Succinct summation of week’s events (12.23.11)
Succinct summation of week’s events:
Positives:
1) ECB lends 489b euros to 523 banks. Weak or healthy, what bank wouldn’t take 1% funding for 3 years?
2) German IFO business confidence unexpectedly rises a touch
3) Multi family construction in the US rises to the most since Sept ’08
4) NAHB index up at best since May ’10 at 21 (though still well below 50)
5) Months supply of new homes for sale falls to lowest since Mar ’06 as absolute # for sale falls to lowest since at least 1963
6) Initial Jobless Claims at 364k, 16k less than expected at lowest since Apr ’08
7) UoM confidence rises to best since June, led by the Outlook. One yr inflation expectations drop to lowest of yr at 3.1% likely due to lowest gasoline prices since Feb
8) Looking ahead, two 3 day weekends in a row for those of us working
Negatives:
1) Italian 10 yr back to 7% as doubts remain with Monti budget
2) Italian consumer confidence at lowest since at least 1996
3) Shanghai index ends the week down for a 6th straight week
4) US Q3 GDP revised down to a punk 1.8% growth, follows 1.3% in Q2 and .4% in Q1
5) Existing Home Sales revised sharply lower back to ’07 but months supply falls to 7.0
6) Non defense cap goods ex aircraft unexpectedly declines, where is the kick start from the 100% 1st yr depreciation expense tax credit expiring next week?
7) MBA said even with mortgage rates falling to 4.08% on avg, a multi decade low, purchase apps fall to 5 week low
8) Nov Spending and Income light, savings rate falls to 3.5%, matching lowest since Dec ’07
HAPPY EVERYTHING!
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December 23rd, 2011 at 3:30 pm
First off I want to thank you, Barry, for putting your thoughts down in this publicly available blog. You are now part of my daily read. Part of what makes your site so great is that you encourage and allow a diverse mix of feedback via the comment forums. Thanks for the great 2011!
In regard to the post at hand… interesting that a positive and negative seem to be directly related:
“5) Months supply of new homes for sale falls to lowest since Mar ’06 as absolute # for sale falls to lowest since at least 1963
7) MBA said even with mortgage rates falling to 4.08% on avg, a multi decade low, purchase apps fall to 5 week low”
To sum it up; the real estate market is in shambles.
My analysis; Owners are underwater so they can’t sell and in essence are trapped combined with lending criteria so strict that unless you are a cash buyer you really can not get financing it is no wonder mortgage apps are down. Anyone who has not bought a home yet, and does not need to, is just waiting for prices to fall further. Builders are not building new homes and therefore the available inventory number is down (they would have sold a few homes to the people who “need to buy”). And if you are a cash buyer why would you buy now when prices are still being artificially buoyed by “record” low rates.
On a personal note; here in SoCal I am sitting on my cash available to buy a new home. This will sound wrong but I am waiting for rates to finally rise or an earthquake to strike since either scenario will finally drop the other shoe on prices and make things way more reasonable.
December 23rd, 2011 at 4:02 pm
Happy Everything to you, too!!
While anecdotes don’t really matter, I’m aware that there are hundreds of late-pay/near-default residences in SE Wisconsin which are NOT in foreclosure, nor “for sale.”
If that’s echoed nationally, methinks the ‘months’ supply’ number is unrealistic.
December 23rd, 2011 at 4:58 pm
The supply rate is realistic. It generally falls slowly over the course of the cycle then cresting its decline. The fact the production side is picking up, is a atonement to this fact. Much like the 90′s, that isn’t the end of the housing bust, but the productions side end. I don’t see the price bust ending to the 20′s.
I doubt the production expansion will be overly impressive either before the next fall.
December 23rd, 2011 at 5:04 pm
“US Q3 GDP revised down to a punk 1.8% growth, follows 1.3% in Q2 and .4% in Q1″
and it will be revised up over the years, especially the 3rd quarter. I find GDP reports useless as they can’t keep up with the trends. The late 90′s proved that to me. They were way off(far to weak).
December 23rd, 2011 at 7:17 pm
I can’t understand why the building industry has not moved to Zero-Energy Homes.
Solar Roof Panels, Triple Pane Windows, 2×10 framed houses with Real Insulation,
should be a hot seller with current and future Volatile Fuel Prices.
You need a hot product, to get people to Buy.
December 23rd, 2011 at 9:03 pm
Since February, the TRENDLines Recession Indicator has been predicting a shallow trough occurring in 2012 – but only one update (Aug) gauged it to be a contraction. That said, it is quite likely all 2011 quarters will be downgraded in the July revisions.
TRI quantification of the past week’s forward-looking data suggests a 2.6% GDP pace in December will give way to a o.5% trough in April … en route to a robust 4.1% business cycle crest in 2014Q4 and an end-of-cycle 1.8% soft landing in 2017Q4.
TRI chart: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm
December 23rd, 2011 at 9:31 pm
“…The economy is growing at an estimated 3.5 percent to 4 percent annualized pace in the fourth quarter. And there’s a decent chance the first quarter won’t look quite as bad after the BEA’s benchmark revisions this summer. The increase in first-quarter gross domestic income, the other side of the ledger, was revised from 1.2 percent to 2.4 percent after relevant source data on wages and salaries became available…”
http://www.bloomberg.com/news/2011-12-23/here-s-hoping-for-more-lousy-forecasts-in-2012-caroline-baum.html
December 23rd, 2011 at 9:59 pm
tsetsaf,
I don’t think you are wrong to want to buy a house when interest rates are high. I agree with the idea that higher interest rates push prices down. The monthly payment is the same, but the principal owed is lower, so if interest rates drop you have a chance to refinance.
Back in 2006, the National Association of Realtors told us that economic fundamentals justified high home prices because interest rates were low. Now they will tell you that you need to buy now because interest rates are historically low. They don’t see the conflict with those statements.
To be honest, I don’t think interest rates are going up anytime soon. My guess is that mortgage rates will stay low for years. Of course, that is just a guess. If I really knew the future of interest rates I’d be writing this post from my Yacht in Tahiti.
This leads me to a criticism of the FED that you never hear. By keeping mortgage rates low, the FED is putting today’s home buyers at risk of being underwater in the future. If mortgage rates move from 4% to 7%, it’s going to be tough for future buyers to be able to afford today’s prices without significant wage inflation.
December 24th, 2011 at 6:07 am
Happy peace on earth and merry bah humbug to you.
Here is a riff on one of your themes:
http://informingthe99percent.blogspot.com/2011/12/big-lie-grows.html
“The drug lord was Wall Street. This was money looking for people to exploit.”
December 24th, 2011 at 7:06 am
Happy times to all!
Watch what you eat:
http://www.huffingtonpost.com/2011/12/23/antibiotic-resistance-fda-livestock-animal-feed_n_1167851.html?utm_campaign=122311&utm_medium=email&utm_source=Alert-green&utm_content=FullStory
December 24th, 2011 at 7:42 am
Let us praise Joe Nocera!!!!!! http://www.nytimes.com/2011/12/24/opinion/nocera-the-big-lie.html?_r=1&ref=opinion