Housing Depression: February 2009

Thursday, February 26, 2009

New Home Sales in Fall 48%

New home sales in January fell 48.2% from January 2008. This is the slowest rate Census Bureau has recorded.

Seasonally adjusted, there were 309K new homes sold compared to 597K last year. With the jobs report like the one this morning, it's going to be harder for families to buy a new home.

Meanwhile, the inventory for new homes rose to a record 13.3 monts from 12.2 months last month and 9.8 months in January 2008.

It's getting worse for the housing market. But it's better to let the market find the equilibrium rather than have the government intervene and try to prop up the market artificially. Affordability is the key to solving the housing crises and we still have a long way to go before we stabalize.

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Technorati Tags new,sales,home

Fed Creating Another Japan

Fed Creating Another Japan?

From WSJ:

Research papers by Douglas Diamond and Raghuram Rajan of the University of Chicago show that the fed may be making the same mistakes Japan had. Japan kept it's zombie banks running instead of taking the losses, which elongated the downturn. Fed seems intent on doing the same thing.

To me, the only right decision they made was to let Lehman Brothers go down. Of course, most analyst will tell you that this is the biggest mistake they made (The same analysts who thought our economy was fine). But it is better to get over with the problems sooner so we can have a recovery quicker.

As fresh data from the Fed will show Thursday, the central bank's balance sheet has more than doubled since August 2007. Some Fed programs have helped loosen the credit logjam, including the Term Securities Lending Facility, which lets banks borrow money using mortgage-backed securities and other hard-to-sell assets as collateral.

Not only are we keeping bad companies alive, but also the talks of susupension of Mark-To-Market rules are another step in that direction. Just imagine if we could mark-to-fantasy our home prices!

"Central bank intervention to lend against all manner of collateral may not be an unmitigated blessing," Messrs. Diamond and Rajan wrote.

I hope Uncle ben is reading this.

http://online.wsj.com/article/SB123560389732776681.html#articleTabs=article

Friday, February 20, 2009

Gold Futures Hit $999

From WSJ:

April gold futures are expected to open floor trading in New York around $16 an ounce higher Friday, based on electronic activity ahead of the pit session at the Comex division of the New York Mercantile Exchange. March silver is expected to be up 40 cents an ounce.

Gold seems to be going through the roof. I wonder if gold is going to be last year's oil. I have been selling some of my gold since we are in time of deflation. And it should bring gold prices lower also.

Investors continue to buy gold on a "fear factor," with the metal now back above $990 an ounce, said George Gero, vice president with RBC Capital Markets Global Futures. This is occurring amid ongoing worries about the banking sector and a continued sell-off in equities, he said.
"Unprecedented" investor demand is fueling the rally, as the "traditional" drivers of gold such as jewelry and fabrication demand, combined with dollar strength and mine supply, otherwise would be consistent with a "considerably lower" price, said J.P. Morgan analyst Michael Jansen.

Much of the buying is due to the fear of a collapse in the financial system. If this keeps up, how long before gold is banned? If you think this can't happen in the US, there is already a precedent. President Roosevelt signed executive order 6102 - "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates."

http://online.wsj.com/article/SB123513686761333121.html

Technorati Tags Gold,6102

Thursday, February 12, 2009

700 Millionaires at Merrill Lynch

The give aways from the government are ennough to drive the tax payers angry. But add things like this and you realize why there is so much outrage over all the bailouts.

Merrill Lynch gave 700 employees bonuses of $1 million. This while the company was losing $27 billion. They paid the bonus in December - much earlier than it's usually paid - so they can get away with it before the Bank of America merger.

The fed and the treasury, which strong handed Bank of America to merge with Merrill does not seem to have any issues with these bonuses. It seems even Ken Lewis, Bank of America CEO, seems to have signed off - implicitly if not explicitly. But he fired John Thain so all the blame goes on John Thain.

Amid all this, Tim Geithner does not want any conditions imposed on the banks for taking the bailout. Not pay limits, no lending limits (This is one place where I agree with him. People are so debted right now and with the economy getting worse, it does not make sense to have lending limits), and no penalty for share holders! How do you give a bail out to bank and not penalize the share holders?

http://www.nytimes.com/2009/02/12/business/12merrill.html?_r=1

Technorati Tags boa,merrill,lynch,bonuses

Wednesday, February 11, 2009

Mortgage Applications Down 24.5%

From Marketwatch.com:

The mortgage applications were down 24.5% from last week.

Overall, application volume for the week ended Feb. 6 contracted by an unadjusted 43.9% from the same week in 2008, the MBA said.

That's half the mortages from last year. The fed and everyone else in the government seems to be concerned about mortgage rates. But until the debt-to-income ratio improves, lower rates are not going to help much. It does not matter what the rate is, if you lose a job, you won't be able to afford a mortgage.

So the government focusing on mortgage rates and bank lending seems misguided. But everyone these days seem to be throwing money at something to see if it sticks. I disagree with Obama that a not-so-great stimulus plan is better than none at all. We are spending $1 trillion dolloar! We better make sure it's not a wasted like TARP 1.

Meanwhile, applications for home-purchase mortgages also dropped, down a seasonally adjusted 9.8% -- pushing the MBA's purchase index to its lowest level since the end of 2000

The MBA purchase index shows that there is more refinancing activity than purchasing.

Technorati Tags MBA,weekly,mortgage

Tuesday, February 10, 2009

Run on Money Market Funds

Rep. Paul Kanjorski C-Span tells us why there was a need for the TARP and why they could not tell what the "abyss" that they kept referring to.

Here is an excerpt from the video.

On Thursday at about 11:00 am, the federal reserve notead a tremendous draw down of money market account to the tune of $550 billion was drawn out in a matter of hour or two. The treasury opened it's window to help. They pumped $105 billion into system and quickly realized they could not stem the tide. We were having a electronic run on the bank.......
It would have been the end of our polictical system and economic system as we know it...."

Technorati Tags Bank,Run,Kanjorski

Friday, February 6, 2009

Payrolls Down by 598,000 unemployment up to 7.6

Jobless rates rose to 7.6 from 7.2 in December. There were 598,000 jobs lost. But this is only half of the story. To see the real story, we need to look at U6 number and beyond.

U6 includes persons "discouraged" from working. i.e. People so discouraged by not finding a job, that they have stopped looking.

The U6 number (not seasonally adjusted) is 15.4 and seasonally adjusted to 13.9. That means even looking at the better number, we have reached 13.9 number. Only 12 away from 25 of great depression.

According to ShadowStatistics.com, the real unemployment number is 18. Here is a chart from ShadowStatistics.com.

Technorati Tags monthly,payroll

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