new west conference
Housing Won’t Bottom Out Until Late 2009 or 2010, Economists Say
At the 3rd annual New West conference, top economists forecasted what's next for the Northern Rockies and beyond.By Robert Struckman, 10-24-08
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A big screen image of a howling ghost opened Chris Thornberg’s economic forecast Friday morning at NewWest.Net‘s 3rd Annual Real Estate and Development in the Northern Rockies conference.
So what was Thornberg’s spooky forecast?
“We’re not out of this, by any stretch of the imagination; 2009 is going to be a bad year, not deeply negative, but a little bit negative. We’re not going to come out of this until the first quarter of 2010,” he said. “There will be a lot of bankruptcies. It’ll be bad, but not a depression.”
Thornberg presented his economic forecast and then spoke on a panel at Missoula’s Hilton Garden Inn with regional economist Tobias Madden of the Minneapolis Branch of the Federal Reserve Bank, economist Larry Swanson of the Center for the Rocky Mountain West in Missoula and real estate economist Dave Eacret of Sand Point, Idaho.
The panel’s consensus was that housing prices will stop going down in the latter part of 2009 but won’t begin to rise again until 2011 or later.
“Don’t confuse the bottom with the start of another recovery. Housing markets don’t bounce, they splat,” Thornberg said. 
While others hyped the housing industry, Thornberg has been calling it a bubble and predicting its collapse—and the pain from the end of the American consumer’s overspending—for several years.
Contrary to the howlers, said Thornberg of Los Angeles-based Beacon Economics, he’s become bullish.
Recessions have opportunities, he said. Well-positioned businesses can buy competitors, for instance. Plus, recessions are relatively short-lived. “It’s not the end of the world. It’s not going to be the next Great Depression. This is not 1930. Come back from the ledge. Take a deep breath. Look at what’s going on and why it’s happening,” he said.
“Equity markets,” Thornberg cautioned, “are the drama queen of the financial markets. They always overreact to everything. I would argue there are buy opportunities in the equity markets.”
First, Thornberg discounted the extreme downs and ups on Wall Street these days. “The volatility is due to a fear of the unknown. The fundamentals of the U.S. economy don’t change that rapidly.”
More importantly, he said, it’s a mistake to ask what effect Wall Street has on Main Street. It’s the other way around. The economic panic is a function of the slowdown in the economy. Spending has slowed. Job loss has been huge. And financial firms have lost a lot of money. “No matter how you slice it, something is wrong with the U.S. economy. It’s a recession, folks,” he said.
The housing bubble fed a national equity bubble, across the board, Thornberg said.
“The gross value of all assets went way, way, up. Stocks, bonds, houses, everything. That money wasn’t there. It was phantom wealth. Thirteen or 14 trillion dollars in wealth is going to disappear, go back to the ether where it came from. It wasn’t there,” he said. People overspent because they felt rich.
Who will feel the most pain? “It’s going to be a rough road for builders in the U.S. for quite some time. It doesn’t seem like there’s any bottom in housing starts, which have gone down by two-thirds,” Thornberg said.
The construction slowdown will hurt in Montana. Missoula economist Swanson showed data that Montana’s employment health is very closely tied to construction jobs.
In Idaho, which has overbuilt housing much more than Montana, a more diversified economy—with relatively strong recent growth in technology and manufacturing, for instance—may help it weather the overall economic downturn, Eacret said.
“Don’t panic,” Thornberg concluded. “Good things will rise out of this. We were an economy on an unstable path. Out of the crisis comes opportunity. Recover is inevitable, even if delayed. Remember the maxim: Expansion is for growth, regressions are for market share. Cash is king, and low home prices are good in the long run.”
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Lumber industry threatened by glut of unsold homes
Thursday October 23, 2008
By Timothy R. Brown, Associated Press Writer
JACKSON, Miss. (AP) -- The glut of homes in foreclosure, vacant, or stuck on the market has the nation's lumber industry hanging on by a limb.
Since housing starts hit their peak in mid-2005, demand for lumber used in floors, home frames, and cabinets has declined sharply, and experts say the number of unsold homes would need to significantly decrease before homebuilders commit to building new ones.
Glenn Hughes, a forestry expert with the Mississippi State University Extension Service, said many loggers are faced with difficult decisions. A global economic slowdown, tight credit, and the housing bust are hitting sawmills hard and shutting down logging companies.
"Boy, surviving this downturn. I have talked to a lot of people who have been in the business for many, many, years -- this is probably the roughest they have seen it," Hughes said.
The brutal economics of the housing crisis don't appear to be letting up, continuing to drag down demand for both hardwood lumber, for floors and cabinets, and softwood, used in home frames.
Even if home buyers miraculously returned to the market to purchase unsold homes, Al Schuler, a research economist with the USDA Forest Service, says it may be a little too late to lift up the lumber industry because the inventory of unsold homes is "a huge number."
"We are going to be building smaller houses. We are going to see lot more 2,000 square-foot homes rather than 5,000 square foot," he said.
http://www.theworldlink.com/articles/2008/10/25/news/doc49022a91e76cf893775265.txt
Timber industry falls on tough times
Friday, October 24, 2008
ASTORIA (AP) - A spokesman for Oregon forest owners and wood manufacturers says the economic meltdown is going to be harder on the state's timber industry than was the early 1980s recession that caused a major shakeout.
Ray Wilkeson, legislative director of the Oregon Industries Council, also said the situation caused by the nation's weak housing market will get worse before it gets better.
"The worst thing is we don't really know when we're coming out of it," he said. "There are more foreclosures predicted."
The crisis has brought home construction to a virtual standstill and decreased the demand for lumber.
"Until the housing market stabilizes and the oversupply of housing is absorbed, we'll see new construction stay pretty bleak," he said. "There's only limited demand for the product at a very reduced price."
"Nobody really wants the lumber right now," said Steve Zika, chief executive officer of Hampton Lumber. "Prices are at historic lows.
Full story at:
http://www.theworldlink.com/articles/2008/10/25/news/doc49022a91e76cf893775265.txt