The Wall Street Journal is reporting Macy’s Drops ‘Mock Homes’ for Martha Stewart
Last spring, Macy’s Inc. Chief Executive Terry Lundgren came up with an ambitious plan to display a massive new line of home goods produced exclusively by Martha Stewart: creating 3,000-square foot mock “homes” in key stores. Home builder KB Home planned to build the huge showcases inside Macy’s stores in such cities as New York, Chicago and San Francisco.
But Macy’s now has canceled the mock-home plan, citing a sharp decline in the housing market.
There you have it. Not only are cancellations of real homes soaring but cancellations of fake houses are soaring as well.
Kevin Depew on Minyanville was talking about this today in Five Things.
In a sign of yet more deterioration in housing, KB Home (KBH) is reportedly even seeing a spike in order cancellations for fake houses.
- The Department story Macy’s (M) has reportedly canceled plans to build 3,000-square foot fake homes inside stores in such cities as New York, Chicago and San Francisco, according to the Wall Street Journal.
- The fake houses were part of an ambitious plan to display a large new line of home goods produced by Martha Stewart (MSO) the newspaper said.
- The department store is canceling the plans due to a sharp decline in the housing market.
- You know, that “sharp decline” in housing that is not spilling over into other areas of the economy… except retailers, automakers and other businesses that make money by selling things to people.
- Home builder KB Home (KBH) had been in talks with Macy’s to build the fake homes as part of a “daredevil discussion” between former KB Chief Executive Bruce Karatz and Macy’s Chief Executive Terry Lundgren, KB Home spokeswoman Caroline Shaw told the Journal.
- But building a fake house inside a department store “takes an immense amount of logistics and resources that both sides were not ready to allocate at that time,” Shaw said.
- This cautionary tale just serves to illustrate that even the fake house construction market is weakening more than expected due to fallout from the real estate mania.
Housing Bubble News Interview
On another note, I was interviewed last week by Housing Bubble News.
Here is a portion of that interview:
HB: Thanks for joining us Mish. When did you first become interested in the housing market?
Mish: I started watching housing as a bubble phenomenon in 2003 or so. Housing was clearly in a bubble already but that bubble soared exponentially in 2004 and 2005. I was lucky to have called the precise top in the summer of 2005. I did so on the basis of the cover of Time Magazine ‘Home $weet Home’. The subtitle was ‘Why we are gaga over real estate’.
I looked at that and said ‘That’s it’. At the time people were camping out overnight in Florida for a chance to buy a condo. Prices were rising every day. That was another key signal. When things get that nuts there are no buyers left.
Here is an interesting picture that I created, overlaying my thoughts on top of a chart of Japanese land prices.
Each arrow was put out real time. The hardest arrow was the first one. It seemed like a top was coming but it was not confirmed until much later although I was sure I was right that summer. I have not updated the chart for a while now.
HB: Have you ever seen a U.S. bubble that is comparable to this one?
Mish: There has never been a housing bubble in the US as big as this one, on a national scale. Perhaps some international bubbles have been as big. Vancouver Canada is going to implode like Florida did. Spain and the UK are huge problem areas right now. The bubble in Japan was arguably bigger and it took 18 years to unwind.
HB: What are the three biggest reasons why we ended up in this mess, and is there anything we can do to reverse the damage that has been done?
Mish: We ended up in this mess because of bad policies from Congress, bad policies from this administration, and bad policies from the Fed, all compounded by consumer greed. That is a toxic mix. Starting with Congress we have had policies that encouraged housing via tax breaks. That is a violation of sound free market policies. We had the creation of Fannie Mae. There were 300 some odd programs to make housing affordable.
Well, guess what happens when you go pushing houses on everyone and handing out tax breaks? Prices go up. The more programs that were created to make housing affordable the higher prices went. Illinois Governor Rod Blagojevich went off the deep end with a program guaranteeing mortgage loans for illegal aliens. The peak of insanity was when Alphonso Jackson, Housing and Urban Development Secretary actually went so far as to send this message to private sub-prime lenders: ‘I am absolutely emphatic about winning back our share of the market that has slipped away to subprime lenders.’ Look at the insanity. Government was talking about winning market share from the private sector on housing.
Then of course we have Bush’s Ownership Policy making renters feel like second class citizens. Government has no business promoting one form of housing over another. The Fed’s role in this was slashing interest rates to 1 percent in an inane attempt to prevent deflation in the aftermath of the last recession. At the same time Greenspan openly endorsed ARMs right at the bottom of interest rate yields. Greenspan is a man who was wrong at every major turn. History will not treat him kindly. The role of consumer greed should be obvious.
HB: How long will it be before housing finally hits bottom? And where will prices decline the most?
Mish: It took Japan 18 years to hit bottom. I suspect it will take at least 5 to 7 here and 5 is very optimistic. It could easily take 10 years or more. My best guess is 7 but it all depends on what the Fed does to fight it. Ironically enough, the more the Fed fights it the longer it will take. That is what happened in Japan and it will likely happen here. Prices will decline most in the bubble areas: California, Florida, Phoenix, Las Vegas, Boston. Some of the rust belt states where masses of jobs were lost will also get hit hard. The process has already started. Florida is a disaster already: ground zero of bubble busting.
HB: What do you think about the proposed sub-prime bailouts? Will they help or cost more money than they are worth?
Mish: Government intervention is one of the causes of the housing bubble. It is axiomatic that the problem cannot be the solution. Note that Congress acted too late anyway.
Government always does. The market already imposed its solution to runaway credit and ridiculous lending standards: the market’s solution was a subprime lending blowup and forced tightening of lending standards. If the free market is given a chance to work it will. Bear in mind some will say the free market caused this reckless expansion of credit in the first place and government is needed to clean it up. That is ass backwards. Remember my answer to what caused the problem? It was government intervention compounded by the Fed that allowed subprime lenders to wreck havoc.
For a complete text of the interview click on the above link.
Coming Up: a post called “Rampant Inflation“.
Stay tuned in.
Mike Shedlock / Mish/