The Least Likely Victims of the Housing Market Slump
Even before the housing market began to decline in earnest, many companies began complaining - not always all that convincingly - that they were suffering collateral damage from the bursting bubble.
Slate.com notes that Ford, for example, tried to blame its poor results for declining sales of pickup trucks to contractors. As the housing market slump has deepened, the damage has become real.
Companies whose fortunes are directly tied to housing and to housing credit have been hit hard. Home builders like Lennar and D.R. Horton have reported sharply lower results; subprime (bad credit mortgage) lenders such as New Century have gone bankrupt.
In today’s Wall Street Journal, Justin Lahart notes that stocks of credit-rating agencies like Moody’s have suffered in recent months because their operations have become too reliant on rating bonds backed by home loans.
The carnage is likely to worsen. The National Association of Realtors reported that existing home sales in March were down 11.3 percent from March 2006. The effects of the housing decline are now spreading to less obvious victims, such as:
– Railroads. Railroads are thriving, thanks in part to rising shipments of coal and corn. But freight trains in recent years have also been full of building materials — cement, lumber, drywall.
– Boat retailers and manufacturers. The industry may have weathered higher gasoline and material prices, but a weaker real estate market is a bigger challenge, for two reasons:
- Entry-level boat buyers are being hit by the resetting of adjustable-rate mortgages.
- Boating sales are concentrated in U.S. coastal areas, such as Florida and California, where the deflation of the bubble is leaving buyers at all price points with less home equity in their properties to tap for boat buying.
– All of Latin America. An excellent article in the Wall Street Journal says that retailers and service companies throughout Latin America are starting to feel the pain of weak housing in el norte. In recent years, hundreds of thousands of Hispanics have found work in construction-related trades.
Even more industries will suffer as declining home prices, rising mortgage interest rates and decreased levels of new construction eat away at incomes and buying power throughout the Western Hemisphere. But which ones?
SOURCE: Slate