Scott Brown - on the housing bubble & the need for job growth

24 Aug 2011 Bloomberg
Scott Brown is chief economist at Raymond James & Associates. He is ranked one of the most accurate economic forecasters by Bloomberg. This is an incredibly important video.

[Today's numbers are another indication that the housing market remains unstable. What's driving this instability?]

Well the spring's selling season was a major disappointment. We had seen pretty decent job growth in the early spring [!] there was hope we would see the housing sector turn the corner. But ultimately we're going to need to see really strong job growth to really support housing [Absolutely]. You have credit issues, appraisal issues that are keeping activity weak.

[The mortgages on 6.5 million homes had late payments or are in foreclosure in June. With no job growth how much longer will the housing sector continue to languish?]

It's really going to be several years. Conditions do vary around the country, certainly the areas that had the bigger housing bubbles are experiencing the bigger pops. You have a lot of homeowners that are under water on their mortgages. Most of those will be able to stay in their homes and continue to make payments. The problem is if somebody loses their job, if somebody gets sick, get divorced then selling that home will become a problem.

[The National Association of Home Builders says each new home built creates an average of three jobs and about $90,000 in taxes. Without those jobs and without those taxes what's the outlook for communities that are already decimated? Is there a real possibility that some cities and towns will never recover from this?]

It's a very lengthy process. It's going to be a long time to get construction jobs back. It would have been nice to see a stimulus to road building, bridge repairs things like that where there would be some transfer of skills from construction workers to those investment projects [Amazing]. We knew from the beginning that this was not a typical recession. Recessions from financial crises are more severe they last much longer. And recoveries really take a long time.

[Even with mortgage rates at a 50-year low will that glut of existing homes and the prospects of foreclosures keep builders from starting new projects?]

I think that's the case. We'll see some activity levels obviously in the more attractive locations of the country. And again some of the areas that didn't have the housing bubbles necessarily aren't going to see the pop. But it's going to be a mixed bag around the country. In aggregate this is going to be pretty slow going. You really need to see much stronger job growth. We would like to see job gains, non-farm payrolls around 300,000 to 400,000 or so per month every month for three of four years. It just doesn't seem likely any time soon [Oh my god]

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