Blood in the water: Housing starts at decade-long low

    The U.S. Commerce Department reported this morning that the 1.38 million new homes and apartments built in July was the lowest figure since January 1997, down almost 21 percent from a year ago.  The government agency also reported that unemployment figures, as indicated by those filing for benefits, had increased by 6,000, a surprise to people who watch such things and probably an accelerant for yet another triple-digit stock market drop this morning.
    I'm not an economist, nor do I play one at this web site.  But I do own two homes and a piece of "unimproved" property, as well as a few shares of this and that company, and I suppose that gives me the right to offer some thoughts and whine a little.  So here goes.
    I wouldn't show one scintilla of mercy to those idiots who gave away free money in the form of sub-prime loans.  Let them fend for themselves the way a potential seven million people who face foreclosure on their over-leveraged homes will have to (a prediction by the loud but savvy Wall Street sage, Jim Cramer).  Ditto the equally dumb but exceedingly greedy hedge fund managers who bought and consolidated the dopey loans, and then fed the rotten paper to their customers.   Greed is not good...
    Read the feature on the Montes family of California in today's Wall Street Journal.  Tired of renting an apartment, Mario and Leticia Montes signed on for a sub-prime loan two years ago for a $567,000 house in California.  Their payments will rise ("reset") in December to $50,000 annually from $38,400 this year.  The couple makes a combined $90,000 per year.  They already had two car loans and a loan to pay for a daughter's education.  What were their lenders thinking?  What were the Montes' thinking?  Yet there are tens of thousands of Montes' out there.
    I don't know if the Federal Reserve lowering interest rates will re-stimulate the housing market, but instinct tells me no.  It is too late for the Montes' and the others who were suckered by low interest and no down payment.  The poison may just have to flow out of the patient for a while.
    I have my own take on the unemployment numbers.  As I have traveled through the southeastern U.S. and stopped to look at many homes under construction, Spanish is the dominant language at the sites, and I have always suspected that many of those workers were undocumented.  As new home construction began its descent, the first ones laid off were undocumented, and so the official unemployment numbers were unaffected.  But now as new construction grinds pretty much toward a halt,  we can expect the unemployment numbers to escalate.
    It is hard to see anything too positive in the near term, although in the housing market, like the stock market, pain often provides excellent buying opportunities.  When we hear of some, we will pass them along...and hope you do the same.