On Housing, the Answer Remains the Same

Although home-builder stocks tested new highs once again on the heels of this morning's housing data, I can't help but question whether the unrelenting euphoria is justified.

As the chart shows, we saw a similar pattern of data being reported during the period from late-2009 to early 2010, when existing home sales rose sharply amid a more subdued uptick in new home starts and sales.

In the end, the jump in the former proved to be temporary and appeared linked to an increase in foreclosures, short sales, and purchases by investment-oriented cash buyers, rather than to a change of heart by traditional homebuyers.

Moreover, while today's ultra-low borrowing rates undoubtedly aid affordability, there is still plenty of evidence that suggests prospective homeowners are finding it difficult or even impossible to get a mortgage.

That begs the question, of course, of whether this time is different. As usual, I believe the answer to that question is "no."

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Comments

[roger]

Would operation twist have anything to do with it?
at best it will be a very short term benefit with negative results on the international
scene (weakening of the dollar) the Fed subterfuge wont work, everything it has done so
far is kicking the can down the road, the forces eliminating the jobs have not so far
subsided, au contraire they are gaining momentum, globally. Just ask FedEx.

[Tom]

It's the same in many other "consumer" related businesses, since they're all connected. For example, as roger points out the Fed Ex company is seeing global shipping contracting, probably due to the global squeeze on labor and therefore less "discretionary" spending. From that we get the knock-on effect of fewer boxes being made, less work for shippers (both prompting lay-offs). i'll keep it simple with just these two factors (there are many more). With less work companies drop excess labor who then have less to spend on frivolities (and even necessities after a short while). This "death spiral" continues to have ripple effects throughout the society - lower tax bases for municipalities where these people used to work, more foreclosures, more homelessness, more stress, more illness, less money to take care of the needy.
It goes on and on (as we've seen since 2008). Soon we're like Japan and find ourselves a few decades down the road with no or extremely low growth, stagnant economies (including wages). In our case we see squalor and decay, abandonment and neglect, and hopelessness.

Unfortunately, when people give up looking for work, because there are no decent jobs, the government accountability people see this as an improvement - they don't count them (though they're still here consuming whatever resources they can and the pressure builds to "do something about it" - all too often going out with a violent bang as they realize their plight). i don't see a happy ending to this.

[Tom]

forgot this corroborating article:

http://news.yahoo.com/us-economy-bottomed-census-suggests-yes-025320011.html
Has US economy bottomed out? Census suggests yes
The U.S. economy is showing signs of finally bottoming out: Americans are on the move again after record numbers had stayed put, more young adults are leaving their parents' homes to take a chance with college or the job market, once-sharp declines in births are leveling off and poverty is slowing.

New 2011 census data being released Thursday offer glimmers of hope in an economic recovery that technically began in mid-2009. The annual survey, supplemented with unpublished government figures as of March 2012, covers a year in which unemployment fell modestly from 9.6 percent to 8.9 percent.

Not all is well. The jobless rate remains high at 8.1 percent. Home ownership dropped for a fifth straight year to 64.6 percent, the lowest in more than a decade, hurt by more stringent financing rules and a shift to renting. More Americans than ever are turning to food stamps, while residents in housing that is considered "crowded" held steady at 1 percent, tied for the highest since 2003.

Taken as a whole, however, analysts say the latest census data provide wide-ranging evidence of a stabilizing U.S. economy. Coming five years after the housing bust, such a leveling off would mark an end to the longest and most pernicious economic decline since World War II.

"We may be seeing the beginning of the American family's recovery from the Great Recession," said Andrew Cherlin, a professor of sociology and public policy at Johns Hopkins University. He pointed in particular to the upswing in mobility and to young men moving out of their parents' homes, both signs that more young adults were testing out job prospects.

"It could be the modest number of new jobs or simply the belief that the worst is over," Cherlin said.

Richard Freeman, an economist at Harvard University, said the data point to a "fragile recovery," with the economy still at risk of falling back into recession, depending in part on who is president and whether Congress averts a "fiscal cliff" of deep government spending cuts and higher taxes in January. "Given the situation in the world economy, we are doing better than many other countries," he said. "Government policies remain critical."

The census figures also show slowing growth in the foreign-born population, which increased to 40.4 million, or 13 percent of the U.S. population. Last year's immigration increase of 400,000 people was the lowest in a decade, reflecting a minimal gain of Latinos after many Mexicans already in the U.S. opted to return home. Some 11 million people are estimated to be in the U.S. illegally. (there's a little more)

[What about the shadow inventory?]

The Corruption to Production Ratio:

Look at African countries that collapse or that are run by corrupt leadership; their economies are dismal and you see the corrupt leaders living like kings. You have to look at the the “corruption-to-production ratio.” When you aren’t producing very much, and you have a very corrupt system, you see an economy that is in shambles. We have always had corruption in the United States, but we had checks and balances. And our production was so brilliant that the corruption basically didn’t matter that much because our corruption-to-production ratio was low. But in our lifetime, the corruption-to-production ratio has gotten out of whack. And so that’s why you’re seeing our economy basically being drained. And you are seeing fifty-one million people on food stamps right now, and you’re not seeing manufacturing coming back to create jobs for those people, which is our biggest problem.

http://www.capitalismwithoutfailure.com/2012/09/janet-tavakoli-control-fraud-is.html

[subterfuge]

The very painful end of the US anaesthetic is at the crossroads of the seven key factors of a double shock of the coming weeks
Because it is indeed that. As we have underlined on many occasions in the GEAB, the United States has, since the beginning of this crisis, refused to face reality (5) by having increasing recourse to financial, monetary,… (and military) subterfuge to try and mitigate the consequences of the crisis. All this however is proving to be ineffective at the end of summer 2012, in spite of the trillions of Dollars thrown down what is proving to be a bottomless hole.

The best proof is the Fed’s September 13th decision to maintain its Operation Twist programme of Treasury repurchases by adding to it an unlimited programme (in time and amount) of mortgage backed securities repurchases (40 Billion USD/per month) to try and revive the US property market and, through the latter, employment and consumption. The Fed is aware that this decision will cause a backlash and damaging consequences internationally. In fact it has been hesitating for months ahead of a new QE3 (6). But, in trying to avoid a socio-economic implosion and a stock exchange collapse on Wall Street ahead of the November 2012 elections (7) whilst trying to save its own credibility under heavy attack from the Republican camp, it chose “Psychological Easing” rather than “Quantitative Easing”.

The Fed is increasingly becoming the key player in the US property market, thus persisting in confusing the problems of liquidity and solvency. US households don’t have any more money to buy or build houses (8). Mortgage interest rates won’t change anything here. Only Wall Street, for a certain time, will be able to continue surfing on record levels until one “beautiful morning” everything collapses due to a sudden awareness that the real economy is sinking into depression.

http://www.leap2020.eu/GEAB-N-67-is-available-Global-systemic-crisis-October-2012-The-global-economy-sucked-into-a-black-hole-and-world_a12189.html

[sharonsj]

If the real estate market isn't dead yet, it's because of (1) speculators buying foreclosed homes to rent out and (2) new multi-family homes being built so multiple apartments can be rented out. In both cases, few people are actually buying homes for themselves, mortgages are hard to get for most individuals, and everybody with some kind of money still needs to rent a roof over their heads.

[FK]

All these trillions of dollars printed so far by the Fed only helped banks and little to none actually reach main street. It helped banks at the our expense via inflation. Our national debt is out of control and inflation is up. Bankers will not lend when the future look so bleak. They rather hold cash or invest somewhere else. As a business person who could open or expand the business, inflation increase my cost of doing business. Inflation cause people to spend less. With that outlook I'm not going to hire more people, instead I'm more likely to lay off people.

There are so much corruptions on Wall Street and in Washington. Evidences surfaced for everyone to see, investor lost billions, and none goes to jail. People see this and many have already opted out. We now have a market that is so heavily manipulated by the 1%. When the game is not fair and cheaters get away, who wants to play? Forget this Ponzi I'm back to basic gold and silver. Land of opportunity? - today it's more like land of corruption.

[Alex Gold Goldman]

Gold Price Chart – Live gold spot prices

http://www.sh1ny.com

dr. Alex Goldman
http://www.sh1ny.com Co-Founder

[Alex Gold Goldman]

It is propably the best gold price chart on the market for investment http://www.sh1ny.com

Alex Goldman
http://www.sh1ny.com Founder.