Is gov't aid nearing its limits?
Construction of new homes dipped 10% last month. What does the surprising drop say about our recovery? Bob Moon reports.
A construction worker measures a window as he works on a new home at the Olson Homes Garden Walk development in Hayward, Calif. (Justin Sullivan/Getty Images)
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Kai Ryssdal: We will begin today with the numbers. Not those, we'll get to those later. You know that. The numbers of interest today were about new housing construction and inflation. Inflation-wise there is still not a whole lot to worry about. The Consumer Price Index rose a modest two-tenths of 1 percent. That's an OK number given the state of the rest of the economy. Of course that leads us back to the housing market.
We learned this morning new home construction dropped more than 10 percent in October. Now one month's shaky numbers do not a double-dip recession make, but the economy did get some high level attention today, as our senior business correspondent Bob Moon reports.
BOB MOON: The surprise downturn was a startling revelation for many economists. It shows just how critical government support remains to the barely budding economic recovery. It's also raising urgent questions about just how long the government can keep this up.
David Crowe is chief economist at the National Association of Home Builders. He says while Washington wrangled over extending a tax credit for homebuyers, nervous builders put construction on hold.
DAVID CROWE: The builders slowed down in production to make sure they didn't get ahead of themselves.
They've cut back, in fact, to their smallest new-home inventory in more than a quarter-century. Get this: the number of new homes for sale has dwindled to just 251,000 in all, barely the size of some small towns.
Congress agreed earlier this month to extend the tax credit, and Crowe hopes that will now "work its magic," as he puts it, to turn around home sales and the overall economy.
But is just five more months really enough time to rekindle sales? Buyers need to sign a purchase agreement by the end of April to get the tax credit.
CROWE: After that, we've got to hope that that was the spark and the economy's starting to move forward, 'cause we've already told the Congress we're not going to come back and ask for more.
President Obama underscored that government support is nearing its limits, during an interview today with Fox News.
PRESIDENT OBAMA: If we keep on adding to the debt, even in the midst of this recovery, at some point people could lose confidence in the U.S. economy, in a way that could actually lead to a double-dip recession.
But today's numbers raise an additional worry: It's not just that the government is nearing its limits, but that the impact of all that stimulus spending might be limited, as well.
I'm Bob Moon for Marketplace.
Comments
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11/19/2009
The points questioning my reference to a "small town" are well taken and duly noted. By the way, since we're based in Los Angeles, I wasn't viewing this from the banks of the Hudson, but I actually did have a nearby "town" like Fresno, Calif., in mind -- population 909,000. Since growing up in Southern California, I've always thought of Fresno, respectfully, as a small "town." Arguably, I should have used "some small cities." Apologies for my imprecise wording. Which is, to be precise, another way of saying that I was wrong.
From San Antonio, TX, 11/19/2009
Personally I hope the government aid, mainly in the form of interest rates, ends soon. Any inflation at all after a bubble burst is a scary thing. No inflation at all, still means we're pretending like all that money still exists in the marketplace. It doesn't, it's gone. When can the value of my dollar go up?
From Milan, MI, 11/18/2009
The government isn't *nearing* its limits; the government passed its limits before Obama took office, but instead of imposing fiscal discipline as he'd promised, he took that out-of-control spending as a good start.
11/18/2009
Obama is telling us to not get in debt? Isn't this the same guy that enticed millions of Americans into getting a car loans with the Cash4Clunkers program? I can't wait to see the wave of repossessions hit (see http://www.repofinder.com) that sinks us into another recession.
From Portland, OR, 11/18/2009
Echoing Bill Turner's comments, I was taken aback by the statement that, "the number of new homes for sale has dwindled to just 251,000 in all, barely the size of some small towns."
One of the things I love about Marketplace is your normal avoidance of innumeracy, but this time you seemed to have missed the mark. A quick Googling of "average number occupants single family homes U S" reveals a figure of 2.8 according to the Census Bureau. This would leave your small town with a population of over 700,000. I live in Portland, OR where we have a population of 550,000. I guess I have to start telling people I live in megahamlet.
From ME, 11/18/2009
Appalling. Yet again.
What is this love affair with "Growth"
Are you all really that incapable of the concept that there are only so many square feet of Planet?
You decry Energy use, yet applaud not only the consumption required to CLEAR & PAVE land to BUILD new houses, but then the new residents will obviously need lots of new power to run them.
Also, no one mentions that DEMAND is what drives it - you cannot just keep building homes (with no regard to the limits I just mentioned) unless you have the CONSTANTLY INCREASING POPULATION to fill them.
40 years ago we actually talked about optimal Global Populations - now it's the mantra, "Sustainable Growth" !! oxymoron, anyone??
Claude Levi-Strauss recently passed away, just short of his 101st birthday - NPR even had a spot about it, and a quote:
"Mr. LEVI-STRAUSS: (Through Translator) There is today a frightful
disappearance of living species, be they plants or animal. And it's clear that
the density of human beings has become so great, if I can say so, that they
have begun to poison themselves. And the world on which I am finishing my
existence is no longer a world that I like."
No one seemed to notice or remark upon what he said - the wisdom of a Century wasted on the MEMEME TODAY society.
I agree with him, but am not so eloquent.
From OH, 11/18/2009
I take exception to a remark in this story that the inventory of unsold new homes for sale has 'dwindled to just 251,000 in all, barely the size of some small towns.' The writer must be typical of mainstream US press & has never ventured beyond New York City & thus believes that the East & Hudson rivers define the limits of civilization. A 'town' of 251,000 homes would likely have a population of 500,000 to 1,000,000 residents and would be a fair-sized city!
I think the writer needs some schooling not only in geography but also the population distribution in the US, as well as the rest of the world.
From Jacksonville, FL, 11/18/2009
President Obama is now standing in quicksand and his democratic party majority does not care. This is reflected in the polls. Mr. Obama put too much on the agenda for voters.
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