Inside the Fed in 2006: Missing the Coming Crisis

Minutes recently released from the 2006 meetings of Federal Open Market Committee (FOMC) offer some disturbing insights into the failure of Fed officials to understand how deeply intertwined the housing sector and financial markets are.  This New York Times piece goes into much detail regarding this and other less-than-flattering aspects of these meetings.  While residential investment represents a tiny four percent (4%) of Gross Domestic Product (GDP), it has far reaching backward- and forward-linkages into many other components of GDP, such as construction, construction materials, durable goods, home furnishings, brokerage and financial services.  For this reason, it is often said that when it comes to the strong effect residential investment has on the economy, that housing is the “tail that wags the dog.”

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Apartment Market Conditions Holding Steady

The National Multi Housing Council (NMHC) released its Apartment Market Conditions survey results, depicting steadiness in the apartment market, with 62% of respondents stating that conditions were virtually unchanged from the prior quarter.  So the good news for property owners is that conditions appear to have stabilized somewhat, although I still expect to see continued, albeit slow declines throughout the remainder of 2010.  Here’s a link to the full survey results:

http://www.nmhc.org/Content/ServeContent.cfm?ContentItemID=5579&IssueID=164

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Homebuilder Sentiment Moving Sideways

The latest builder confidence index has just been released by the National Association of Home Builders (NAHB).  The current January index is at 15, down from 16 in December and 17 in November, but up Y-O-Y from a dismal 8 in January 2009.  While we’re slightly better off than last year, keep in mind that during the residential construction boom, index levels were in the 70′s.  Any number lower than 50 indicates more builders view conditions as negative as compared to those who them as positive.  Bottom line: we detect some vital signs, but the market is still very much on life support.  Here’s the link to the published index:

http://www.nahb.org/generic.aspx?sectionID=134&genericContentID=529

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