US housing data shows market already in a double-dip recession
Posted on 22 March 2011 with 4 comments from readers
If this was Wall Street a 9.6 fall in sales last month would be regarded as something of a slump.
But yesterday the Street chose to ignore a 9.6 per cent fall in the total combined sales of all previously owned houses across the United States in February. And the market also dismissed a decline in the median US home price to $156,100, the lowest since the dog days of 2002.
US housing, as Professor Nouriel Roubini noted in Dubai last week, is already back in a double-dip recession, and shows absolutely no sign of recovery. Far from it, and yet interest rates are presently very low and ought to be reviving the US housing market.
Interest rate outlook
This is worrisome. As the economy recovers, or rather if the current anaemic upturn in manufacturing proves to be more than a blip in the face of weakening global demand, then interest rates will have to go up to combat rising inflation.
House prices would probably fall again, although some hedge fund managers think prices are close to the bottom now and buyers should be locking in at these interest rates in order to get the best deals going (click here).
Economists are wracking their brains to understand why house prices are still declining while the jobs data is beginning to improve slightly. Could it not be that the jobs data is wrong? You cannot mess quite so easily with the prices of second hand homes that estate agents display in their windows?
Some analysts point to a mismatch of supply and demand but that is surely to state the obvious. More significant is the 33 per cent of sales to cash buyers, showing that the mortgage market is still tight for many buyers who don’t qualify for loans at low rates.
Debt destruction
This is where deleveraging is still biting the US economy in its most important consumer segment. The leverage has all gone into the stock market through the money pumped into the financial system by the Federal Reserve. The recovery is therefore not only weak but a false one.
If the housing market is in a double-dip recession what does that say about the rest of the economy? Housing led the way in 2006. For most Americans talk of a recovery is a bad joke. Food and energy costs are soaring, income levels are at best stagnant and only the Wall Street bubble makes them feel happier about the future.
After two years of rising stock prices that false friend may soon blow a raspberry.
4 Comments posted by readers:
The US Federal Reserve will have to disclose the recipients of the $3.5 trillion dollars of emergency loans (?) it made after the 2008 meltdown. Bloomberg LP beat them in 3 courts, and the US Supreme Court refused to hear the case. Someone on TV said that it is their first court loss on secrecy in nearly 100 years.
Residents in Tokyo have been told to expect 4-hour daily power outages for about a year. I’m not sure that the CBD will be included.
An auto plant has already shut down in the USA because of a parts shortage from Japan.
The US has moved a super carrier further away from Tokyo because they couldn’t allow the interior to be permanently contaminated with radioactive dust which is now blowing Southwest. The threat of a complete reactor meltdown has receded, and Buffet said he is buying, so the Tokyo stock market is going up, at least for a while.
Who will buy US debt when the Government stops doing so in June? More importantly, at what interest rate? That rise in rates won’t help the housing market too much. And the stock market might, stall unless QE 3 comes along.
Yemen is about to lose a ruler. It could become a base for attacks on Saudi Arabia, but they would probably be ineffective. Even Syria now has instability. That would never happen if his daddy was still running the place. Who is next?
Bottom line is people can not afford to pay them property taxes every year on homes over $500K. When you have a 30-45% tax bracket and other taxes to where people pay over half of their income in taxes the last thing on their mind is to go out and buy a new or used home at $500K+ and pay another 5% interest on top of that.
On a $500K home in Los Angeles you are looking at roughly $6.5K+ per year in property taxes while a similar priced home in Taipei,Taiwan would set you back about $600 a year in taxes and one wonders why homes are not selling lol..
Ed Note: Yes Housing Tax + Community Fees in Dubai would be around $5k which is also a bit expensive. But then your rent would also be around $50,000 here, and it would presumably be much lower in LA, so buying does not look so expensive.
Going to get worse in the US for housing prices. See link below:
http://www.reuters.com/article/2011/03/23/us-usa-economy-housing-idUSTRE72F3XG20110323?pageNumber=2
29 March Update:
January Housing Data: Case-Shiller:
The latest Case-Shiller data is now out, and should come as no surprise to regular readers of this blog (though the US government may feign “surprise” here!), since we’ve discussed this topic ad nauseum over the past 9 months.
In summary:
1. “Keeping with the trends set in late 2010, January brings us weakening home prices with no real hope in sight …”
2. “The 10-City and 20- City Composites continue to decline month-over-month and have posted monthly declines for six consecutive months now…”
3. “the feared double-dip recession may be materializing”
Go here for more info:
http://www.zerohedge.com/article/january-case-shiller-data-atrocious-worst-feared-double-dip-recession-may-be-materializing