Comments on: New Home Sales Fall 21.3%

By: Bernard Meisler » Blog Archive » Lies, Damned Lies, and Housing Statistics

Wed, 29 Jul 2009 17:51:06 +0000

[...] New Home Sales Fall 21.3% [...]

By: Jill Schlesinger: Is Housing a Barometer for Economic Recovery? » A Couple Things » A couple things about politics, sports, travel, and other stuff.

Wed, 29 Jul 2009 14:44:38 +0000

[...] Still, the improvement in prices follows three other pieces of housing news reported recently: June Housing Starts were up 3.6%, June Existing Home Sales rose 3.6% and June New Home Sales increased by 11%. Same deal with all of these reports–the general year over year looks ugly, but the month over month shows signs of life. One more thing: the margin for error on housing stats is huge. [...]

By: Is Housing a Barometer for Recovery? - CBS MoneyWatch.com

Is Housing a Barometer for Recovery? - CBS MoneyWatch.com — Wed, 29 Jul 2009 14:22:24 +0000

By: philipat

philipat — Tue, 28 Jul 2009 00:26:08 +0000

Next Month should be fun. Seasonality starts to work against monthly data as from August. So we can now anticipate the headlines one month from now, along the lines of “Unexpected drop in housing sales”?!!

By: cvienne

cvienne — Mon, 27 Jul 2009 23:54:52 +0000

I’ve been away for a bit but I see this “cash for clunkers” argument has been forwarded just a bit…

I’m at a slight loss here because I’m just browsing the various posts, but if I may, I’d like to consolidate my opinion…

I basically am on board with most of what DeDude has been saying (but I’ll stick to what I CONSIDER the highlights)…

- First of all, I ACTUALLY DO think the program will be a success (I will either be right or wrong in 6 months)…we’ll revisit this…It was a tremendous success in Europe, and I know quite a few here who have creatively taken advantage of the program.
- I DON’T put the program in the same category of tax credits for 1st time homebuyers (for reasons that will likely be evident in my following bullet points).
- I think DeDudes estimate of 250,000 vehicles might be a pretty good educated guess.
- I think if the program ends up to be a success, then they can easily allocate more funding for it going forward (after all – what’s a billion these days?)
- I DON’T think of this as the same type of moral hazard (because there IS sort of an efficiency gained by “incentivizing” new purchases of more energy efficient vehicles).
- I DEFINITELY DON’T THINK that “credit” is an issue here…In many cases (depending on where a person is in their balance history), a person could actually IMPROVE their cash flow by trading in an old car, and extending the financing on a new one…I KNOW, it’s hard to argue that one because there are so many individual variables, but my gut tells me the aggregate could be to ease the present burden.

Lastly (and this is probably THE most important – and I think this is where DeDude was leading)

- Success in this program is an efficient way to reduce INVENTORY at a time where that is badly needed…

So what if nobody thinks anyone will ever buy a car again…Let’s just say that IN CASE THEY DO someone will have to build a new car…Low inventories will mean that they’ll have to fire up the production lines at some point (be it 2010 or 2015)…

It’s a step in the right direction…

By: DeDude

DeDude — Mon, 27 Jul 2009 22:57:17 +0000

Lets say a company has been working fine and made a profit with a (yes agree irresponsible) model where every payday it loans 90 million of its 100 million cost for salaries – and slowly pays it all back just before the next pay day. It also pays out what corresponds to 5 million in dividends per pay period to its shareholders. This has worked great for years and every body were happy (including the bank that made a fair amount of money on the line of credit). Suddenly a credit crunch comes along and credit is getting very stringent so the bank cancels the line. Result is bancrupcy; huge amounts of money is lost, hundreds of people lose their job (and 100 million of taxable salaries disappear), and the factory is left empty to rot after all that was in it has been sold at huge discount for scrap. All of that could have been avoided if the velocity of change in credit stringency had been slowed down and the reduction in the credit line had been less than 5 million per pay period until the line was zero (instead of the sudden cancellation). End result is the same credit stringency (no more payday loans for the company), but the velocity makes a huge difference in end result for company, workers and taxbase. The same goes for changes in stringency of consumer credit, if you change it to fast the result is a lot of unnessesary pain for everybody including society. So get there, yes, but get there at a pace that can be absorbed.

By: DeDude

DeDude — Mon, 27 Jul 2009 22:29:09 +0000

I did not state that october was not the “result” of lending standards, just that we switched to to stringent a lending standard at that time. And I am not judging lending stringency by moral standards or even what is best for the individual. I am simply looking at what it does to the economy to switch from pre-October to post-October stringency – and that is very bad. After the economy has recovered, it may be preferable for us to get to even more stringent standards than we have had in the last decade. It’s the velocity of the change that hurts the economy.

By: Thor

Thor — Mon, 27 Jul 2009 22:14:22 +0000

DeDude – Personally, I would hope that these ‘more stringent” lending standards are the new norm. We’ve seen what the average person does with too much easy credit and where it’s gotten us. Forcing most of us to live within our means for at least the next several years is one of the ways I think we’ll pull ourselves out of this.

By: ben22

ben22 — Mon, 27 Jul 2009 22:08:02 +0000

DeDude,

Sorry but if you think what happened in October was a result of us going to stringent lending standards then you may not have a clue about what is really going on. I suggest taking a look at this chart again for an understanding of where we’ve been and where we are when it comes to credit expansion.

http://www.ritholtz.com/blog/2009/07/the-jalopy-economy/

By: rootless_cosmopolitan

rootless_cosmopolitan — Mon, 27 Jul 2009 21:56:51 +0000

I said:

“Then there is a also 10% probability that the increase was smaller or larger.”

Not “increase”. Decrease, of course.