Will the Housing Bottom Analysts Please Stand Up?
Sales of existing US homes fell 1% in April, slightly better than expected, but inventories of unsold homes surged 10.5%, according to the National Association of Realtors.
You have to love the MSM and the analysts. Just make everything "Better Than Expected" and make it look like everything is fine. Remember from May 15 - Freddie had a loss
"smaller than expected" so the markets are up. There are so many examples over the last month, it would take few blogs to just list them all.
You can't put a lipstick on this pig. Remember this is the spring selling season. This means the spring selling season is a bust. Inventories are suppossed to be moving down. But they keep moving up!
For single family homes, at the current sales pace there were 10.7 months' worth, the biggest supply since June 1985 when it stood at 11.4 months.
We are talking record inventories! We are closing in on 1 year inventory mark.
"My projection is that the second half will be notably better in terms of home sales,'' said NAR chief economist Lawrence Yun, commenting that inventories are ``uncomfortably high.''
It's so bad, that even the morons at NAR can't put a lipstick on it (that doesn't mean they won't try). And you know it's pretty bad when NAR says inventories are ``uncomfortably high.''
There have been analysts calling for a housing bottom since last year. Will they please stand up and tell us whether they think this is the bottom?
We've have said in the past on this blog there are still more risks to housing. With more layoffs, the job market is getting worse. And with inflation rising, the interest rates might start going up. I don't even want to think what would happen if the interest rates started going up.
So this is where the fed rate cuts, who in the last rate cut said the 8-2 vote for rate cut was a "Close Call", has left us. The rate cuts have not helped housing, and they have hurt the consumer with rising inflation.
Mortgage Applications Near 2008 Lows
Is it time to call the spring season a bust? With each passing week it looks more and more like it is.
The Mortgage Bankers association said its seasonally adjusted index of mortgage application activity fell 7.8 percent to 621.6 in the week ended May 16.
....
The MBA's seasonally adjusted index of refinancing applications declined 8.7 percent to 2,210.5 last week, the MBA said.
The gauge of loan requests for home purchases dropped 6.9 percent to 352.5 in the period.
Applications for refinancings fell 8.7 percent to 2210.5 from 2422.1 the previous week.
Fixed 30-year mortgage rates averaged 5.9 percent in the week, 8 basis points higher from the prior week.
Even with the mortgage rates low, people are not buying. Remeber the economy, job market, and inflation are worse than the official number. It's going to get worse before it gets better.
Yet another day, Yet another "Is the market Rally Real" Article
By now, most investors are tired the question "Is this rally real?" We've already explored the topic on this blog. But here is one more article in WSJ about the market rally.
After a rough start to the year, the Dow Jones Industrial Average has surged close to 11% since March 10. It is down just 8.3% from October's record, a lot stronger than many expected.
It's alot stronger than I certainly expected.
Over the past 60 years, market leaders at the start of lasting recoveries often were stocks tied to consumer spending: hotels, resorts, cruise lines, general-merchandise stores, banks, home builders. Investors were betting on a rebound in consumer spending.
Yet another proof we live in a bizzaro-world. You know more writedowns is good because we are at (Yet another) bottom in writedowns; Oil prices up, good for energy stocks and thus good for market; Oil prices go down - good for the market because it helps consumers and so on.
"This kind of work suggests that it is not a bull market, but really a bear-market rally," Mr. Bjorgen says.
.....
Hopes are spreading among economists, too, encouraged by retail sales that weren't as bad as expected and by economic-growth and employment numbers suggesting that the economy might be avoiding recession. But there also are doubters here, and they focus on the same area as Mr. Bjorgen: the consumer.
This is my one question to goldilocks. Consumers are 70% of the economy and they are spent. How do you have a recovery without them?
So far, consumers have been more resilient than expected, and Mr. Pandl notes that, in recent years, it has always been an error to predict the American consumer's demise.
Still, he points to Fed data suggesting that consumers are sustaining their spending by shifting more debt to credit cards because new mortgages and home-equity loans have become hard to get. He believes there is a limit to how long consumers can put off the day of reckoning.
"Ultimately, there is only so much you can borrow" on credit cards, he says.
...
Mr. Pandl and his Lehman colleagues believe that slumping consumers will send the economy into a double dip, with a tax-rebate-fueled recovery this summer and a sag starting later this year and running well into 2009.
We'll soon find out whether this is a real rally or not.
http://online.wsj.com/article/SB121114495689301827.html?mod=todays_us_money_and_investing
Consumer Sentiment Falls to Lowest Level in 28 Years!
"Consumer confidence continued to slip in early May due to surging food and fuel prices," the Surveys of Consumers statement said. "Record numbers of consumers viewed the economy in recession and saw little hope of recovery anytime soon."
We can thank the fed. Of course, there is no inflation. Remember the CPI numbers was "good".
Also worrying for policymakers at the Federal Reserve, five-year inflation expectations hit their highest since August 1996, edging up to 3.3 percent from April's 3.2 percent.
Why are these people worried about inflation? Inflation is "contained".
Let's see if we get another clown claiming this is good for stocks as it's a contrarian indicator.
Housing Start Jump in April
Housing starts over all were up by 8.2% in April. But the housing starts for single-family houses fell to the lowest level in 17 years. The jump was due to building of townhouses and conominiums.
``You cannot take the headline starts number seriously because of the increase in the multifamily number,'' said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York, who had the closest estimate in a Bloomberg News survey. ``The trends are horrific'' because ``why would you spend money to buy a depreciating asset?'' he said.
Building permits also rose by 4.9 percent.
http://www.bloomberg.com/apps/news?pid=20601087&sid=abWYAJPuHSAY&refer=home
Have We Averted a Recession?
Economists in WSJ are less sure about a recession then they were just a month ago. Many see Fed's response of cutting rates and fiscal-stimulus checks helping to avert a recession.
Still, Mr. Bryson and other economists note that though two main pillars of the economy, the labor market and consumer spending, have faltered, they have not collapsed as they did in past recessions. On Tuesday, the Commerce Department said retail sales fell a slim 0.2% in April from the previous month -- a decline due mostly to a steep drop in auto sales. Excluding autos, retail sales climbed 0.5%.
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Claims for unemployment benefits -- which typically rise well above 400,000 a week during recessions -- have stayed well below that level, and fell last week. In addition, the economy isn't shedding hundreds of thousands of jobs a month, as it usually does in an economic contraction. In April, employers cut just 20,000 jobs, and the unemployment rate fell.
While the labor markets look strong, remember the BLS data had 267,000 jobs created from the Birth/Death model. In a recession (or near-recession), that sounds too high. Also, instead of cutting jobs, many employers are cutting back on the hours.
As for consumer spending, while you never can count the American consumer out, it finally seems like consumer spending is slowing. More and more consumers seem to be using Credit Cards as a last resort.
To be sure, even economists who are becoming more upbeat say the U.S. may be in for a period of protracted sluggish growth.
If we do avert recession (which I do not believe we will do), then we probably have substituted sluggish growth for a recession.
"I think the problems are just starting," said Lehman Brothers economist Drew Matus, citing high gasoline prices and tightening lending standards, saying that prolonged stagnation can be worse than a recession.
Asked in an interview with The Wall Street Journal whether the U.S. could avoid a recession, Gary Stern, president of the Federal Reserve Bank of Minneapolis, said, "No," adding, "But there are recessions and then there are recessions....The average resident doesn't distinguish between whether the economy is growing half a percent or one and a half percent....It's more, how does this feel?"
And then from a different article, our old friend David Rosenberg...
The U.S. economy is in a recession and stimulus from a government tax rebate later this quarter will only temporarily stem a fall in consumer spending, a Merrill Lynch economist said on Wednesday.
"I still maintain the business cycle is bigger than the government," Merrill's North American economist David Rosenberg said at a client conference in Singapore.
"No asset class security is priced today for a recession scenario," Rosenberg said, which is why he was bullish on U.S. Treasuries but bearish on stocks.
http://online.wsj.com/article/SB121068163716188223.html
http://www.cnbc.com/id/24606689/for/cnbc/
