Saturday, July 24, 2010

How Texas Avoided the Great Recession and Real Estate Bubble: Market-Oriented Land Use Policies

From the article "How Texas Avoided the Great Recession":

"One reason that Texas did so well is that it fully escaped the “housing bubble” that did so much damage in California, Florida, Arizona, Nevada and other states (see chart above). One key factor was the state’s liberal, market oriented land use policies. This served to help keep the price of land low while profligate lending increased demand. More importantly, still sufficient new housing was built, and affordably. By contrast, places with highly restrictive land use policies (California, Florida and other places, saw prices rise to unprecedented heights), making it impossible for builders to supply sufficient new housing at affordable prices.

Speculation is often blamed as having contributed to the higher house prices that developed in California and Florida. This is correct. Moreover, with some of the strongest demand in the United States, Texas would seem to have been a candidate for rampant speculation. After all, it happened back in the 1970s when a huge oversupply of housing, industrial, retail and office space collapsed in the face of falling energy prices.

Yet the speculators were not drawn to the metropolitan areas of Texas. This is because speculators or "flippers" are not drawn by plenty, but by perceived scarcity. In housing, a sure road to scarcity is to limit the supply of buildable land by outlawing development on much that might otherwise be available.

However, the speculators did not miss California and Florida. Nor did they miss Las Vegas or Phoenix, where the price of land for new housing rose between five and 10 times as the housing bubble developed. Despite their near limitless expanse of land, much of it was off limits to building, and the exorbitant price increases were thus to be expected."

MP: The graph above shows that Texas never had a real estate bubble like those in California, Florida, Arizona or Nevada.  Consequently, Texas never had the real estate crash like in the other states.  This article presents an interesting perspective about how restrictive land use policies contributed to the real estate bubbles around the country, and how Texas may have escaped the Great Recession at least partly due to more liberal land use policies. 

HT: Romell Nandi

Sen. John Kerry Skips Town on Sails Tax

Boston Herald -- "Sen. John Kerry, who has repeatedly voted to raise taxes while in Congress, dodged a whopping six-figure state tax bill on his new multimillion-dollar yacht by mooring her in Newport, Rhode Island, instead of in Nantucket, MA, where the senator summers. Cash-strapped Massachusetts still collects a 6.25% sales tax and an annual excise tax on yachts. Sources say Isabel sold for something in the neighborhood of $7 million, meaning Kerry saved approximately $437,500 in sales tax and an annual excise tax of about $70,000."

HT: Matt B.

Where the Jobs Are: The Top 25 Counties in U.S.

From CNN Money, note that 5 out of the top 7 counties are in one state. 

HT: Romell Nandi

Friday, July 23, 2010

Markets in Everything: The $35 Computer

CS Monitor -- "It looks like an iPad, only it's 1/14th the cost: India has unveiled the prototype of a $35 basic touchscreen tablet aimed at students, which it hopes to bring into production by 2011.

If the Indian government can find a manufacturer, the Linux operating system-based computer would be the latest in a string of "world's cheapest" innovations to hit the market out of India, which is home to the 100,000 rupee ($2,127) compact Nano car, the 749 rupees ($16) water purifier and the $2,000 open-heart surgery."

HT: Joy Pavelski

FL Home Sales Increase 22nd Month Year-to-Year, Median Prices Up for Fourth Straight Month

ORLANDO, FL -– Sales of existing homes in Florida rose in June, marking 22 consecutive months that sales activity has increased in the year-to-year comparison, according to the latest housing data released yesterday by the Florida Realtors.  Other highlights of the report include:

1. A total of 18,038 single-family existing homes sold statewide last month compared to 15,732 homes last year (see chart above). 

2. June’s statewide existing home sales increased 7.7% over statewide sales activity in May of 16,748 homes.

3. June's statewide existing-home median price of $143,400 was 2.1% higher than May’s statewide existing-home median price of $140,400, marking the fourth consecutive month that Florida's median home price has increased over the previous month.

MP: This almost seems like there might actually be something resembling a real estate recovery going on in Florida - 22 straight months of sales gains, and four consecutive months of increasing median home prices?

Thursday, July 22, 2010

Bouillabaisse

1. Family companies represent 60% of the nation's employment and almost 80% of all new jobs. Family businesses control roughly 50% of the country's GDP and some 35% of the Fortune 500 are family businesses.

2. There is a real hunger in consumers for customized, personalized products, and a new wave of entrepreneur is capitalizing on this trend to bring "customization to commerce" for chocolate, men’s dress shirts, and a whole lot more.

3. Maywood, a city in California now outsources everything.  Sky hasn't fallen.

4. Another California city, Bell (population of 38,000), one of the poorest municipalities in Los Angeles County, is paying its city manager an annual salary of $800,000 and its police chief is making $457,000 per year. Outsourcing anyone?

5. Books sold on the Kindle are now outpacing the hardcover books Amazon sells. In the past month, for every 100 hardcover books sold, there have been 180 Kindle books sold through Amazon.

6. Wi-Fi service is now offered on more than one-third of the nation's passenger planes.

Rail Traffic Continues to Post Gains vs. Last Year

The Association of American Railroads released its weekly update today on rail traffic through last week, reporting that rail activity continues to show improvements compared to the same weeks last year.  Highlights include:

1. U.S. railroads originated 282,199 carloads for the week ending July 17, 2010, up 5.5% compared with the same week in 2009, but down 13.8% from pre-recession levels in 2008.

2. Intermodal traffic totaled 227,661 trailers and containers, up 20.1% from the same week a year ago and down only 2.5% compared with 2008. Compared with the same week in 2009, container volume increased 22.1% and trailer volume rose 10%. Compared with the same week in 2008, container volume increased 5.6% and trailer volume dropped 32.5%.

3. For the first 28 weeks of 2010, U.S. railroads reported cumulative volume of 7,874,125 carloads, up 7.3% from 2009, but down 13.2% from 2008, and 5,855,507 trailers or containers, up 13.1% from 2009, but down 6.4% from 2008.

4. Combined North American rail volume for the first 28 weeks of 2010 on 13 reporting U.S., Canadian and Mexican railroads totaled 10,278,759 carloads, up 10.3% from last year, and 7,319,184 trailers and containers, up 13.8% from last year.

MP: Overall, this was a fairly positive report, despite the AAR's headline "Weekly Rail Traffic Continues to Reflect Sluggish Economy."  Compared to the same week last year, both carload and intermodal volumes were up, by 5.5% and 20.1% respectively.  The graph above displays 4-week moving average growth rates for both series (to smooth out the weekly fluctuations), and shows ongoing weekly improvements in rail traffic compared to last year, especially for intermodal shipping.  Intermodal traffic volume has registered year-to-year gains for 30 straight weeks, starting late last December; and the last 20 weeks have all been double-digit gains.   

Markets in Everything: The Pedal Pub

PedalPub.com

Median Home Price Reaches 20-Month High

One bright spot from today's housing report from the National Association of Realtors is that the median home price in June reached a 20-month high of $183,700, the highest median home price since October of 2008 (see chart above).   Also, existing-home sales in June were 9.8% above last year, which marks the 13th consecutive month of year-to-year sales gains, following at least 30 consecutive months of year-to-year declines.   

Wednesday, July 21, 2010

One More Reason Wal-Mart Deserves Nobel Prize


NY Times Economix Blog -- "Mr. Mobarak, a Bangladeshi who has advised his country’s government, found that the presence of apparel jobs in Bangladesh appears to bolster school enrollments of girls, especially for young girls (see chart above).

“A doubling of garment jobs causes a 6.71 percent increase in the probability that a 5-year-old girl is in school,” Mr. Mobarak writes in a summary of his findings.

For India, Bangladesh and other developing countries, these findings provide a reason for optimism. Governments in these places are struggling to improve the quality of infrastructure — hard (highways, ports, electricity) and soft (schools, courts, basic governance) – but private forces unleashed by nascent economic reforms and globalization are not standing idly by. They are already changing societies and economies."

MP: Thanks to Milton Recht for sending this along, and for pointing out that Wal-Mart should get some of the credit for this phenomenon by providing a market for all of the clothing produced in countries like Bangladesh. 

California Mortgage Defaults Fall to 3-Year Low

DQNews -- "The number of California homes pushed into the formal foreclosure process between April and June dropped for the fifth consecutive quarter to the lowest level in three years. The declines were greatest in the most affordable areas, where foreclosure activity continues to fall from extremely high levels over the past two years.  Highlights include:

1. A total of 70,051 Notices of Default (NODs) were filed at county recorder offices during the April-to-June period. That was down 13.6% from 81,054 for the prior quarter, and down 43.8% from 124,562 in second-quarter 2009. 

2. Last quarter's total was the lowest since the second-quarter of 2007, when 53,943 NODs were recorded. The peak was in first-quarter 2009 when 135,431 homeowners received foreclosure notices.

3. Foreclosure resales accounted for 36% of all California resale activity last quarter. It was down from a revised 42.5% the prior quarter, and down from 49.9% a year ago. The peak was 57.8 percent in first-quarter 2009."
 
MP: This news about California defaults falling to a three-year low, and to a level in 2010:Q2 of about half of the level in 2009:Q1, suggests that the real estate problems in California and other markets are "slowly fading," and confirms some commentary about the economy in general from Scott Grannis, who writes today that:
 
"The economy's problems are slowly fading.....   Jobs are now being created, albeit slowly, but they are no longer being destroyed. Those who are working are doing just fine, as productivity has been quite healthy. Much of the world is doing pretty well, and some places, like China and India, are growing like weeds. Commodity prices show no sign of flagging demand. The yield curve is very steep, and that makes it easy for bank profits to mushroom; plus, a steep yield curve has been a very reliable predictor of recoveries."

Tuesday, July 20, 2010

ASA Staffing Index 24% Above Same Wk. Last Year

The weekly American Association Staffing Index for temporary help and contract work continues to show strong gains compared to the same week in the previous year, and the index has increased in every week this year vs. 2009 (see chart abvoe). For the last twelve weeks (starting April 19) the weekly gains have been above 20%, and for the last 20 weeks (starting Feb. 15) the gains have been above 10%. Compared to last year, the ASA Index was 24% higher during the 28th week of this year (July 5 - 11 this year).

High Stakes Test: Can Big Government Successfully Organize the Dynamic, Information Age Economy?

David Brooks in today's NY Times:

"When historians look back on the period between 2001 and 2011, they will be amazed that a nation that professed to hate bureaucracy produced so much of it.

First, Democrats passed a health care law. This law created 183 new agencies, commissions, panels and other bodies.  Democrats also passed a financial reform law. The law that originally created the Federal Reserve was a mere 31 pages. The Sarbanes-Oxley banking reform act, passed in 2002, was only 66 pages. But the 2010 financial reform law was 2,319 pages, an intricately engineered technocratic apparatus. As Mark J. Perry of the American Enterprise Institute noted, the financial reform law is seven times longer than the last five pieces of banking legislation combined.

Once again, government experts were told to take a complex, decentralized system — in this case the financial markets — and impose rules, rationality and order. The law creates one über-panel, the Financial Stability Oversight Council. It directs government experts to write rules in 243 separate areas.

This progressive era amounts to a high-stakes test. If the country remains safe and the health care and financial reforms work, then we will have witnessed a life-altering event. We’ll have received powerful evidence that central regulations can successfully organize fast-moving information-age societies.

If the reforms fail — if they kick off devastating unintended consequences or saddle the country with a maze of sclerotic regulations — then the popular backlash will be ferocious. Large sectors of the population will feel as if they were subjected to a doomed experiment they did not consent to. They will feel as if their country has been hijacked by a self-serving professional class mostly interested in providing for themselves.

If that backlash gains strength, well, what’s the 21st-century version of the guillotine?"

LEIs/CEIs: U.K., China, Spain, France and Germany

Over the last week, The Conference Board has released leading economic indexes (LEIs) and coincident economic indexes (CEIs) for the following five countries, which all registered increases (or stayed the same) in May:

1. The U.K. leading economic index increased by 0.3% in May to 102.4, following gains of 0.6% in April and 1.0% in March. The Coincident Economic Indicator (CEI) for the U.K. increased by 0.1% in May.

2. China's leading economic index increased by 0.8% in May, and China's CEI increased 0.9% in May, following a 1.4% increase in April and a 0.5% increase in March.


3. The Conference Board LEI for Spain remained unchanged in May after increasing in April and the Coincident Economic Index (CEI) increased 0.1% in May.

4. The LEI for France increased 0.3% in May and the CEI increased 0.2%.

5. Germany's LEI increased 0.5% in May and its CEI increased 0.5%.

Bottom Line: Steady and positive growth is ongoing in all of these countries, and
can be expected to continue in the future.

Markets in Everything: You Drink, They Drive

Minnesota's Premier Designated Driving Service

Monday, July 19, 2010

Markets in Everything: Rent-A-Friend

Scott Rosenbaum, 30, has a database of 218,000 men and women who members of his site Rent a Friend can hire "to hang out with, go to a movie or restaurant with," or be "someone to show you around an unfamiliar town." The US-based site already has around 2,000 members, each paying up to $25 to access the site.

When they see a friend they like the look of, they can rent them for as little as $10 an hour. Rosenbaum said he wanted to "go a step back" from dating sites and offer a service that was, in the words of his website "strictly platonic." He told The Times: "No one was offering friendship."

The service is not just about getting people to meet up for a drink or a meal. It lists a host of diverse activities that members might like to hire friends for, including "teaching manners," "snowboarding," "family functions" and just "hanging out."

Link.

HT: Steve Bartin


Vogue's September Issue: +100 Ad Pages vs. 2009

Crain's New York -- "Luxury magazines, like the economy, are making a slow comeback. On Monday, Vogue magazine will announce ad-pages results for its all-important September issue, and industry insiders say that the fashion monthly will show a spike of 100 advertising pages, or 23% over a year ago, for a total of 529 (see chart above).

The relatively improved economic climate has been boosting numbers for Vogue's sister titles at Condé Nast, the most luxury-oriented of the major magazine publishers and the one that was hardest hit by the downturn. But even 23% growth for the September issue—in which designers and fashion companies display their next season's lineups—barely puts Vogue back in the league it was in a few years ago.

In 2007, the magazine carried a record 727 ad pages—and weighed in at four pounds nine ounces. In 2008, Vogue dropped 7% of its ad-weight, coming in at 674 pages."


Double Dip? Seven Reasons Why Not

From Lord Abbett's senior economist Milton Ezrati in today's WSJ:

"It seems these days that half the headlines in the financial media fear a double-dip recession, as do half the conversations on Wall Street. There certainly are risks, not least in Europe’s financial difficulties. But still, there are reasons to question such widespread concerns. History, after all, offers only one true double-dip experience, and that grew out of a policy error. More, the actual data on the economy fly in the face of such an outlook. Following are seven reasons to doubt the double-dip outlook."

The reasons include: Consumer spending is firm, housing data are misleading, business spending and exports are awfully strong for a dip, overall production is good, employment is not so threatening, financial markets are healthier than the headlines imply, and China continues to grow.

Read the rest here.

Exhibit A: Increased Worker Productivity



Watch an amazing video of robotic inventory and mobile fulfillment that triples worker productivity and reduces errors. See related CD post here on how increases in worker productivity have eliminated millions of manufacturing jobs.

Sunday, July 18, 2010

CA June Home Sales: Median Prices Rise for 8th Month, Foreclosure Sales Fall to 28-Month Low

Highlights from the DQNews report on June California home sales:

1. In June, 43,964 houses and condos were sold in California, which was an increase of 7.3% percent from May (40,965), and down by 0.50% from the 44,167 houses sold in June 2009 (see chart).

2. The median price for a California home sold in June was $270,000, up 9.8% from $246,000 in June 2009, and down by 2.9% from $278,000 in May (see chart).

3. The year-over-year increase in median home prices in June is the eighth month in a row of an increase (starting in November 2009, which likely marks the bottom for home prices in CA), following 27 months of year-over-year declines.

4. Of the homes sold in June, 34.7% were properties that had been foreclosed on during the past year, down from 35.4% in May and down from 45.6% in June of 2009 (see chart). The last time foreclosure resales were as low was in March 2008, 28 months ago.

Seattle Shipping Boom: +45% Gain YTD from 2009


The chart above shows monthly shipping volume (TEUs = twenty-foot equivalent units, data here) at the Port of Seattle (America's 10th largest port, and third largest port on the West Coast).  As might be expected, shipping at the Seattle port is dominated by trade with China, to the extent that more than half (56%) of the shipping volume (by dollar amount) is with China, and the almost $19 billion of shipping with China in 2009 was more than the value of shipping with the next 100 countries combined.   

Shipping volume for June (190,129 TEUs) was 49% above last year's shipping in June, and this follows year-to-year increases of 57.38% in May, 57.2% in April, 39.4% in March, 48.2% in February and 21.7% in January.  Year-to-date, shipping volume at the Seattle port is above last year by 45.2%.  At this pace, annual Seattle shipping in 2010 will likely exceed both last year's shipping volume of 1.58 million TEUs and the 1.70 million TEUs in 2008, and possibly even the 1.973 TEUs in 2007.