Conventional wisdom says that trade jobs related to housing will remain strong even if new home construction takes a tumble. I guess the theory is that people will have to maintain their houses and will be putting more into them as opposed to buying new houses. These things are hard to debate with the “housing will never die” crowd so sometimes you just have to wait for a practical example. I just found one.
The Sydney Morning Herald is reporting a renovators’ nightmare for builders.
Sydney’s infatuation with home improvements has abruptly ended, as evidence grows that the end of the housing boom is hitting the city’s economy.
The value of home renovations in NSW has plunged $120 million in just three months, or more than 20 per cent – the largest fall in dollar terms since the Bureau of Statistics began collecting records in 1974.
The number of home building starts in the state also fell, as did the total value of building work in the March quarter.
Architects, seen as bellwethers for the building industry and the broader economy, said yesterday that their workloads had held up nationally but fallen by a third in Sydney since the peak of the boom two years ago.
We have already seen consumer spending and home sales drop like a rock in both the UK and Australia. One argument currently floating around in the US is that we aren’t making any more land. The Last time I checked they were not making land in London any more either. Japan has not made any land recently but that did not stop prices from falling for 18 consecutive years.
The UK is just about finished year one of a housing bust and Australia is well into year two. Already UK retailers are clamoring for lower interest rates to prop up consumer spending. The first of probably many rates cuts in the UK is likely in August. I doubt it will do any good. Consumers are just plain tapped out and job losses are mounting.
The UK “Consumer Spending Express Train” has left the station. It is now heading South. It may be years before it heads back North. Look for Sydney to lead. I suspect we will soon be hearing about “Renovators’ Nightmares” in the UK. A liquidity trap is coming your way soon.
Meanwhile, back in the US, consumers merrily go about their business buying homes sight unseen. Check out this article in Newsweek Business.
“In the last year Stocker has also bought rentals in Alabama and Florida; he hopes to buy at least 10 altogether. ‘Next year I plan to buy a motorcycle and take a tour of my properties,’ he says, since he’s never seen any of them.”
These Johnny-Come-Latelies accumulating condos and houses sight unseen will soon be in for a rude awakening. Professional investors are for the most part gone but amateurs are still bidding up properties even with inventories of unsold homes skyrocketing in Boston, California, Las Vegas and other places. 80% of the condos in Florida are now being sold to “investors”. The writing’s on the wall if anyone would bother to stop and read it.
Mike Shedlock / Mish/