The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Sept Existing Home Sales totaled 5.57mm annualized, 220k more than expected as the window started to close on the first time home buying tax credit. Every region was up and both single family and condo’s/co-ops rose. Months supply fell to 7.8 from 9.3 to the lowest level since March ’07 and were lower in both categories. The amount of homes for sale fell to 3.63mm from 3.92mm, the lowest since Jan. Distressed sales made were 29% of the total and the median sales price was $174,900, down 8.5% y/o/y and lower by 1.4% m/o/m. The NAR said “much of the momentum is from people responding to the 1st time buyer tax credit…we are hopeful the tax credit will be extended and possibly expanded to more buyers.” They said 1st time buyers accounted for 45% of home sales during the past year. What they didn’t say is that many buyers would have bought even without the tax credit, thus making it a very expensive enticement.

Existing Home Sales fell 5.4% last month, despite the nonsense you have read elsewhere.

NAR continues to bullshit America with their garbage data and spin, month after month, with few people calling them on it. Well, I’ve had it up to here with their garbage:.

Big Rebound in Existing-Home Sales Shows First-Time Buyer Momentum

Existing-home sales bounced back strongly in September with first-time buyers driving much of the activity, marking five gains in the past six months, according to the National Association of Realtors

No, home sales did not rebound — that was purely the result of SEASONAL ADJUSTMENTS

As you can see on the NON SEASONALLY adjusted chart below, from August to September (Red Bar) Sales actually dropped. In prior years — 2005, 2006, 2007, and 2008 — there was always a big fall from August to September.

This year, the fall was more modest.

Why was this year so different? We have ZIRP (which will eventually go up) and a large 1st time buyers tax credit that is scheduled to expire.  Hence, the unusual September activity that dos not reflect the traditional drop off.

Mark Hanson notes that on a NSA basis, Existing Home Sales actually dropped 5.2% — this was the second straight monthly drop on an NSA basis.

Mark adds:

The NAR’s attempt to annualize seasonality never before seen has resulted in a headline very far off base . . . The fact is, Sept NSA sales were above last year’s 438k but below last month’s 498k coming in at 472k as shown below. In addition, sales prices fell. This pulled-forward demand sets up the slow season to be one of the slowest on record.

The tax credit effectively extended the purchase season which is why sales were even this strong. But when you consider the hundreds of billions spent to prop up the housing market, which only resulted in 34k additional sales over last September (one of the worst years on record for housing) and fewer sales YoY in CA, sales were really not that great. When organic sales go away suddenly for the season, which will happen in the near-term whether the tax credit is extended or not, it sets sales and prices up for the largest swings lower we have seen since all this began two years ago.

That’s precisely correct — the usual selling season was extended due to the tax credit.

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click for larger chart

courtesy of calculated risk

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I am honestly unsure of whether the folks at the NAR are dumb as lawn furniture and make these misrepresentations honestly — or whether are just another group of disgusting spin doctors, willfully peddling lies because it helps their own agenda.

Those are pretty much the only options: Idiots or full of shit.  (You decide).

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Source:
Big Rebound in Existing-Home Sales Shows First-Time Buyer Momentum
October 23, 2009

http://www.realtor.org/press_room/news_releases/2009/10/rebound_shows

MSNBC’s Morning Meeting

Last minute tag.

Be back soon . . .

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UPDATE: Video, where I politely school a Congressman as to how wrong he is can be found here.

The UK economy remained in the doldrums in Q3 as it unexpectedly fell .4% q/o/q, the 6th quarter in a row of contraction for the first time since at least the 1950′s. Expectations were for a rise of .2%. The pound is down sharply in response but the FTSE is higher as is the rest of Europe as the data is perceived as old news as the Euro region Oct manufacturing and services composite index rose to the highest since Dec ’07 at 53, 1.4 pts above forecasts and the Oct German IFO business confidence figure rose to the highest since Sept ’08 (about in line with estimates). The two most important members of the Fed and I’ll refer to them as King Doves, Bernanke and Kohn, speak today. Bernanke’s speech is on financial regulation and I’m sure he just sticks to that topic. Kohn speaks on the financial crisis. Sept Existing Home Sales are expected to total 5.35mm, the most since Aug ’07 helped out by the home buying tax credit and 4 year olds.

Source:
The Dollar Is Dying a Slow Death, Says Niall ‘Ascent of Money’ Ferguson
Peter Gorenstein
Yahoo Tech Ticker Oct 20, 2009

http://finance.yahoo.com/tech-ticker/article/357373/The-Dollar-Is-Dying-a-Slow-Death-Says-Niall-%27Ascent-of-Money%27-Ferguson

“I would say more, but I don’t want somebody knocking on my door and asking for $50,000 back. It’s almost like bribery; I felt that I was supposed to sign the agreement, take the money and keep all their secrets.”

-former Freddie Mac employee who worked on internal financial controls.

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I find this fascinating: Some people simply do not understand basic contractual freedoms between consenting adults. Others do not understand the concept of ethics. And, they want the free lunch, no personal responsibility, having it both ways. They want the money but not the obligations it comes with.

Sorry, that ain’t how it works.

Here’s the story: Former Freddie Mac employees, who upon departing FMC, were required to sign nondisclosure agreements (NDAs) as part of the severance package. These employees are now being requested to violate those agreements in civil — not criminal — litigation. Under the law, you cannot privately contract not to answer questions from government prosecutors and investigators in any criminal case or in a regulatory proceeding. Really smart class action lawyers try to get a criminal case going simultaneously.

But as to writing books, newspaper articles or appearing as witnesses in a civil case?

Sorry, but that is simply not how contract laws work in the US. You, as an employee, do not have to accept the money in exchange for your silence. But you did. If you feel dirty because you agreed to keep what you know to yourself in exchange for cash — well, you should feel like the dirty whore you are — you sold your silence and your soul to the highest bidder. THATS WHAT YOU WERE PAID FOR NOW SMILE FOR THE CAMERA.

Barring a court order — and I suspect its unlikely we will get one — former employees are prohibited from cooperating with the civil lawsuits against Freddie Mac.

Now, you may say that sucks, and how evil Freddie Mac is. But let’s not ignore the folks who signed on the dotted line and sold their silence. They may have regrets now, but that’s what happens when you let cash trump ethics. Like the people who knew their CDOs would blow up, as well as the buyers who knew they could not possibly afford the house they were buying. Bad decision making process, bad outcome.

At some point, we have to make adults who make scummy decisions in exchange for cash own those decisions, and take responsibility for what they did.

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Source:
Freddie Mac’s Secrecy Pacts Face Court Test
EDMUND L. ANDREWS
NYT, October 22, 2009

http://www.nytimes.com/2009/10/23/business/23mortgage.html

Its the longest slump since Britain began keeping records in 1955, and yet the contraction data is “unexpected.”  Who are these people that are always “confounded”?

“Initial data on British third-quarter growth showed the economy there remained mired in recession, while survey releases from the euro area Friday presented a picture of steadily improving economic activity. A preliminary release from the Office of National Statistics in London showed that Britain’s economy remained deep in recession during the third quarter. Gross domestic product contracted by 0.4 percent between July and September from the previous three months and shrank by 5.2 percent compared with a year earlier, the agency said.

The data confounded analysts, who had expected a 0.2 percent growth on the quarter, based on recent improvements in housing, purchasing managers’ indexes and the weak pound, which should make exports more competitive.”

“Confounded”? Really . . . ?

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Over reaction: BRITISH POUND (S.B.S) Dec 2009

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Sources:
U.K. Economy in Recession for 6th Straight Quarter
MATTHEW SALTMARSH
NYT, October 23, 2009

http://www.nytimes.com/2009/10/24/business/global/24euro.html

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This is weird: My RSS feed leapt this week from low 40ks to 56,000.

I have no idea why; perhaps it was yesterday’s Bloomberg Surveillance guest hosting (podcast here) — but that is just a wild guess on my part.

Recall that last week, after the Goldman bonus debate, it popped from 41k to 46k.

Here are the web versions of the broadcast:

George, Ritholtz Discuss Corporate Earnings, Housing: Audio

Oct. 21 (Bloomberg) — David George, an analyst at Robert W. Baird & Co., and Barry Ritholtz, chief executive officer and director of equity research at Fusioniq, talk with Bloomberg’s Ken Prewitt about U.S. corporate earnings and housing.

Listen/Download

Bianco Says Cheap Financing Will Drive Stock Rally: Audio

Oct. 21 (Bloomberg) — Jim Bianco, president of Bianco Research LLC, talks with Barry Ritholtz, chief executive officer and director of equity research at Fusioniq, and Bloomberg’s Ken Prewitt about capital flows and the equity market.

Listen/Download

Kotok Calls Build America Taxable Muni Bonds Attractive: Audio

Oct. 21 (Bloomberg) — Barry Ritholtz, chief executive officer and director of equity research at Fusioniq, and David Kotok, chief investment officer at Cumberland Advisors Inc., talk to Bloomberg’s Ken Prewitt about U.S. corporate earnings, housing, equity and bond markets, and Federal Reserve monetary policy.

Listen/Download