Sunday, December 2, 2007

Housing bubble? What housing bubble?

That bubble done popped.

No, what we got here is a New Business Bubble. Transpose those two charts, the one showing new building starts, and the one showing new businesses, and tell me we don't have a problem in the making. It looks to me as though the madness has just transferred to commercial lending.

Put bluntly, the new business starts are exactly 10x the starts in 1997. We've gone from 41.9 starts in 1997, to a peak of 468, and we are still at 409.


At the same time, building permits have gone from 126 in 1997, to a peak of 392, and now down to 82. Yes, 35% less than 1997.

(I'm still trying to imagine 2000 realters running around trying to sell 82 houses...)

The obvious answer is that this incredible business start statistic is just lagging the housing market. But the end result will probably be the same. Actually, worse. When a house loses value, you can still live in it. When a business starts losing money, you can't do anything but fall behind on payments.

There are going to be a huge, HUGE, numbers of businesses failing over the next 3 or 4 years.

People move to Bend, and they have to open businesses, because there isn't anything else happening here. I'm going to guess a bunch of these businesses are related to building, but many more are dream businesses, retail and restaurants and salons.

One last thing to say about the Bulletin housing article.

Come on. Give us the month to month, dammit! Third Quarter? That includes July and August and Sept. That will really hide the extent of the problem. What we really need to know are the statistics from Sept. and Oct. and Nov.: I guarantee you, those stats are much, much worse.


Duncan McGeary said...

I so wish someone would do a survey of how many businesses and retail footage we have here per capita.

I seem to remember a study some years ago, and I remember it being in the NY Times, but I've never been able to find it, but it said we were the second most over retailed town in America, behind Las Vegas.

And this was many business starts ago.

I know this though -- we are way, way over retailed.

I don't know why no one talks about this. Certainly, the media has stayed away.

But I think it may be time for me to bring this subject up on a regular basis.

Do some research folks! Find out what the per capita density is for your type of business, and find out what Bend has.

I'll bet you'll find you're just piling on.

IHateToBurstYourBubble said...

That huge spike in business starts REALLY reflects the realization that cloaking all business & other assets in an LLC effectively protects people from lawsuits & compartmentalizes losses.

Starting Start you up an LLC to protect it from slip & fall scamsters in the store.

Believe me, the LLC spike is just standard operating procedure CYA bullshit. There ARE NOT 10X the "new business starts" there were 10 years ago.

Duncan McGeary said...

That would seem more like a change in legal status than a new business startup.

I can believe those numbers, based on what I see. The big jump from 378 in 1st quarter 2006, to 409 this last quarter, is certainly reflected by the number of businesses I've seen open in the last few months.

So, maybe not ten times, but certainly way more than the increase in population.

It's getting so any business is razor close to profitability, and the way things are going, that doesn't bode well.