Housing Hype

There is a lota hype and horse spittle swirling around the main stream financial media spin rooms today over the pending homes sales numbers. The housing bubble is the head of this credit horse, lead the ballooning out and it was the first part of the beast to pop, so the thinking goes when the housing market turns so will the entire economy. Horse pucky! The overall economy certainly will not recover until housing market does, but that just makes it a necessary, not sufficient condition to recovery. But instead of telling it like it is the main stream whores try to color the picture hopeful.

There was another ray of hope Monday for the distressed housing market: the National Association of Realtors said the volume of signed contracts to buy previously occupied homes rose for the second month in a row.
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"After nearly three years of freefall, housing activity may have found a floor," wrote Paul Dales, U.S. economist with Capital Economics in Toronto.

It was a ray of hope in the rainbow of deception and lies. Nothing goes up or down in a straight line. After the brutal free fall the banks and builders were in a bounce was the only thing to be expected. That bounce has now run it's course and the best way to know it is to hear, the rose colored news spewed by analysts and the media, which typically occur at the top of the market. It's the same ole same old scam again. The institutional investors lure you in just before they get out. As the retail investor drives the home builders up, they cash out with what used to be your money. In fact it's not even worth of being called a consolidation, rather it's a manufactured consolidation, a false bottom.

Homebuyers taking advantage of bargain prices, low interest rates and a tax credit for first-time buyers pushed the seasonally adjusted index of pending sales up by 3.2 percent to 84.6 in March.

In fact they left a lot out.

Nonetheless, the payoffs of increased home buying activity aren’t showing yet.

A separate report released Monday by the Commerce Department shows construction spending on residential projects fell 4.2% in March. But overall construction spending rose in March, boosted by spending in nonresidential buildings and public works. Economists were expecting a 1.5% decline, according to a Market Watch report, but overall spending actually increased 0.3%, as January and February spending was also revised higher.

But the hype and horse sh!t never ends.

“People are worrying a bit less about a depression and starting to see signs of recovery,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut.
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Other reports point to some stabilization in the housing market. The decline in home prices in 20 major U.S. cities slowed during February for the first time since 2007, the S&P/Case-Shiller index showed on April 28. Also, sales of previously owned homes in March held above a decade low reached two months earlier, NAR, the realtors group, said April 23.

Government efforts to lower borrowing costs and unclog lending may be starting to pay off. The average rate on a 30- year fixed mortgage fell below 5 percent for the second time on record in the week ended March 19 and has held below that since, according to Freddie Mac. The rate reached a record low of 4.78 percent in the week ended April 2.

Right on James, the hype and horse crap did their job, suckered the public to be sapped once again. See Jame's gang want you to think that the only place from here is up, it aint.

What James and his boyz won't say is that the false bottom built on deflationary foundation have yet to take their next leg down, that future lower wages have yet to catch and lower current higher home prices. When they do Crash!

The cost to employ people in the private sector rose only two-tenths of a percentage point in Q1, the lowest increase on record. If recent trends continue, wages will soon be falling.

Although some companies use pay cuts as a way to avoid mass firings, Paul Krugman notes that the overall trend isn't good news.

Why?

Because people whose salaries get cut can't buy as much stuff. And that forces other companies to make pay cuts. Then their workers can't buy as much stuff. And so on.

How long will the wage cuts last? Let's just say that no one is making short term bets.

wages now being slashed to cope with the economic downturn are likely to stay low long after the recession is over, experts say.
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"It is going to be a long time before we see sustained pay raises," Harvard University economist Lawrence Katz told the Post.

How long can be long debated, but is absolutely no doubt about who's beating it will be.

The situation is worsening the fate of workers trying to rebuild investment nest eggs socked by downturns in the housing and stock markets, analysts said.

Still don't know who to believe, then just go to an old horse trader who knows a thing or two about money and markets.

Billionaire investor Warren Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., said he’s seen no indication of recovery from the real estate slump that helped cause the U.S. recession.

“There’s no signs of any real bounce at all in anything to do with housing, retailing, all that sort of thing,” said Buffett, 78, in a Bloomberg Television interview before the Omaha, Nebraska-based company’s annual shareholder meeting today. “You never know for sure, even if there’s a leveling off, which way the next move will be.”

Which way? Warren you're so coy, not cute just coy. You just said it wont be up, that leaves just sideways or down and side ways it cannot be.

What no one wants to say is that zero growth is just as unsustainable as the bubble was.

Suppose you sell a few villagers milk from one cow and have one helper you pay to milk it. Can you just break even? Why do you need to buy 10 more cows and hire 10 more milkers?

First if the guy you pay is the only other person in the village he can't afford your milk. If he could you could not make a profit. So, you will have to lower your price, thereby cutting his wages, there by lowering your price, etc,..

Now you might say that is an artificially simple closed economic system, but that's what the global economy is a closed economic system.

Don't believe in mind games and theoretical Bull, then believe this, Japan super-micro managed it's economy after their bubble burst drifted in and out of recession with nearly zero economic growth for 20 years, lost a decade and has just this year droped into depression.

On the other hand the greatest depression the US ever had was the depression of 1921. Never heard of it? That's because it was left alone by government and bankers and the free market fixed it in a year. There is no free lunch. Once the bubble burst the piper will be paid, it's just a matter of who foots the bill. 

So that's the math, an economy on flatline with no hope of recovery has only one way to go.