Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Don’t Celebrate the U.S. Housing Market Recovery Yet

Housing-Market / US Housing Mar 30, 2015 - 05:49 PM GMT

By: Money_Morning

Housing-Market

Shah Gilani writes: When I moved to Sarasota, Fla., in 1999, I was invited by a prominent local to an “un-wedding wedding” to make new friends in town. I accepted the invitation and, not wanting to display my ignorance, avoided asking the burning question: “What’s an un-wedding wedding?”

Inevitably, I found out what an un-wedding wedding is. It’s a full-blown wedding, only the host isn’t actually getting married. He or she wants to get married but isn’t – and goes through the motions anyway.


This manipulation of celebratory events to fabricate optimism about a desired future reminds me of the state of housing in the United States today.

Here’s why…

The Un-Recovery

There’s no reason to celebrate anything in the housing market’s un-recovery recovery.

Past and present manipulations must be continued to prevent collapse, but they won’t help economic growth in the United States as they did until 2000. Instead, those manipulations only act as a headwind from time to time.

Take February housing “starts.” They were down 17% from January. The annualized single-family starts number for February was 593,000 units, which was essentially flat from the year-ago February 2014 starts number of 589,000.

According to the U.S. Department of Commerce, “Start of construction occurs when excavation begins for the footings or foundation of a building.”

In a recent column, David Stockman, the head of the Office of Management and Budget in the Reagan administration, says the slow starts aren’t due to the weather – although February 2014 and 2015 were especially cold months in the East – but about swings in interest rates.

“The seasonal adjustments are supposed to factor in weather,” Stockman writes. But the raw unadjusted, non-annualized starts number for February 2015 was 40,700. In February 2014, it was 40,600. In 2009, it was 25,000. In 2005, starts were 124,000, and in 2000, they were 88,000 units.

He makes the case that Federal Reserve manipulation of interest rates, not weather, caused these wild fluctuations.

“In short, in the name of improving upon the alleged instability of the private economy – absent the Fed’s expert ministrations – the geniuses in the [Fed] have actually caused the rate of housing starts to gyrate wildly,” Stockman writes.

Stockman goes on to say that the U.S. economy isn’t analogous to a giant bathtub, as Keynesians might suggest. That’s because, he writes, pouring “‘demand’ into the housing market through what amounts to cheap, subsidized interest rates (from the hides of savers) and, presto, activity rates will soar.”

That hasn’t happened.

Free Market Suppression

New home sales in February rose 7.8%, to a seasonally adjusted 539,000 units. That’s the best number for new home sales in seven years.

Still, according to a graph on the National Association of Home Builders’ website, new single-family home sales going back to 1978 show that current levels of sales are barely approaching 1980 levels. They are more than 50% below average sales from 1980 to 2006.

While new home sales, which make up one-tenth of home sales, on the surface looked robust in February, existing home sales rose a scant 1.2% according to the National Association of Realtors.

That’s what I call an un-recovery recovery, or a bum wedding.

Free-market capitalism wedded to democracy yields a living, changing economic system that thrives on creative destruction and withers under socialist-style command and control. The Federal Reserve’s interest-rate manipulations over the past 20 years only prove they are incapable of fostering natural growth in the economy.

The Fed never should have been allowed to manipulate rates so low for so long to inflate the housing bubble in the first place. Fannie Mae and Freddie Mac had to be bailed out, but by now should have been dismantled. They’re backing more mortgages now than ever before.

While two governments and the Fed couldn’t let the financial system implode and too-big-to-fail insolvent banks eat their own poison, everybody should have by now worked together to have broken up Fannie Mae and Freddie Mac once they were back on their feet.

What people forget is the Fed and the government helped bail out builders after the crash.

In a May 6, 2010, Reuters article, author Helen Chernikoff quoted Moody’s Economy.com Chief Economist Mark Zandi saying, “Without the government’s support, in all likelihood we would have seen more failures among the builders. It’s almost hard to list all the things that have been done to support homebuilding either directly or indirectly.”

Then the Fed, with a wink and a nod from successive government administrations went on a $2 trillion Treasury bond-buying binge to start up its zero interest-rate policy (ZIRP).

And to prove no matter how much money it throws at housing it is hapless, the Fed bought $1.8 trillion of mortgage-backed securities (MBS) to narrow the MBS-over-Treasury spread to try and make more mortgage money available.

That didn’t work.

The Takeaway

Without a so-called “clearing mechanism” that balances home sales and rental rates based on supply and demand against free-market interest rates reflecting real-world risk and returns in the $16.8 trillion U.S. economy, not only won’t the housing market ever fully recover, but the economy won’t either.

Like an un-wedding wedding, the housing market’s un-recovery recovery is a sad state of affairs.

P.S. I encourage you all to “like” and “follow” me on Facebook and Twitter. Once you’re there, we’ll work together to uncover Wall Street’s latest debaucheries – and then we’ll bank some sky-high profits.

Source :http://moneymorning.com/2015/03/30/with-yemen-burning-arab-spring-ii-is-underway/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules