The latest Case Shiller Index is out, and it fell 8.9% year over year, but rose a modest 0.3% for the month. The Home Price Index improved in Q3 of 2009 — its 2nd consecutive quarterly increase. Prices declined 8.9% in the quarter versus Q3 2008.
Prior Quarterly falls were worse, with the index falling 14.7% Q2 ’09, and 19.0% in Q1. The month-to-month data improved, albeit slightly, for the 5th consecutive month.
Other data points worth noting:
• 10-City and 20-City Composites posted their fifth consecutive monthly increase with September’s report.
• Nationally, the Composite rose by 3.1% in both Q2 & Q3 2009.
• Average home prices in Q3 2009 are at similar levels to Q3 2003 — 6 years earlier;
• Los Angeles, New York and Washington values are 70-80% above their 2000 averages;
• Detroit is still at only 73% of its 2000 value;
• Prices in Las Vegas (the most depressed market) have declined for 37 consecutive months; Peak-to-trough, Vegas is down -55.4%.
The charts:
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Source:
Home Prices Show Sustained Improvement through the Third Quarter of 2009 (PDF)
Case-Shiller Home Price Indices, November 24, 2009
http://bit.ly/75169a
Nov Confidence was 49.5 up from 48.7 in Oct and above estimates of 47.3 but still remains below the high this year of 54.8 in May. The rise was all on the Expectations side which rose 1.5 pts. Present Situation was down .1 to the lowest level since ’83. Those that said jobs were Plentiful fell to the lowest since Feb ’83 while those that said jobs were Hard To Get rose to the highest since May ’83 and this likely explains why the current situation is so subdued. Those that plan to buy a home within 6 mo’s fell to the lowest since Oct ’82, even with low mortgage rates, sharply lower prices and the extension of the home buying tax credit. Those that plan to buy a car within 6 mo’s fell to the lowest since Mar. Those that said Business Conditions will get better over 6 mo’s fell .8 pts but those that said it will get worse also fell 3 pts. Because confidence is anecdotal in nature, we have to see what actions will follow these words with holiday sales
According to the S&P/CaseShiller HPI of 20 cities, prices fell 9.36% y/o/y in Sept, a touch more than estimates of a decline of 9.1%. On a m/o/m basis, prices rose .3% to the highest price level since Jan ’08 but has it still 29% below the July ’06 record high. 9 cities of the 20 saw m/o/m gains with Minneapolis and Detroit (yes Detroit but y/o/y fall still steep) leading the way but all 20 are still experiencing y/o/y declines led by Las Vegas and Phoenix. Overall, the improving home price data reflects the spring/summer home selling season which is the best of the year and also the influence of the home buying tax credit combined with low mortgage rates, cheaper prices and FHA guarantees for certain buyers with little down payment. With a likely rapid rise in future foreclosures still ahead and the prime area of the market feeling stress, home prices next year should resume lower after the tax credit expires and the Fed stops buying MBS.
Q3 Real GDP was revised to a gain of 2.8% from the initial reading of 3.5% and this is in line with estimates BUT Nominal GDP was revised to below forecasts at 3.3% vs forecasts of 3.6% and down from the 1st reading of 4.3% as the deflator was revised to a .5% gain vs expectations of .8%. Personal Spending was revised down to +2.9%, down from 3.4% and below forecasts of 3.2%. The inventory drag was a bit more than the 1st report and Real Final Sales, which takes out the inventory impact, was revised to a gain of 1.9% vs 2.5%. Trade was more of a drag as imports were revised higher than export growth. Government spending and spending on equipment and software were revised up but CRE and residential RE construction were revised lower. US corporate profits in Q3 rose 10.6%. Bottom line, while somewhat old news in that we’re 2/3 done with Q4, it sets the stage at which Q4 began and that was slightly below nominal estimates.
Martin Wolf wants to take bankers who are living large on the taxpayer dole, and tax them, big and hard. He gives 6 reasons:
1) Some institutions that are “making exceptional profits because they are beneficiaries of unlimited state insurance for themselves and their counter-parties.” These largest business subsidies ever deserve to be taxed.
2) “Profits being made today are in large part the fruit of the free money provided by the central bank, an arm of the state.” It is not the role of the state to give banks a “license to print money.”
3) Generous bailouts were “to restore the financial system and the economy, not to enrich bankers.”
4) Risk takers deserve huge rewards — but not those who risked and lost and were rescued by the state.
5) Exceptional interventions in times of crisis also mean exceptional interventions to recoup costs when the crisis is past.
6) These enormo bonuses are “Hidden gifts” from the state. What the state gives, the state is entitled to take back.
Can’t say i find much to disagree with there . . .
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Source:
Tax the windfall banking bonuses
Martin Wolf
FT, November 19 2009 22
http://www.ft.com/cms/s/0/f9d3132c-d55b-11de-81ee-00144feabdc0.html
After a night of binge drinking there is always a price to pay the next day. After extending 8.9T yuan of bank loans ytd thru Oct vs 4.9T all of last year, its time to sober up for Chinese banks. The 5 biggest Chinese banks gave regulators their plans to raise capital to fill holes created by the massive lending. This coming supply sent the Shanghai index down 3.5% and the rest of Asia was lower. European stocks are hanging in after Germany’s IFO business confidence # rose to the highest level since Aug ’08 at 93.9, 1.4 pts above estimates. Add Russia to the list of nations who are steering policy for the sole purpose of weakening their currency vs the US$. They cut rates by 50 bps to 9% and specifically said it was intended to stem the rise in the ruble. With long term implications for the US$ as a reserve currency, the Hong Kong Monetary Authority ceo said China is thinking about expanding its program to use Yuan for the settlement of trade.
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Here’s a stat to wake you up this morning: 23% of all mortgage borrowers in the US are underwater:
“The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn’t expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.”
There are 5.3 million U.S. households with mortgages at least 20% higher than the home’s value. And it gets worse, depending upon the vintage of the mortgage.
During the boom, appreciably worse: Of those who took out mortgages at the 2006 peak, more than 40% are under water.
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Source:
1 in 4 Borrowers Under Water
RUTH SIMON and JAMES R. HAGERTY
WSJ, NOVEMBER 24, 2009
http://online.wsj.com/article/SB125903489722661849.html
“We feel like this market still has some room to move higher,” said Burt White, chief investment officer at LPL Financial in Boston, which oversees $259 billion. “We’re still at levels that are lower than we were before Lehman Brothers. We are vastly better off than we were then.”
-Bloomberg
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Are we really “vastly better off than we were then?” Gluskin Sheff’s David Rosenberg (via Barron’s) looks at the details and concludes not one tiny bit:
Since Lehman, we have lost 6.2 million jobs;
The unemployment rate is 10.2% now, versus 6.2% the day before Lehman collapse;
Real gross domestic product is still down 3% since the summer of 2008;
Housing starts are down 30%;
Auto sales are down 23%;
Bank credit has contracted by $500 billion, or 8%;
Household net worth is down $7 trillion;
Home prices are down an average of 10%;
Office-vacancy rates are up 3.5 percentage points, to 17.2%;
Apartment-vacancy rates are up a percentage point to 11.1%;
Consumer confidence is down 11 points;
The budget deficit has tripled;
If this is “vastly better off,” I shudder to think what “worse off” would look like. . .
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Source:
Long Way for Nothing
ALAN ABELSON
Barron’s NOVEMBER 23, 2009
http://online.barrons.com/article/SB125875996020558221.html
Everyone knows that senior execs at Bear Stearns and Lehman Brothers were paid largely in stock, and that they lost most of their wealth when the companies collapsed, right?
Turns out, not so much:
“Three professors at Harvard are disputing that logic in a new study, saying it is an urban myth that executives at Bear and Lehman were wiped out along with their companies.
Though the chiefs at both investment banks lost more than $900 million in their stock holdings, the professors argue that it is important to also consider all the riches the bankers took off the table in the years preceding the crisis.
At Lehman, the top five executives received cash bonuses and proceeds from stock sales totaling $1 billion between 2000 and 2008, and at Bear, the top five received more than $1.4 billion, according to the study, which was released on Sunday night on the Web site of the Program on Corporate Governance at Harvard Law School.
The payouts came in the form of cash bonuses as well as thousands of shares of stock that the executives sold as the share prices of their companies soared. Most of the executives sold far more shares during that period than the number they held when their companies hit bottom.”
Another myth of the Bailout era dies . . .
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Source:
Executives Kept Wealth as Firms Failed, Study Says
LOUISE STORY
NYT, November 22, 2009
http://www.nytimes.com/2009/11/23/business/23pay.html
This got big laughs in Berlin (despite the description of Europe)
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Hat tip Prieur!
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Not to be confused with Saul Steinberg’s New Yorker cover (March 29, 1976) “View of the World from 9th Avenue.”
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