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Housing Index Expected To Hit A New Low

The New York Times tries to prepare us for more bad housing new:

Case-Shiller Index Expected to Show New Low in House Prices

Published: May 31, 2011

SAN FRANCISCO – The desire to own your own home, long a bedrock of the American Dream, is fast becoming a casualty of the worst housing downturn since the Great Depression.

Damn that downturn.

Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.

But no one is to blame. It’s just the fault of the downturn.

Disenchantment with real estate is bound to swell further on Tuesday when the most widely watched housing index is all but guaranteed to show that prices of existing homes sank in March below the lows reached two years ago – until now the bottom of the housing crash. In February, the Standard & Poor’s/Case-Shiller index of 20 large cities slumped for the seventh month in a row.

And yet the recession has been officially over since July 2009.

Housing is locked in a downward spiral, industry analysts say, not only because so many people are blocked from the market – being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage – but because even those who are solvent are opting out.

"The emotional scars left by the collapse are changing the American psyche," said Pete Flint, chief executive of the housing Web site Trulia. "There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own."

Then the news media is doing its job. After all, we have to learn to settle for less if we are going to have true social justice.

Trulia, a real estate search engine for buyers and renters that is based here, is a hive of renters, including Mr. Flint. "I’m in no rush at all to buy," he said. He expects homeownership to decline further to about 63 percent, a level the country first achieved in the mid-1960s.

Fifty years of progress wiped out without the batting of an eye.

Tim Hebb, a Los Angeles systems engineer, expertly called the real estate bubble. He sold his bungalow in August 2006, then leased it back for a year. Since then, the 61-year-old single father has rented a succession of apartments.

I have flirted with buying again many times over the past few years," said Mr. Hebb. "Let’s face it, people are not rational creatures."

You see, buying a house is just a crazy dream. In fact, maybe we should even do away with the home mortgage deduction, altogether.

The market signaled further trouble on Friday when the April index of pending deals was released by the National Association of Realtors. Analysts had predicted the index, which anticipates sales that will be completed in the next two months, would be down 1 percent from March. Instead, it plunged 11.6 percent


And what a shock that such bad news came out on the Friday before a long holiday weekend.

This article was posted by Steve on Tuesday, May 31st, 2011. Comments are currently closed.

10 Responses to “Housing Index Expected To Hit A New Low”

  1. Petronius says:

    May economic report :

    • The US economy sucks.

    • And it’s getting worse.

    • Over 75,000 people applied for 2,000 jobs at McDonald’s in Chicago. That pretty much says it all, but more follows.

    • A Gallup poll found that over half the American people believe the country is in a recession or depression — 29% said depression, 26% said recession, and 16% said slowing down, with 27% saying economy is growing.

    • The housing crash is getting worse.

    • Existing home sales fell.

    • Foreclosures accounted for 28% of all houses sold in the first quarter. Nevada led the country with 53%. California and Arizona tied for second at 45%.

    • Canadians and other foreigners with their strong currencies are beginning to buy up American real estate on the cheap. Foreign home buyers now account for 8% of the US housing market.

    • Housing starts dropped 10.6% in April and are at the lowest level since WWII –– down 75% from 2006 and getting worse.

    • Home prices fell 8% from last year, 3% on the quarter, and are falling at the rate of 1% per month.

    • Real estate information company Zillow predicts a further 8% decline this year and that house prices will not bottom until 2012.

    • Bank of America’s home loan division has lost $15B in the last year and a half.

    • Over 16 million families –– 28% of homeowners –– are underwater on their mortgages nationwide. Most of these people will never recover.

    • The Fed’s low interest rates also keep real estate prices higher than they would be otherwise.

    • Shopping mall real estate has stabilized, but retail sales are falling.

    • American entrepreneurship –– new business start-ups –– is at an all-time low.

    • The Richmond Fed Manufacturing Index reported that manufacturing is shrinking.

    • Business equipment production (capital goods) is in steep decline.

    • Orders for durable goods fell 3.8% in April.

    • Boeing received only two orders in April, compared with 98 in March.

    • GDP rose a measly 1.8% in the first quarter. GDP of course includes a hefty component for government spending –– about 41%.

    • Government spending hit the national debt ceiling in May.

    • The debt now stands at $14.4 trillion.

    • The estimated deficit for fiscal year 2011 is projected to be $1.4 trillion.

    • On 17 May, Senator Tom Coburn quit the bipartisan “Gang of Six,” signaling that the Senate is not interested in debt reduction.

    • Of course we can always tax the rich, right? But if you confiscated Bill Gates’ entire net worth, it would cover only 15 days of the deficit. Throw in Warren Buffett’s estate, and you’d get cover for another 13 days. Big hairy deal.

    • The Index of Leading Economic Indicators fell for the first time in a year.

    • Corporate profits are decelerating.

    • Unemployment is getting worse. The unemployment rate increased to 9% in April and jobless claims rose in May.

    • 47 million people — or more than one in every seven Americans — are on food stamps.

    • Spending on food stamps, Medicaid, unemployment, public housing, and other welfare is up 54% over the last two years.

    • Consumer spending is falling.

    • American consumers are falling further and further behind. In the current circumstances, there is no way that consumer spending can sustain economic growth. That is why the American economy is turning down.

    • Gap’s profits fell 23% in the first quarter, stung by weak consumer demand across all three flagship clothing chains, and by cost inflation.

    • WalMart reported eight straight quarters of declining sales at its US stores.

    • WalMart CEO Mike Duke says its shoppers are running out of money faster and have nothing left to spend at the end of the month, probably due to high gasoline prices.

    • Sadly WalMart cannot stock its store shelves with American-made goods because we don’t make them anymore.

    • Warren Buffett shocked the experts when he said, “The United States is not going to have a debt crisis as long as we keep issuing our debts in our own currency. The only thing we have to worry about is the printing press and inflation.”

    • It’s hard to get a read on inflation because wages are flat and real estate is declining. However, the prices of most things Americans need to buy are going up –– food, fuel, health care, and tuition.

    • John Williams’ Shadow Govt Stats shows US inflation at nearly 10% when inflation is calculated using the old government formula.

    • Bill Gross’ PIMCO bond fund is shorting US Treasuries.

    • Steve Forbes predicted America will return to the gold standard within 5 years.

    • Grain traders in Minneapolis bid $14.30 a bushel for spring wheat compared to $8 last year. The price is being driven by export demand from Asia and Mexico.

    • Dr Pepper Snapple Group reported that higher prices for aluminum and juice concentrates would lift its cost of goods sold by 9% this year.

    • Kraft and Sara Lee report corporate margins are being squeezed by rising prices for everything from meat to dairy to wheat as commodity hedges roll off.

    • Smucker raised the price of its Folgers brand and Dunkin’ Donuts coffees 11%; this followed a 10% hike in February, and was the fourth hike in a year. Kraft raised the price of Maxwell House 22%, up 56% on the year.

    • The US monetary base was $822 billion at end of April 2007. At end of April 2011 it is $2.5 trillion, a three-fold increase. It has been called quantitative easing and stimulus and political payoffs, but the proper economic term is inflation.

    • The Fed has been supporting the regime’s policy of massive spending and debt. The Fed does this by creating money to buy Treasury bonds. This money creation is driving inflation worldwide.

    • Inflation has also been driving the US stock market. Fed policies (QE and low interest rates) are boosting the market. The rising market gives people the sense that things will turn out OK.

    • Bernanke indicated that the Fed is finished with QE and announced it was in no rush to raise interest rates.

    • Some Fed officials have called for a rate hike this year, but most Fed watchers predict nothing will happen until next year. Watch for Bernanke to keep rates low as long as unemployment is high.

    • QE2 expires on 30 June. Watch for the economy and stocks to decline, and then we’ll see if the Fed responds with QE3.

    • However, if the Fed reduces QE, interest rates will need to rise in order to attract investors to buy government debt that the Fed will no longer cover.

    • The Fed says that, if necessary, it can cool inflation by withdrawing money from the economy. This means it stops buying US government bonds. But if the Fed does that, where will the money come from to support our trillion dollar annual deficits?

    • Interest rates would have to rise in order to sell US government bonds in the market. And, as Tim Geithner reminds us, higher interest rates would pose an unacceptable risk to the economy.

    • Thanos Papasavvas, chief of currency management at Investec Asset Management, said that if the economy continues to deteriorate, the Fed will prop up the economy with a third round of QE, which will make it difficult to unseat Nerobama in the 2012 election.

    • Interest rates actually fell this month and bonds rose. This happened despite the weak dollar, massive spending, QE, and inflation. Thus this action was contrary to the fundamentals and to long-term trends. The leading bond sectors have been world bonds and emerging markets.

    • The US stock market is also benefitting from the global economic recovery. Foreign stocks and international stocks are leading the market. However, overseas earnings are not translating into American jobs or investment in America.

    • Commodities guru Jim Rogers says, “Savers and investors are going to get wiped out, totally wiped out.” (Interview 9 May, Fox BusinessNews.)

    • In an April 29th interview with The Gold Report, Doug Casey said the current American fiscal and monetary policy is “going to wind up with the currency being destroyed. It’s going to be a disaster … a worldwide catastrophe.”

    • John Williams predicted a double-dip recession and that hyperinflation hits the US by 2014 or sooner. “The average person, though, should be feeling enough financial pain that political pressure will tend to mount before the 2012 election; but whether or not the average person will take political action remains to be seen. I don’t think you have until 2012 before this gets out of control and there’s hyperinflation. It could go past that to 2014, but we’re seeing all sorts of things happening now that are accelerating the inflation process.” http://www.theaureport.com/pub/na/9435

    * Closure of the Mississippi River due to flooding will cost the US economy an estimated $300M per day. Watch for increased prices for cotton, rice, and corn.

    • The US dollar lost ten percent of its value in the first four months of this year.

    • On 4 May the US dollar index hit a 3-year low at 72.69.

    • The dollar index is currently rebounding, as a result of the European debt crisis, but the rebound will only be temporary. The long-term trend remains down.

    • The US dollar represents an IOU from a bankrupt Federal government.

    • Strong foreign currencies are benefitting from the demise of the dollar. The US dollar has fallen 25% against the Swiss franc since last year.

    • Commodities –– and especially silver –– were hammered early in May.

    • We are now entering the summer off-season when gold and silver prices traditionally retreat for a few months.

    • George Soros’ hedge fund dumped most of its gold holdings in the first quarter. Soros reduced his position in gold ETFs from $774M at end of year to $7M at end of March. He also sold off most of his gold and silver mining shares.

    • Silver fell sharply, about 30%. Silver was overbought and this is a healthy correction. It is currently above its $35 support level, and has deeper support at $32-28.

    • Gold remains very strong at $1530; it has support at $1480; its next support levels are $1445 to 1430.

    • China passed India as the biggest buyer of gold –– Chinese investors bought nearly 91 metric tons of gold in the first quarter.

    • Utah became the first State to make gold and silver coins legal tender. North Carolina, Idaho, Minnesota, and several other States have similar bills pending.

    • Real estate should begin to compete with gold as an inflation hedge, as real estate prices are at historically low levels in America.

    • Hedge fund managers are investing in farmland as a cushion against high grain prices, the weak dollar, inflation, and the adverse political environment. http://www.observer.com/hedge-funds-running-farms-05172011

    • Institutions are not yet buying physical gold (as opposed to gold ETFs). When they do, gold will rise sharply.

    • Oil price has backed off some and is settling near $100 bbl. But gas prices are still high enough to dampen demand.

    • S&P cut Greece’s bond rating two more notches deeper into junk bond status.

    • There’s good news from little Sweden. Sweden announced more tax cuts to spur its economic growth. Sweden has cut income taxes, the corporate tax, payroll tax, and stopped the wealth tax; it will make further cuts to income and payroll taxes, and new cuts to property taxes and to taxes on dividends, pensions, and in the VAT. Finance minister Anders Borg said historically high taxes in Sweden have done “large damage in terms of lost jobs and shortages in our business climate.” The tax cuts have resulted in job growth, budget surpluses, and economic growth in Sweden of 5.5% in 2010, 4.6% in 2011 (estimated), and further growth is predicted for 2012 (3.8%) and 2013 (3.6%). Those growth rates are comparable to those historically experienced by the US prior to the era of TMG.

    • JohnMG says:

      Borg gets it. Why can’t the cyborg we have at 1600 Pennsylvania Avenue catch on? Or will we all be required to buy something else we don’t want?

      Save a horse…..buy a Volvo.

    • proreason says:

      as long as it doesn’t happen before nov 2012, the make believe media will be ecstatic

    • jobeth says:

      Obalmy is right on target in the grand scheme. Remember he began doing everything negative he could think of from his first day in office. Everyday since its been more and more of the same and worse.

      He WANTS to destroy America. So far he’s getting it done. “God Pleeeeze help us. If there are 10 good men in America will you save it”…..(paraphrase)

    • David says:

      Great list but I didn’t understand this one, can you explain how it works?

      The Fed’s low interest rates also keep real estate prices higher than they would be otherwise.

    • Petronius says:

      David — When interest rates fall there is a redistribution of income away from savers and lenders (who receive less) toward borrowers and debtors. Lower interest rates boost consumer confidence. Generally people will buy big ticket items like autos and houses only when they feel financially confident about taking on new debt. Low rates support consumer confidence.

      High interest rates (a contraction in credit) increase borrowing costs and mortgage costs, and therefore reduce consumer demand for housing.

      Conversely, low interest rates make mortgages cheaper, and under normal conditions should stimulate higher market demand, which puts upward pressure on house prices.

      Thus lower rates tend to increase house-buying, and the rise in home prices will increase housing wealth and increase buyer confidence. That is one of the reasons why the Fed is pursuing a policy of low rates — it is trying to support house prices and stimulate buyer demand and promote economic growth with a policy of easy credit. Trouble is, it’s not working this time because people still lack financial confidence. But if you kicked out the low rates that currently prop up the housing market, home prices would fall even farther.

      During the run-up to the subprime meltdown, mortgage companies were offering teaser rates and low adjustable rate mortgages (ARMs), combined with ever-loosening lending standards, to accommodate every Tom, Dick, and Harry, which pumped up demand, thereby driving house prices higher and higher into a housing bubble. In 2006, interest rates began to rise, the ARMs had to be reset, and pretty soon people began to default on their mortgage payments. When this bubble burst it set off the Sep 2008 financial meltdown and the housing collapse that we are still struggling with.

      If the Fed were to raise interest rates now, it would contract credit, reduce consumer demand, housing prices would tumble farther, and our economic decline would accelerate. Tax increases have the same effects.

      Americans are currently experiencing double digit price inflation for food, fuel, health care, and other items. In the meantime, the Fed is holding interest rates artificially low. With 10% inflation, this means that investors with bank deposits may be losing over 8% of their savings each year. This is a hidden transfer of wealth from the private sector to the government. This is one of the things that has been driving up the price of gold. The day may soon be coming when it will be considered risky to hold your savings in US dollars.

    • tranquil.night says:

      “If the Fed were to raise interest rates now, it would contract credit, reduce consumer demand, housing prices would tumble farther, and our economic decline would accelerate. Tax increases have the same effects.”

      This is why we’re seeing the necessity for QE3 become conventional wisdom in the run-up among analysts, even though low-interest rate policies are what Liberal’s oft cite as “Bush’s role” in the housing bubble, and indeed, misappropriately continue to be blamed for current stagnation today by nutroot drones.

      Whatever role rates played in artificially managing the market and bank lending (which is subordinate to that played by ideological government policy), the fact remains that the federal government never did anything to fundamentally address the cause of the collapse or promote an economic or regulatory environment where any sort of substantive growth could take root, outside of whom the regime threw slush money. They just printed money to buy all the toxic assets, and provide interest free ‘loans’ to crony domestic/foreign corps and banks, whom they also took owner’s equity.

      It’s beyond maskable to the mainstream now. The more the spiral continues, the more drastic the choices become until they start being made for you by nature. Already buying up to 70% at their latest Treasury auctions, Bernanke now faces the grim choice of embracing reality and endangering his master’s ‘recovery,’ or further floating out into uncharted waters on his rickety craft and hoping it doesn’t hit the squalls until at least November of next year.

  2. theforgottenman says:

    If we didn’t have sycophants in the media, the article would read like this:

    Obama Administration’s Economic Failures Lead to the Worst Housing Conditions Since Great Depression

    The American Dream is now the American nightmare for far to many Americans, according to the newest numbers from the Case-Shiller Index. The Obama administration has had few answers to improve the situation.

    Even as the economy continues to hold on by a thread, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.

    The situation shows no signs of improving and will probably show further erosion with the numbers from existing home sales to be released on Tuesday. The fear that we will now be entering a dreaded double dip housing dip has all but sealed the fate of Obama who hopes to win reelection next year.

    The Obama Administration has tried some band aid solutions which have backfired and actually exacerbated the fallout in pricing. Even staunch democrat supporters are disillusioned with the failed policies which threaten to cripple any chance of a recovery in the near future. Most housing experts now say it may be another year or two before any stabilizing of this critical sector to the economy will occur.

  3. jobeth says:

    Hubby said he heard Rush say something about the Dims claiming it’s oh so much better to rent than to own.

    I knew it. I said a long time ago right after “O” got in he would be trying to rearrange our living conditions if he could. If he can pull this off…and keep control…I can see a UK type of “council’ housing for the American populace. I can see a situation where government comes in and owns all these houses in forclosure..(.just to keep them from being unoccupied of course. We must protect neighborhoods from vandalism…yeah…right) and brings in a government program to rent homes back to us…but the one THEY want us to have not the ones we want to live in. They get to control. KInd of like all the fairness in health care….oh…right…some do get waivers….ummmm. Guess those that hone the arse kissing skill will get the bennies.

    Then as I said …you get the type house some bureaucrat wants you to have. If you want 3 or 4 bedrooms…nope…you must be in that little house Or an apt… where they tell you to live. You don’t need but X number of bedrooms or sq footage.

    My Brit step daughter had to be on a waiting list for well over a year while continually being told that she was “next on the list”…for a new flat in order to get out of a dangerous neighborhood where her kids couldn’t even go out of the house. All the while knowing that Pakies were coming into the country and being bumped ahead of her. Bad… Housing is so expensive…even now…over there, there is no way a young family could ever get ahead enough to buy.

    Oh the joys of socialized housing…in addition to socialized meds…and anything else they can give to the government to run.

    My Brit sis in law…who loves Obama and rolls her eyes at anything we say against him (what the heck would she know anyway) was wailing on why airfares were so expensive. I told her. If “O” would allow drilling (I know…dreaming) the world oil prices would drop like a rock. Of course she would rather talk about who is the next super star than politics. Grrrr. Yet she rolls her eyes at us.

    I really feel for those who are losing their homes to Obalmy’s economy. Not the people who over bought but the poor sap who wants to pay…but who lost his job…who is struggling mightily but can’t hang on with no resources.

    I rarely waste a “hate” emotion because those worthy of hate aren’t worthy of my effort…if you understand what I mean. I’m having a hard time not allowing my view of our prez to go beyond that boundry. What a jerk.

  4. U NO HOO says:

    “• Of course we can always tax the rich, right? But if you confiscated Bill Gates’ entire net worth, it would cover only 15 days of the deficit. Throw in Warren Buffett’s estate, and you’d get cover for another 13 days. Big hairy deal.”

    And, what do we do next year and the year after that…?

    Cash for Clunkers eliminated inexpensive used cars that might have allowed house buyers to buy…etc.

    Spread the wealth for fundamental change.

    A reasonable man could reasonably conclude that Obama does not want America to prosper.

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