The ripple effect of a housing downturn

When house prices get pushed up beyond their fundamentals it doesn’t take an economic downturn to cause prices to drop, they can drop simply due to exhausted demand and a smaller pool of buyers due to lack of affordability. Unfortunately this in itself can lead to an economic downturn as the ripple effect takes over and less money changes hands leading to leaner times to all types of connected and seemingly not-so-connected businesses.

There’s a scary article on MSNBC right now about how this seems to be playing out in the US, where home prices peaked two years ago and have been soft or falling since.

The Sun Belt city of Fort Myers saw real estate and construction grow to dominate its economy, accounting in recent years for nearly one out of every four jobs. That meant the housing downturn hit swiftly here, making it a kind of early and extreme indicator of what might happen to the U.S. economy as a whole.

The effect could be less dramatic in places like Washington, where government contracting and other industries may provide a cushion. What the Federal Reserve is trying to determine, as it decides Tuesday how much to cut a key interest rate, is to what degree the rest of the U.S. economy will behave like that of Fort Myers.

How much of our local economy is based on temporary boom-time employment due to construction and infrastructure projects that will be completed in the next couple of years? What happens when those jobs disappear, will there be others to fill their place and will they pay as well?

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satv
satv
13 years ago

Chief,chief,chief…..

satv
satv
13 years ago

thanks every body love you all

satv
satv
13 years ago

Cheif,Thanks cheif you also appeared second last day before friday was above to beging next day.Thanx

satv
satv
13 years ago

Asalvary,I like to say special thanks to asalvary appearance,to move forward jamed titanic from that friday.he provided lots of assistance when our own bloggers were cheating with their soul.thanks asalvary

satv
satv
13 years ago

Freako,when you say"google should be under scaner that was actually under scanner that time.

satv
satv
13 years ago

Tulip,when you think you are right,you should have reverse those trend when more people are coming to vancouver.instead people should be leaving from Vancouver if our city is expensive,inflation is higher or counter tops are expensive,people should not be coming to Vancouver.easy that way

satv
satv
13 years ago

Solipsist,Do you remember that song bye-bye-my friends good bye,but you brought me back from vhb.than last time when you say"satv is real our user got confused,hey every body solipsist mean to say real is true in sense of commentary,and Solipsist I also congrats you to provide fair representation and let me pour my engrish here.finally I wanted to say people who were in affordable situation should have taken advantage instead some body else buy before them,and sell them later they should have done that.for all your life all the best Solipsist.heartly thankful to you.satv b4sat@yahoo.com

satv
satv
13 years ago

The pope,I appreciate your hard work to run lots of issue to understand fundamental,and tonz of issues through the term really appreciate that.your site provided us very big plate form to put our thoughts in the thread.more than two year of hard work, I hardly can express my thanks in words.wish you all the best for your future hope you full fill all of your dreams.your site has provide very fair representation for all type of induviduals not just one sided thought.heartly thanking you,satv- b4sat@yahoo.com

satv
satv
13 years ago

FINAL ASSISSTANT—————-Help your self to translate the graph for this post.Electricity wires then lightning collision projected over vancouvercondo.info

freako
freako
13 years ago

Carry trades have relatively low risks percentage-wise, but they only make real money by running at very high levels of leverage. They are a classic "everything is great! until it isn't…" Well, my thought is that they underestimate the risks of low probability catastrophic events. I mean, why not cancel your fire insurane and pocket some easy cash? Free lunch? Hell no.

TheVanMan
TheVanMan
13 years ago

Optimus_subprime said:In addition, for whatever reason the classification within the index changes… ie: fresh fruit could mean a whole wack of different things such as 2kg's of red delicious apples or 3kg's of spartan's…I said:But the classification had never changed. What had changed was that fresh fruit of 20 or 30 years ago isn't classified the same as fresh fruit of today. The definition of fresh fruit means fruit devoid of artificial means of cultivation and the use of foreign insecticides, aka organically and manually grown fruits. They actually taste a whole lot better than fresh fruits cultivated offshore and imported in by modern means!! But these fruits cost a whole lot more. For health reasons, would you want to consume organically grown and fresh fruits or chemically grown? Some people puts a high price on their own health you… Read more »

Damir
Damir
13 years ago

Sorry it was not intended to be confrontational, I just wasn't sure which one you meant to be true.There are no "free money" trades.Period.Full stop.Carry trades have relatively low risks percentage-wise, but they only make real money by running at very high levels of leverage. They are a classic "everything is great! until it isn't…" position as we've seen with numerous hedge funds over the summer – and they are ideally suited for use with Other People's Money.

tulip-Mania2
tulip-Mania2
13 years ago

SATV:Just how stupid are your cohorts?Rather than selling when the market is good, they plan to sell when it's a good time for them.Problem:They will all try to sell when the demographic, economic, and finance, conditions will be at its worst in decades.The rich kids from Kits have all purchased, with the help of mom and dad, and cheap teaser rates. The new immigrants just don’t make enough money working in retail and tourism.The Fed is so concerned that it is willing to take steps so drastic; it almost seems they are taking advice from economists who ran Argentina and Russia into the ground.Tick Tock, Tick Tock

cape
cape
13 years ago

Interesting article in the Sun this morning. You may remember some complaints in the past about construction workers abusing drugs on the job: http://tinyurl.com/3cw8zl

satv
satv
13 years ago

BC FAMILIES:THE BREAK DOWN*a couple with children include married or common-law 26.32%*a couple include married or common-law without children 29.58%*one person house holds 28.03%*other house hold types 16.07%VANCOUVER*a couple with children include married or common-law 28.53%*a couple include married or common-law without children 25.74%*one person house holds 28.41*other house hold types 17.32%

satv
satv
13 years ago

*Bernanke pluged in wires into spidermans net*Did he spin the global map?Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control.The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure," he said.*Bank of canada is being force to cut the interest rates.http://www.cbc.ca/money/story/2007/09/21/interestrates.html

freako
freako
13 years ago

You seriously have no clue WHAT you are talking about do you.Well apparently you do, so fill me in Jimbo. Please explain how the carry trady offers free money without strings.

Jim
Jim
13 years ago

Freako Wrote:"You are arguing that the carry trade is free money, few strings. I don't think it is."You are such a dweeb freako. You seriously have no clue WHAT you are talking about do you.

freako
freako
13 years ago

Regarding inflation – it would seem the actual inflation number is far less important than having a more or less stable, predictable inflation number. 1% – 3% – 5% -8% – whatever – so long as it remains stable.Yes, it is unexpected inflation that is the problem. The problem with unpredictable inflation is that it increases the uncertainty for long term lenders and borrowers. As long as it is stable, and low enough that the hyperinflation isn't a concern, it it is not a stealer of wealth, but a zero sum game. And the more stable it is, the less redistribution.Back to the low long rates, I think the risk of a deflationary spiral is priced in.

freako
freako
13 years ago

You're posting to the wrong guy, Freako, I agree with many of your comments to optimus.Sorry it was not intended to be confrontational, I just wasn't sure which one you meant to be true.

Damir
Damir
13 years ago

You're posting to the wrong guy, Freako, I agree with many of your comments to optimus.Regarding inflation – it would seem the actual inflation number is far less important than having a more or less stable, predictable inflation number. 1% – 3% – 5% -8% – whatever – so long as it remains stable.They're all just zeros in a computer somewhere anyway…

freako
freako
13 years ago

It cannot be both "free money" and a danger of "biblical proportions" at the same time.Well, which is it then? And please note that I said "inefficiency" not "danger", these are not necessarily the same thing.

satv
satv
13 years ago

Damir,Thats what I like to hear, for best place life is expensive,Vancouver is worlds best liveable city.more and more people want to live here,no wonder how high this city can go.so far from 2001 to 2006 Vancouver population increased by 1,29,152.00,and countinue to come ever after regardless type of counter top,kitchen,bathrooms and many more future like cost of living etc,etc.

Damir
Damir
13 years ago

I don't care what the inflation numbers are, I wouldn't trade living today with living in 1914 for *anything*. If the incredible life expectancy (20 extra years!) and ease of life (private bathrooms for every family!) are in any way dependent on inflation – bring on more of it.The carry trade is a classic derivatives trade. It cannot be both "free money" and a danger of "biblical proportions" at the same time.

satv
satv
13 years ago

"DO U SMELL WHAT INFLATION IS COOKING"A "basket" of goods andservices that cost$100.00 in 1914that cost now: $1,861.67 in 2007 Per cent change: %1,761.67Number of Years:93Average Annual Rate of Inflation/ % 3.19Decline in the Value of Money: CPI for first year(Aug 1914) 6.0CPI for second year:(Aug 2007) 111.7oh my…….