and no college degree required.
High $/sf prices justified a lot of these past 3 years’ construction. With plummeting prices, building a new place or renovating/expanding your house makes less financial sense.
Once prices go under a certain level, some developments will not be possible. Think condos towers in Soma. Who would sink 10s of Ms for condos that would sell for 600, 500, $400/sf.
Builders saturated and outpaced demand in many markets across the US. Now it’s time for them to sit the sidelines while that inventory absorbs (if it ever does). Econ 101.
And at some point, construction costs (ie wages) must go down – just like what’s about to happen to UAW wages and benefits (once we stop this nonsense about a Big 3 bailout).
Inventories always absorb, lest there’s a major event that permanently makes a place undesirable. SF is not Detroit or California City. Everything will fill up once prices are right.
Not possible? Not possible without innovation, you mean. We do that kind of thing around here. SPutting more than half of all construction money into on site labor never made any sense. Modular construction will eliminate some of that, and other new practices such as Parametric Modeling will eliminate more.
Besides, the jobs were not good, they were traps. In the modern, value added economy high labor, low education positions have less value all the time and are being eliminated in great numbers. The construction industry has amounted to a giant excuse for low achievers to avoid self improvement. It is great to see people putting advanced degrees to use get better compensation than thugs that nail boards together and declare their monster trucks to be essential tools of their trade so they can get a tax deduction.
“…thugs that nail boards together …”
I guess someone’s home remodel didn’t go well.
Wow Mole man,
Broad generalizatin don’t you think. Have you looked at how modular works in SF? How about those modular foundations, oh wait no those need to still be done by guys nailing boards together.
Mole man, what do you do and what’s your higher education? What’s your non-trap job that is innovating the world?
mole man,
There was a certain level of flexibility in my quote:
Once prices go under a certain level, some developments will not be possible.
Precisely labor-intensive projects would fall into this category. I am amazed at how much it would cost today to build these “classic victorians”. Thinking some of them were mail-order designs…
Don’t let it bother you, sparky. It’s an honest profession whose salaries are set, daily, by the market. The poster above can complain all he wants to, but you can’t argue with the market.
In other news: Berkshire Hathaway fell below 90k.
And I stand by my “great construction jobs” assertion.
Not everyone was born into money or decent education. Many newcomers didn’t study and few have the background to improve themselves. But their kids can, and providing parents with hard-working OK-paying jobs is a good social balancing tool. It shows that hard work can be rewarded, not like $10~/hour back-breaking strawberry-picking. Construction beats welfare 10 to 1. At least the kids will have seen a dad working, which is the first step into a proper society integration. Too bad this was done during a bubble. I am not sure how these families will turn out once the new reality sets in.
I’m not sure that I understand the vitriol directed versus those in construction.
It’s honest work. I see nothing wrong with it. we all can’t be “intellectuals”.
Besides, many construction jobs are quite technical and require a fair amount of learning. others are more manual. others are quite artistic. there’s a range of talent and skills employed by construction. they’re not all oafs with clubs tugging women by their hair.
we could be a lot worse than to have lots of construction people around. The problem isn’t that we had so much construction, the problem was that the construction was misallocated. so now we have these rediculous houses and condos with italian travertine tile and granite countertops and high end ranges. but what we needed as a nation is modest functional housing. oops.
easy to look down on the downtrodden. but remember, nobody is immune. some intellectuals are going to find out that they too are in a field that was artificially inflated by the credit bubble.
looking forward we have some major systemic problems with our economy. we are basically overbuilt in most fields. we have too many cars, too many houses, too many retail stores, too many hospitals and clinics, too much of a lot of stuff. those areas will now all need to contract to sustainable levels.
but our economy requires continual expansion.
something has to give. and it will.
Sad sad sad for all these great home-building jobs. That’s one segment of the population that will be struggling during a downturn. The pay was good and no college degree required.
High $/sf prices justified a lot of these past 3 years’ construction. With plummeting prices, building a new place or renovating/expanding your house makes less financial sense.
Once prices go under a certain level, some developments will not be possible. Think condos towers in Soma. Who would sink 10s of Ms for condos that would sell for 600, 500, $400/sf.
In other breaking news, water is wet. Ice is cold. Fire is hot.
“the problem was that the construction was misallocated. so now we have these rediculous houses and condos with italian travertine tile and granite countertops and high end ranges. but what we needed as a nation is modest functional housing.”
on another thread I lamented the ubiquity of Viking ranges (for example) in virutally every new construction or remodel over the past few years. While they look cool, no one needs these types of luxuries unless thy’re professional caterers or just plain wealthy enough to afford high-end everything. They’re so not necessary for the typical food network-watching pseudo-chefs with modest incomes. It seems like a lot of the housing inventory I see these days are either badly outdated or ultra high end (not just ranges, but other luxuries like granite, spa tubs, etc.). Not much in between.
Yeah, slapping Granite countertops, Stainless Steel appliances or Viking ranges is pretty out of place with the original quality of most homes.
What matters most I guess is the buzzwords and the wow effect.
You feel you’re not being cheated into paying 200% more than 10 years ago because you’re buying “quality” and “high end”.
These are only quick ROI investment vehicles and they’ll disappear when prices go under a certain threshold.