Housing Bubble Deflation Will Not Cause Recession
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While we know that certain parts of the country are watching the housing bubble deflate, overall the declines seen in the housing industry will not be enough to put the state of California into a recession. California is in the heart of the housing boom and its aftershocks and the fear was that of all the places in the country that could be hurt California was near the top.
The weakness in the real estate sectors will slow everything down a little bit, but not enough to get an actual recession,” said Ryan Ratcliff, an economist at the UCLA Anderson Forecast and author of a report on California titled “At the Tipping Point,” to be released today. Once-lavish run-ups in home values will slow and even sag, according to Ratcliff’s projections. Inflation-adjusted home-price appreciation, which was in double digits from 2002 through 2005, will be 7.5 percent this year, 0.3 percent in 2007 and negative 4.1 percent in 2008, the report forecast. Residential building permits are predicted to decline from 208,900 in 2005 to 179,000 this year to 160,400 in 2007.
The housing slowdown will cause job losses, primarily in the construction and financial sectors, he said. That’s not surprising since sectors related to real estate fueled creation of 30 percent of new payroll jobs in 2005.
Jobs such as mortgage lending, mortgage brokering and real estate brokering are expected to take a hit. Slow but steady growth in financial services jobs in such areas as securities, insurance and banking will offset those losses.
“The total impact on the financial activities category will wash out to be basically flat,” Ratcliff said. “Finance will lose some of its steam but not actually lose (net) jobs.” via the SF Gate.
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Comment by Broderick Perkins on 19 November 2008:
Maybe it was kryptonite…
ECONOMIC REPORT
‘Prolonged’ recession, higher joblessness seen likely
NABE survey indicates most economists now believe U.S. recession’s started
By Mike Maynard, MarketWatch
Last update: 8:29 a.m. EST Nov. 17, 2008
Comments: 147
WASHINGTON (MarketWatch) — The U.S. is in for a “prolonged” recession dragging into 2009, the National Association for Business Economics says.
In its latest survey, the organization sees a contraction in inflation-adjusted gross domestic product of 2.6% in the cards for the fourth quarter, with the weakness carrying well into next year. A separate survey by MarketWatch shows economists more pessimistic, expecting GDP to contract at a 3.5% pace in the fourth quarter.
With a small GDP contraction of 0.3% on the books for the 2008 third quarter, such a forecast would satisfy a widely held definition of the U.S. economy being in recession — two consecutive quarters of negative growth — at the end of the year.
A total of 96% of the economists surveyed by NABE believe that a recession has begun.