{"id":191383,"date":"2009-08-24T17:24:00","date_gmt":"2009-08-24T22:24:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2009\/08\/24\/economics-update-163\/"},"modified":"2009-08-24T17:24:00","modified_gmt":"2009-08-24T22:24:00","slug":"economics-update-163","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2009\/08\/24\/economics-update-163\/","title":{"rendered":"Economics Update"},"content":{"rendered":"<div style=\"border: 1px solid black; margin: 0px 10px; width: 410px; float: right; text-align: center;\"><a href=\"http:\/\/img41.imageshack.us\/img41\/8226\/weakest7months2106525.png\"><img decoding=\"async\" src=\"http:\/\/img41.imageshack.us\/img41\/8226\/weakest7months2106525.png\" bordercolor=\"white\" border=\"0\" width=\"400\" \/><\/a><br \/><a href=\"http:\/\/img9.imageshack.us\/img9\/1597\/2ndhalf092248611.png\"><img decoding=\"async\" src=\"http:\/\/img9.imageshack.us\/img9\/1597\/2ndhalf092248611.png\" bordercolor=\" white=\" border=\"0\" width=\"400\" \/><\/a><br \/><a href=\"http:\/\/img198.imageshack.us\/img198\/8708\/foreclosurevsregsales36.gif\"><img decoding=\"async\" src=\"http:\/\/img198.imageshack.us\/img198\/8708\/foreclosurevsregsales36.gif\" bordercolor=\"white\" border=\"0\" width=\"400\" \/><\/a><br \/><span style=\"font-style: italic;\"><a href=\"http:\/\/www.ritholtz.com\/blog\/2009\/08\/existing-home-sales-not-as-advertised\">The Big Picture<\/a> looks at the sales numbers<\/span><\/div>\n<p>Seeing as how I did not post on Friday, there was a tornado watch, and my kids were freaking, I&#8217;ll start with the big story from last week, which was that <a href=\"http:\/\/www.bloomberg.com\/apps\/news?pid=newsarchive&amp;sid=aBhEOTlnxwmM\">existing home sales rose to a 2 year high<\/a>.<\/p>\n<p>Of course, the 1<sup>st<\/sup> thing that comes to mind is that the National Association of Realtors (NAR) are supplying this data, and it&#8217;s suspect.<\/p>\n<p>The 2<sup>nd<\/sup> thing that comes to mind is that a remarkably large portion of these sales are distressed.<\/p>\n<p>The Big Picture <a href=\"http:\/\/www.ritholtz.com\/blog\/2009\/08\/existing-home-sales-not-as-advertised\/\">runs the numbers more fully<\/a> (chart pr0n is from this link, click to see full size), and while mentioning these two points, notes some other interesting bits of information:<\/p>\n<ul>\n<li>&#8220;If not for a surprise and suspect 16k increase in Northeast condo sales, Existing Home Sales would have been lower month-over-month and only up 12k units from July 2008, which was the worst year on record for housing.&#8221;<\/li>\n<li>Non-seasonally adjusted data actually shows a decrease, and given the high proportion of foreclosures and short sales, seasonal adjustment is actually not going to be accurate right now; the market is just too fracked right now.<\/li>\n<li>Prices are still falling.<\/li>\n<li>Sales less foreclosure activity (bottom pic) is way down.<\/li>\n<\/ul>\n<p>Furthermore, we are also seeing the effect of the <a href=\"http:\/\/www.calculatedriskblog.com\/2009\/08\/comment-on-first-time-homebuyer-tax.html\">housing cash for clunkers tax credit<\/a>, which allows a 10% tax credit (max $8K) on purchases for &#8220;New&#8221; (not owned a house in 3 years) buyers, but the home has to <span style=\"font-weight: bold;\">close<\/span> before November 30, which really means having the sale done in the next 8 weeks or so, so it&#8217;s another blip, unless, as CR notes, the NAR and NAHB manage to successfully <del>bribe<\/del> lobby for an extension.<\/p>\n<p>Note that the tax credit can be used for a down-payment, which further distorts the market.<\/p>\n<p>He have a housing market that is really still heading down, albeit more slowly, despite massive federal subsidies.<\/p>\n<p>If there were really a return to health in the housing market, then Taylor Bean, the 12<sup>th<\/sup> largest mortgage company in the US, would not be <a href=\"http:\/\/www.bloomberg.com\/apps\/news?pid=20601110&amp;sid=a9kb5v7bThoU\">filing for bankruptcy<\/a>.<\/p>\n<p>As to housing news for the rest of us, the rate at which mortgage holders who have fallen behind catch up on their payments, the so-called &#8220;cure rate&#8221;, for holders of <span style=\"font-weight: bold;\">prime<\/span> mortgages, has <a href=\"http:\/\/www.bloomberg.com\/apps\/news?pid=20601087&amp;sid=aC_dNm0IG400\">fallen to 6.6%<\/a>, down from 45% in the years 2000-2006, and very close to the rate for Alt-A (4.3%) and sub-prime (5.3%).<\/p>\n<p>Meanwhile, <a href=\"http:\/\/www.bloomberg.com\/apps\/news?pid=20601087&amp;sid=azUpXKLhTxhc\">treasuries have risen again<\/a>, driving yields down, though it is unclear how much is risk aversion increasing, and how much is the Federal Reserve buying more of the securities.<\/p>\n<p>It does mean that investors believe that the Fed won&#8217;t be raising rates for a while yet, though the <a href=\"http:\/\/www.bloomberg.com\/apps\/news?pid=20601087&amp;sid=a_QdiT_Sa9BI\">Bank of Israel just raised its benchmark rate<\/a>, which indicates optimism on their part.<\/p>\n<p>My guess is that they are wrong, simply because they are the 1<sup>st<\/sup> central bank to do so, and my money is on any first mover jumping the gun.<\/p>\n<p>Then again, they could be right.  The <a href=\"http:\/\/www.calculatedriskblog.com\/2009\/08\/chicago-fed-july-national-activity.html\">Chicago Fed July National Activity Index rose sharply in July<\/a>, increasing to -0.74 in July from -1.82.<\/p>\n<p>Even though the numbers still show contraction, the delta is impressive.<\/p>\n<p>Meanwhile, in energy, <a href=\"http:\/\/money.cnn.com\/2009\/08\/24\/markets\/oil.reut\/index.htm\">crude oil is at a 10-month high<\/a> on &#8220;green shoots&#8221; in the economy, and <a href=\"http:\/\/www.cnbc.com\/\/id\/32531792\">retail gasoline prices have remained basically unchanged<\/a>, despite falls at the wholesale level.<\/p>\n<p>The dollar was <a href=\"http:\/\/money.cnn.com\/2009\/08\/24\/markets\/dollar.reut\/index.htm\">up slightly<\/a>, largely in a holding pattern as traders wait for new consumer spending and housing data.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Big Picture looks at the sales numbers Seeing as how I did not post on Friday, there was a tornado watch, and my kids were freaking, I&#8217;ll start with the big story from last week, which was that existing home sales rose to a 2 year high. Of course, the 1st thing that comes &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1080,973,1135,1004,1088,985],"tags":[],"class_list":["post-191383","post","type-post","status-publish","format-standard","hentry","category-currency","category-economy","category-energy","category-finance","category-real-estate","category-regulation"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/191383"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=191383"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/191383\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=191383"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=191383"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=191383"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}