Wednesday, June 23, 2010

Housing & The Infamous "Double Dip" Recession

Kelly Evans wrote her usual interesting piece in the Wall Street Journal yesterday. The topic was housing, published before the dismal existing home sales data which came out a little later in the morning.

Evans points out that new home sales declines, after some earlier increases, are less troubling than they might seem at first glance. She mentions the now infamous "double dip" term, applying it to housing, but suggests that a dearth of new home sales isn't a bad thing, as it will help trim inventories, leading more quickly to eventual price firming.

That term, "double dip," is about as overused and nauseating these days as "green shoots" was last year at this time.

The other day, on CNBC, Maria Bartiromo, with that distinctive, distracting lisp of hers, was yammering away at everyone in sight about "a double dip," as well.

To me, whether there's a technical negative quarter or two of negative GDP growth in the near future, or not, is probably less relevant than whether the best quarterly rates of growth will ever get to the levels typically associated with vibrant, robust recoveries of prior decades.

Then you have Art Laffer, in a Journal editorial about which I wrote this post two weeks ago, predicting an outright US economic collapse next year, thanks to tax rate increases and additional taxes, too.

One thing Evans did mention, toward the end of her piece, was the role employment and wages play in a housing recovery. How's that going, do you suppose?

Last I recall, the president was in front of cameras after the latest jobs report, trying to explain why a pathetic 41,000 new private sector jobs in the prior month was a good thing.

Let's be honest. We don't want housing and housing finance to ever return to the level of economic importance it possessed during the 2002-2007 period. In the wake of that disastrous period and the excesses which drove it, lenders will understandably be focused on more verifiable, dependable employment in order to judge housing loans as of reasonable quality. I don't think we can count on home loans to temporary census workers or newly-minted federal government hires to drive US economic growth for the next five years.

If private sector employment isn't picking up, housing isn't going to, either. And yesterday's data suggests as much.

As it is, a CNBC report described how some homeowners are simply choosing not to pay their mortgages anymore, thus driving retail clothing, appliance and dining sector growth.

Housing growth depends on employment growth. Employment still isn't growing sufficiently to suggest a robust, healthy US economic recovery right now.

Meddling with housing finance assistance programs may paper over short term valuation issues, but it can't make the US economy grow in the absence of the growth of well-paying, long term private sector job growth.

Double dip or just anemic economic growth, it sure doesn't look, yet, like the US is in the process of enjoying a snappy, sharp economic upturn.

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