The National Association of Realtors reports a 7.7% January drop in U.S. pending home resales and has revised their originally reported 6.3% gain in December down to 4.8%.
“There are just too many headwinds for homebuyers — tight credit, mounting job losses and fears of further price declines,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “The housing market is showing no sign of a bottom. This could be the story for the first half of this year.”
Sounds familiar. That being said, pending sales increased 2.4% in January for the West but driven by the sale of bank owned homes.
∙ Pending U.S. Home Resales Slump More Than Forecast [Bloomberg]
Just watching Bernanke’s performance with the Senate Budget Committee – I can’t imagine buying a house let alone a share of stock with this guy running the Fed. Looks like I’m not alone.
sales will increase when prices fall, which is happening in the West. Huge price reductions (and low interest rates) are needed to get volumes back up to normal levels, and that is starting to happen in some places. However, this certainly doesn’t mean that prices won’t decline further.
Fed critics are so lame. What is he supposed to say? Don’t you realize that if Bernanke emits the kind of hard hitting truth based material that would actually satisfy you that the markets would shrivel like salted snails? Don’t you realize that if you construct a system that requires someone who is brilliant and brave and a bunch of other good stuff as well that it will fail always because humans are not superbeings? And what is he supposed to do that would be so much better? We have a deflationary feedback cycle going on because of the record bubble and he is supposed to do what to make that better? All that bogus credit has to be rolled back and there aren’t any good ways to do that. Would a Fed chair who shoots from the hip and likes blame games really be able to fix everything that much better? Maybe we should get Internet firebrands to staff government positions so we don’t have to worry about all this subtlety and cloaked language stuff.
Mole Man – do you believe in representative government? Bernanke was asked point blank in today’s hearing (and in previous ones) who has received TARP funds. He refuses to answer. Everyone is focusing on the 9,000 earmarks in the stimulus package (which they should) – but how much debate and disclosure has there been with the $180B AIG bailout? Who are AIG’s counterparties? We know that Paulson and Blankfein ensured that Goldman Sachs $20B was covered. Who are the other gamblers on the other side of the AIG transactions? European banks, hedge funds, Saudis, friends of Bill & Hillary, friends of Hank? Why does the American taxpayer have to make good of these bets? And why must we pay 100 cents on the dollar? Who knows how much has been paid to who – and why? The taxpayers and senators and congressmen sure don’t know – but Paulson, Bernanke,and Geithner sure do.
Bernanke lied in front of a senate committee – and, yes, that bothers me. LMRiM is right – the theft is occurring in plain sight.
“The taxpayers and senators and congressmen sure don’t know – but Paulson, Bernanke,and Geithner sure do.”
+1
“And what is he supposed to do that would be so much better? We have a deflationary feedback cycle going on because of the record bubble and he is supposed to do what to make that better?”
Print money (not borrow, print) divide it equally among all adult citizens and hand it out.
LOL, Mole Man and FSBO, tony, et al. Bernanke is like the school nerd whom the jocks used to shake down for money on the playground. The banksters are the jocks. He’s a bright guy, but he’s just a “useful idiot” to the power structure.
A better structure would be one in which “wise Solons” would never be in the position of trying to “tweak” an economy that consists of hundreds of millions of economic actors making literally trillions of decisions. Substituting the judgment of a small elite for all those decisions – and trying to push voluntary decisionmakers towards the outcomes desired by the elite – is doomed to failure.
As for what Ben Bernanke and the USG should do, the answers were always obvious (and obviously never would have been undertaken as it would have constituted an admission by the power structure that it had failed, and that its power should be diminished): cut government spending dramatically, cut taxes (especially on capital formation), leave interest rates alone to do their thing, let asset prices crash to whatever levels are sustainable, and use government resources as necessary to ensure only the most basic of human needs (cots in a gym, MREs for food, etc.) – no more. Obama should use the bully pulpit and his considerable political skills to prepare the people for a very tough 2 years or so, and demonstrate true “shared sacrifice” by ordering cuts in every Federal salary by 20% and exhorting states to do the same for their employees (including teachers, police, forefighters. etc). With major tax cuts, this won’t be as bad as it seems for individuals.
There wouldn’t be any deflationary spiral. Prices would fall a lot, companies would go bankrupt with the assets transferred cheaply to smarter players, and economic activity would flourish (after a very tough year or two). Most importantly, the people would learn some mportant lessons. Or, the “great leaders” can keep going down the same path, which is quickly morphing into a worldwide catastrophe.
My only role in this is to try to figure out as best I can how to profit from it, so I really don’t care either way, to be honest.
**********
Getting back to the subject of this thread (falling existing home sales), remember how everyone was talking about the “Obama” bounce back in the fall? I recall having numerous conversations with Marinfidels and others who assured me that “once Obama is elected, it’s all going to change, and there is going to be a huge sigh of relief from the markets that Bush is gone” (rough composite of many many similar comments). LOL. Looks like the “bounce” went the wrong way 🙂
As for what Ben Bernanke and the USG should do, the answers were always obvious (and obviously never would have been undertaken as it would have constituted an admission by the power structure that it had failed, and that its power should be diminished): cut government spending dramatically, cut taxes (especially on capital formation), leave interest rates alone to do their thing, let asset prices crash to whatever levels are sustainable, and use government resources as necessary to ensure only the most basic of human needs (cots in a gym, MREs for food, etc.) – no more.
This Randian wet dream will.never.happen.
What about police? Won’t we need more of them when the masses start rioting? And the military? Do we need them too?
This kind of overheated, end-of-the-world “solution” is, unfortunately, what passes for analysis in a lot of “conservative” circle these days. (Seriously, some of these sites call for armed insurrection.) Ideologically-driven solutions got us into this mess, they’re not going to get us out. (And yes, Obama is going overboard in this respect as well.)
My solution: give everyone a rifle and a bunch of seeds to plant. That has just as much chance of happening.
We started out discussing home prices, so I thought I’d throw some recent state-by-state statistics on foreclosures into the mix. As usual, a lot of the action is here in California.
http://economix.blogs.nytimes.com/2009/03/02/foreclosure-rates-arent-really-that-high/
I wonder how the markets will react once the gov starts implementing regulations to the financial markets?
It is sad when a proposal for modest cuts in government spending is called a “Randian wet dream”… The cuts and/or big tax increases are going to have to come soon since all government pensions were counting on a Dow above 15,000 (not below 7,000). I predict more home sales after more business shut down or leave California rather than help it to pay six figure pensions to cops, fire fighters and bus drivers who retire at 50 years old…
FAB, you mean more home FOR sale, right? The tax burden on the productive class in CA is going to be huge. The public service unions are going to fight to keep their cushy salaries, benefits and pensions, Obama is giving tax breaks to the 50% who don’t pay income taxes, the Fed is helping to ensure the survival of the banking class, and the only growth will be in the public/pork sector. If you are not in one of those 4 classes, you lose.
If to wish for otherwise is a “Randian wet dream”, then I’m going to rent The Passion of Ayn Rand and hope to get stimulated. Might have better luck with Helen Mirren in The Age of Consent.
Re-read the rant. It’s not “modest.” It’s tent cities. I’m all for cuts in government spending and reworking the ridiculous pension systems. But that’s a big difference from going back to the 19th century.
FSBO,
I think you have public sector there twice, so that’s really just 3 classes that will benefit. I’m not sure if I fit into one of them or not. I work in the non-banking private sector, and I’ve always thought of myself as productive, but I qualify for a tax cut so I must not be.
Speaking about the public sector, it looks like another trillion dollar bailout is going to have to be arranged, this time to support bloated public sector pensions. I’m really surprised, given how competent government functionaries are. You’d think they would have realized the pension projections were not sustainable. (Of course, they always understood that, but they also understood that the foolish taxpayer would be left standing there, ready and willing to be fleeced – same game Wall Street was playing):
http://www.calculatedriskblog.com/2009/03/pensions-another-trillion-dollar.html
@LMRiM –
I agree with the “My only role in this is to try to figure out as best I can how to profit from it, so I really don’t care either way, to be honest.”
You seem to be a seasoned and savvy investor, any tips for a young 20 something engineering professional? Is cash truly king, or for someone with a long time frame wrt investing is this a good time to get heavy into equities (or at least, say starting the next 6-9 months or so)?
Waaah-waaaah-waaaaaaaah, boo-freakin’-hoo! Obama is taxing the holy hell out of most of the country. Now small businesses in California (San Francisco in particular) and other parts of the country are either going to have to shut down or move elsewhere. That means more jobs lost, which means more foreclosures on the horizon, which means more housing inventory, which means the light at the end of this tunnel is nowhere in sight, which means … oh. Y’all VOTED for HIM, REMEMBER???!!! So stand by YOUR man and quitcherbitchin’!!! Y’all are just BEGINNING to get what you deserve! My heart bleeds, really.
Oh, and Bernanke lied to the Senate Committee? Obama and the White House spokesman aren’t forthcoming with the press? No way! That only happens in the Middle East, Russia and China.
@ lolcat_94123 –
About investing in investing, if I were still your age, I’d realize that my number 1 asset is my income earning ability, which is likely to be a source of USD. Because long term the dollar is toast, I’d want to concentrate on diversifying my risk there.
For existing wealth, assuming that you don’t have a good amount of it yet (say, under $1M), I’d think cash is still king, with a little gold (perhaps as high as 10% of net worth if you don’t own a house yet). But only for now. At some point I’d want to diversify that into income-producing assets and real estate (but please not yet in SF!).
For money that you are saving now out of income, I’d think buying US equities at these levels on a mechanical schedule makes sense. However, I don’t think the US is going to do particularly well, and I suspect equity returns will not be great (in real terms) for the next decade or so (just a guess, but it will be a long time). US equities should provide good trading opporunities, and I am bullish right now, but I think buy and hold is not a good strategy for the froeseeable future. Much of what made the US great has been systematically dismantled over the past 40 years, and that process is about to accelerate dramatically. I’d think US equities shouldn’t be more than 20% of net worth/contributions for a USD earner who is going to just hold them.
I much prefer getting exposure to Asian equity markets by buying index vehicles (ETFs for the region, some country specific ETFs and funds) for money that you are saving on an ongoing basis, and I’d want to have about twice the exposure there as to the US.
Income producing real estate in the US should be a big winner in a few years, but I think returns will be very dependent on where you buy (I doubt SF will be a very good investment, except in the very beat down areas, for a long time, but it’s possible that in 2 years there are some very good risk/reward bets that one up).
Last, I’d spend some time to figure out how to shield as much of your income from tax as possible, and if I had my twenties and thirties to do all over again, the one thing I’d do differently would have been to be more tax efficient. It’s tough, but figuring out how to use your professional skills in a non-W-2 environment s the single largest investment you could make IMHO.
I hope that helps!
Should be “About investing in US equities” above. I’m as bad of a typist as hipster it seems 🙂
Thanks LMRiM, that is very appreciated.
I definitely have (far) less than $1M, and also have the feeling that SF RE and US equities might not be the best bet for the foreseeable future. But with the chaos happening right now, like I said I’m just not sure where to allocate my investments.
The “non-W-2” environment suggestion is very interesting; I hadn’t really thought of that in terms of an investment strategy.
Thanks again!