Seeking Alpha

Has the Housing Market Hit Bottom?

by: Tim Iacono

July 30, 2009

The annual rate of 329,000 units seen in January of this year was not only less than the 1981 low in nominal terms, but, after accounting for the increase in population, it was not much more than half that level.

Interestingly, there couldn't have been two different eras for the homebuilders as far as the cost of money is concerned - back then they were sending truck loads of sawed up two-by-fours to the Federal Reserve building in Washington D.C. because Paul Volcker was on a mission to squash inflation with interest rates approaching 20 percent, whereas, today, the Fed has interest rates pegged at zero.

And speaking of the central bank, their legions of economists might think that housing has bottomed when looking at new home construction because this has a direct impact on economic growth - residential construction has been a drag on GDP for about four years now and, from a direct macro-economic perspective, the worst is probably behind us.

For the homebuilders, it's hard to imagine how things could get any worse than they were in January, so, unless this downturn morphs back into the Great Depression II, things have got to get better. In this case, it's probably fair to say that the bottom is already behind us.

Existing Home Sales Have Probably Bottomed

If you're in the business of selling real estate, then you've got to be thinking that you've seen the worst of the housing bubble's mean side and you may be correct in this assessment now that banks are realizing they're not going to get 2006 prices for all those foreclosed homes that have been sitting on their books for the last year or so.

There's a booming business in distressed property sales that have buoyed existing home sales for months now (much to the dismay of the homebuilders). Foreclosures and short sales accounted for some 70 percent of all home sales in Las Vegas last month and that's a good thing.
The "market" is doing what it is supposed to do - price discovery - and the fact that a lot of prices these days are being discovered through auctions is just part of that process.

And those who dismiss the lower prices fetched on distressed property sales as some sort of a temporary phenomenon should realize that they are doing so at their own peril - there's a lot more of this inventory in the pipeline as the next wave of bad loans wash up on the shores of mortgage lenders and ultimately appear on Realtor.com or Auction.com where, eventually, they'll lower their reserve prices and make a few more sales.

Though it's not as clear-cut as in the case of new home sales, existing home sales probably made a bottom back in January although the same caveats about the Great Depression II apply.

(click to enlarge)

The fact that there have been a few false starts before (circled in blue above) should be some cause for concern (particularly the one in late-2008 as it relates to the possibilities of another Great Depression), but as long as the central bank keeps pumping money into the system and as long as the government continues to guarantee the vast majority of mortgages via the wards of the state - Fannie Mae and Freddie Mac - eventually, all the excess housing inventory will be worked down and the bottom in existing home sales is probably behind us.

Before moving on to the next section on a bottom in home prices, it's important to remember that there's a big difference between home sales and home prices along with the timing of their respective bottoms.

Generally speaking, real estate agents (those who survived the last few years) are now a much happier lot than they were earlier in the year because they're making more sales. No sales means no commissions, and whether those commissions are large or something less than large makes little difference.

A real estate agent would be much more willing to help you buy or sell a house at $250,000 rather than not make that transaction at all and the fact that the home may have fetched $400,000 a couple years ago or that it may only be worth $200,000 next year doesn't really matter - they'll help you make the sale at the price you agree to and they'll try to make you feel good about it because, if they don't make the sale, they don't get paid.

A sale is a sale, but a bottom in home sales is quite different than a bottom in home prices.

Home Prices Will Not Bottom for Some Time

The vast majority of people in the world today are neither home builders or real estate sales agents, so, despite everything you hear and read about home sales - up, down, or flat - they really aren't all that relevant to most of us.

If you're like all the other prospective home buyers or sellers out there today, the only thing that you should be concerned about are home prices - whether they'll keep going down or if they've already reached a bottom.

The financial world has been buzzing over the last week as rising new home sales and rising existing home sales were followed up by yesterday's blockbuster report from the folks who run the Case-Shiller Home Price Index that - GASP! - home prices ROSE from April to May.

There it is for all to see in the colorful graphic below - the housing boom and bust in all its glory along with those little squiggles upward on the right-hand side, a sort of resurrection of the housing market by the sounds of some of the press coverage.

(click to enlarge)

Those who think that the relationship between sales and price at the bottom will somehow be different than the relationship between these two at the peak have virtually no data to back that claim.

Unfortunately, as Ben Bernanke famously said a few years ago, home prices have not declined nationally since the Great Depression.

If the bottom in sales occurred in January, why couldn't the May Case Shiller price data indicate a bottom in price?

August 1, 2009

Off the Charts

Why a Recovery May Still Feel Like a Recession

By FLOYD NORRIS


A YEAR ago, the American economy was in recession. Now it may be about to emerge from that downturn.

But if the economy is about to begin growing again, it will be from a very low level. The recession has produced declines far greater than in previous downturns over the past half-century. As a result, the economy may seem to be depressed even after growth resumes.

One area where that can be seen is shipments of durable goods produced by American companies. The rate of such shipments fell by more than 20 percent during this recession, and would have declined further were it not for increased production of weapons.

In no previous downturn since 1958, when the figures began being recorded, had the decline been as much as 14 percent.

The drop is all the more remarkable because such shipments rose at a relatively restrained rate in the preceding period of economic growth, particularly when military sales were excluded.

The accompanying charts show the trend in durable goods spending, for military purposes and for other shipments of durable goods, from 2000 through this June. In June, seasonally adjusted shipments for civilian purposes were 19 percent below the average monthly figure for 2000. Shipments of military items were running 123 percent above the 2000 average.

(CLICK TO ENLARGE)














Those figures are in nominal dollars, not adjusted for inflation. That fact may exaggerate the trend, since prices of some durable goods, like computers, have fallen over the years.

The United States remains primarily a civilian economy. The military now takes about 8 percent of all durable goods, up from 3 percent in 2000.
The charts also show just how much change there was in durable goods orders, and shipments, in the first half of 2009 compared with the first half of 2008.

Over all, shipments for nonmilitary purposes were down by 20 percent, while orders fell by 27 percent. The declines in some areas were much larger, with orders for primary metal products, like iron and steel, plunging by 44 percent. The government cannot track orders for semiconductors because Intel will not provide figures, but shipments in that category were down by a third.

Shipments of commercial aircraft and parts fell by just 7 percent, largely because there are long lead times for such orders, and that helped to keep the shipment decline lower than it would otherwise have been. But orders fell 65 percent.
Those declines are not from boom periods. By early 2008, the recession was on, and durable goods shipments were already coming down. They had peaked the previous summer, and the National Bureau of Economic Research later determined the recession began in December 2007.

In reporting the June figures this week, the Census Bureau said durable goods orders for some categories were up from the previous month, although shipments were still declining. That provided more evidence that the recession might be nearing an end. But a return to high levels of orders, or shipments, may be many months away.

Copyright 2009 The New York Times Company

TRIBUNA: JAVIER VALENZUELA

La aldea global es una novela negra

Las obras policiacas y de espionaje narran con crudo realismo los entresijos del mundo. De ahí su popularidad. Petroleros, vendedores de armas, especuladores, politicastros y sicarios son, entre otros, sus nuevos villanos

JAVIER VALENZUELA 31/07/2009


Resulta que Suecia no es lo más parecido a un paraíso de libertad y justicia. Allí también hay empresarios corruptos, funcionarios venales y machistas asesinos. Debemos este descubrimiento a las novelas de Henning Mankell y Stieg Larsson, pero habríamos podido intuirlo si en su momento, hace cuatro décadas, hubiéramos tenido acceso a las obras del matrimonio formado por Maj Sjöwall y Per Wahlöö, con sus policías proféticamente desencantados con el modelo sueco. En cuanto a Estados Unidos, no es sólo que sus servicios secretos secuestren y torturen en Abu Ghraib, Bagram y Guantánamo, es que, cual James Bond, disponen de licencia para matar. Lo sabemos por una larga lista contemporánea de sicarios de ficción: el Jason Bourne de Robert Ludlum, el Jack Reacher de Lee Child, los Hombres de la Guadaña de John Connolly, el John Rain de Barry Eisler...

¿Cualquier parecido con la realidad es pura coincidencia? En absoluto. En Contrato para matar, John Rain, exterminador a sueldo de la CIA, hace esta reflexión: "Algunas personas necesitan la rutina y se niegan a aceptar las consecuencias que acarrea la previsibilidad de sus movimientos. A juzgar por mi experiencia, esas personas suelen acabar muertas más temprano que tarde. El mundo sigue las reglas de Darwin". Pues sí, el mundo se ha vuelto loco en este arranque del tercer milenio, es una jungla donde impera la ley del más fuerte, y quien mejor lo está contando es la novela negra (thriller en inglés). De ahí la popularidad actual de este género literario: la lectura de este verano vuelve a ser Larsson.

De esto se habló mucho en la última edición de la Semana Negra de Gijón, una de cuyas mesas redondas estuvo dedicada específicamente a las relaciones entre thriller y política. La conclusión fue que la novela negra está abordando con insolente realismo lo que el periodismo oculta o maquilla: la ferocidad de las luchas por el poder, la omnipotencia del dinero, el doble rasero, la manipulación del público... Constreñida por la obligación de publicar informaciones contrastadas y por lo políticamente correcto, la prensa de calidad no puede contar de la misa la mitad; la sensacionalista, por su parte, sólo se ceba en los débiles y los rojos. Así que, como afirma la escritora escocesa Val McDermid, "hoy no existe mejor manera de arrojar luz sobre una sociedad que recurriendo a la novela negra".

Antes de dedicarse al thriller, Val McDermid fue periodista, como lo fue el fallecido Larsson y como lo son tantos de los cultivadores actuales del género. En sus biografías suele haber elementos comunes: una temprana vocación literaria, una posición política progresista y mucha amargura por no haber podido contar en la prensa todo lo que sabían sobre tal o cual cosa, sobre todo cuando había individuos, empresas o gobiernos poderosos de por medio. Tal es el caso del galés Matt Beynon Rees, creador del primer detective palestino de la historia, el profesor Omar Yusef. Entrevistado en mayo por Le Point, Rees decía: "La ficción es más cercana a la realidad que el periodismo".

En Una tumba en Gaza, una de las novelas de Rees, alguien le pregunta a Omar Yusef qué le impulsa a continuar una peligrosa investigación y éste responde: "Soy palestino. Estoy acostumbrado a comer mierda". En otro momento, Salwa, un personaje femenino, suelta: "A veces pienso que los únicos palestinos que no lloran son los muertos". Ninguna crónica, y por supuesto ningún informe de un think-tank, lo puede decir más corto y mejor.

El thriller se ha globalizado. En un doble sentido: sabemos más de cada país concreto y también sabemos más de cómo funcionan las relaciones internacionales. Sobre lo primero: ahora leemos en cualquier parte del mundo a autores que nos cuentan cuáles son los crímenes de sus respectivas sociedades. Ya no nos enteramos tan sólo de lo que pasa en Estados Unidos (fantástico, por cierto, el relato del Katrina de James Lee Burke en El huracán del que sirva de ejemplo esta frase: "Era el Air Force One. Después de tres días, mister Bush se ha dignado venir a sobrevolarnos... Joder, no sabes lo bien que me siento ahora"). O de cómo funciona Washington (David Baldaci, en Absolute Power, contó los escándalos sexuales de la era Clinton; Leonard Downie Junior, en la reciente Rules of the Game, cuenta las intrigas de las industrias militares y petroleras de la era Bush). No, terminó el monopolio estadounidense (aunque ahí siguen clásicos vivientes como James Ellroy y Walter Mosley) y ahora también nos enteramos de lo que ocurre en Suecia (Mankell, Larsson), en Sicilia (Andrea Camilleri), en Venecia (Donna Leon), en Grecia (Petros Márkaris), en Argelia (Yasmina Jadra), en Suráfica (Gillian Slovo, Deon Meyer), en Israel (Batya Gur), en Francia (J.-P. Manchette, Didier Daeninckx, Fred Vargas), en España (Andreu Martín, Juan Madrid, Lorenzo Silva), en Reino Unido (Ian Rankin, P.D. James)...

Descarnados y cabales, los libros de estos autores muchos de los mediterráneos marcados por la herencia de Manuel Vázquez Montalbán son mucho mejores que las guías turísticas para comprender sus países: quiénes mandan, cómo ejercen el poder, cómo se busca la vida la gente de a pie, cómo se practica allí lo que Raymond Chandler llamaba "el simple arte de matar"..

Pero también hay cada vez más novelas sobre política internacional: sobre las pugnas por el petróleo y otros recursos energéticos, sobre las guerras de Afganistán e Irak, sobre la tragedia palestina, sobre los inconfesables métodos de las agencias de espionaje en la lucha contra el terrorismo yihadista (El prisionero de Guantánamo, de Dan Fesperman), sobre las farmacéuticas en África (El jardinero fiel, de John Le Carré)... Y también un significativo regreso en clave negra a los años treinta del pasado siglo en busca de las razones por las que el mundo también se volvió loco entonces (Alan Furst y su El corresponsal, Philip Kerr y sus novelas del policía berlinés Bernie Gunther).

La visión del mundo que se desprende del thriller político contemporáneo es más compleja y menos maniquea que la de Fox News. Los malos no son sólo caudillos izquierdistas latinoamericanos, oligarcas rusos del gas y jeques árabes que financian redes yihadistas. Entre sus villanos también hay políticos y funcionarios de Washington dispuestos a cualquier cosa con tal de que el viejo imperio siga mandando sin que nadie le chiste. Y mucha gente de la CIA que intercepta movimientos, conversaciones telefónicas y accesos a Internet allí donde les place. Y cardenales maquiavélicos del Vaticano, banqueros suizos corroídos por la hipocresía, especuladores financieros e inmobiliarios de múltiples pelajes... y hasta un primer ministro británico (El poder en la sombra, de Robert Harris) que, por oscurísimas razones, arruina su brillante carrera política para ponerse al servicio de Bush.

El triunfo universal de un capitalismo rapaz, el comienzo del declive estadounidense, la resurrección de Rusia y China, el crecimiento de India y Brasil, la acción de terroristas y traficantes multinacionales, el resurgir de los fundamentalismos nacionales y religiosos, todo eso ha convertido el planeta en un campo de batalla... y en un semillero de argumentos para los escritores. En la escena negra global es difícil distinguir a los buenos de los malos: todos piensan que el fin justifica los medios, todos usan móviles encriptados, piratean en Internet y tienen cuentas secretas en paraísos fiscales, y, si es menester, todos matan. En las novelas actuales los narcos no los únicos que contratan sicarios, también lo hacen gobiernos respetables. Ahí está Gabriel Allon, restaurador de arte y asesino al servicio del Mossad, creado por la imaginación de Daniel Silva, norteamericano de origen portugués y también ex periodista. Gabriel Allon es un verdugo con conciencia: le asaltan con frecuencia las dudas, pero su reclutador, el Viejo, siempre acaba convenciéndole de que sus crímenes tienen una buena causa: Israel y el pueblo judío.

Situadas en Berlín, Shanghái, Sao Paulo, Dubai, Ciudad del Cabo o Singapur ¬-las capitales emergentes del thriller- o en Nueva York, París, Londres, Moscú o Hong Kong -las clásicas-, estas novelas ofrecen al lector mucho más que entrenamiento: ofrecen una luz cruda sobre los acontecimientos actuales y, en ocasiones, lo que el crítico Steve Goldstein llama "el oscuro regalo de la profecía". Recuérdese que el 11-S fue anticipado en un best-seller de Tom Clancy.

El ensayista canadiense John Ralston Saul afirma: "Quizá el espionaje sea uno de los últimos refugios de la novela crítica y con peso político". Fortalecida tras el 11-S, el nacimiento de esta rama del árbol negro se remonta a 1909, cuando Joseph Conrad publicó El agente secreto, un libro en el que, a través de un anarquista, predijo la muy contemporánea figura del terrorista suicida. En la primera mitad del siglo pasado los británicos Eric Ambler (La máscara de Dimitrios) y Graham Greene (El tercer hombre, El americano impasible, Nuestro hombre en La Habana) dieron a la novela de espionaje el prestigio que cuajaría en la figura de John Le Carré.

Gran cronista de la guerra fría, es admirable cómo John Le Carré está acertando también en el relato de nuestro tiempo. El heredero de Conrad, Ambler y Greene sintetizó así el disparate de Irak en Amigos Absolutos: "Cada guerra es peor que la anterior, señor Mundy. Pero ésta es la peor que he visto si nos referimos a las mentiras. Da igual que haya acabado la guerra fría. Da igual que estemos globalizados, que seamos multinacionales o lo que sea. En cuanto suena el tam-tam y los políticos despliegan sus mentiras, ahí tenemos los arcos y flechas y la bandera y la televisión las veinticuatro horas del día para todos los ciudadanos leales. Tres hurras por las explosiones y qué carajo importan las bajas mientras sean del otro lado. Y no me venga con esa gilipollez de la Vieja Europa. Aquí nos encontramos con la América más vieja de la historia: fanáticos puritanos que asesinan a los salvajes en nombre del Señor. ¿Qué hay más viejo que eso? Fue genocidio entonces y es genocidio ahora". Claro, directo y veraz.

"Cuando se mete en política", escribe el comentarista francés Patrick S. Vast, "el género negro tiende a rascar donde pica, a no caer en el consenso y en lo políticamente correcto. Impertinente, incluso liante, está cerca de la gente, de sus interrogantes, de sus problemas". Tal como están las cosas, y si Obama no logra detener la caída del mundo por la pendiente y tiene poderosos enemigos dentro y intentan maniatarlo, al thriller no le van a faltar temas para las próximas temporadas. ¿Qué tal, por ejemplo, una novela sobre un político mediterráneo que se dice adalid de los valores familiares católicos al tiempo que monta orgías con jovencitas en su Villa Viagra?

U.S. Economy: Contraction Slows as ‘Sluggish’ Recovery Beckons

By Shobhana Chandra

July 31 (Bloomberg) -- The worst U.S. economic slump since the Great Depression abated in the second quarter as government spending programs started to kick in, while the deepest retrenchment by consumers since 1980 augured a muted recovery.

Gross domestic product shrank at a better-than-forecast 1 percent annual pace after a 6.4 percent drop the prior three months, Commerce Department figures showed today in Washington. A survey of purchasing managers showed separately that business contracted less than estimated this month.

Stabilization in homebuilding and the liquidation of unsold goods sets the stage for gains in GDP starting this quarter, analysts said. At the same time, rising unemployment and weakening income growth threaten to erode household finances; the International Monetary Fund today said policy makers must be ready to employ further stimulus if needed.

“We’re heading to a sluggish recovery,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “We’ll get more support from government programs in the second half, but if you want a strong recovery you need a stronger consumer , and we are not seeing that.”

Stocks fluctuated between gains and losses, Treasuries gained and the dollar remained lower against the euro after the report. The Standard & Poor’s 500 Stock Index was up 0.2 percent at 988.38 at 10:37 a.m. in New York. Benchmark 10-year note yields fell to 3.56 percent, from 3.61 percent late yesterday, and the dollar dropped 0.7 percent to $1.4166 per euro.

Economists’ Forecasts

The economy was forecast to shrink at a 1.5 percent pace, according to the median estimate of 78 economists surveyed by Bloomberg News.
Government spending rose at a 5.6 percent pace last quarter, the most since 2003, as President Barack Obama’s $787 billion stimulus program began to take effect. The funds are aimed at helping states retain workers, financing infrastructure projects and reducing tax payments.

Profits reported for the second quarter by companies from Caterpillar Inc. to Dow Chemical Co. have reinforced signs the slump is coming to an end. The Commerce Department’s figures today, which included benchmark revisions to past years, showed that GDP has tumbled 3.9 percent since the second quarter of last year -- the biggest drop since quarterly records began in 1947. GDP has fallen four straight quarters, the longest ever.

Worst Since 1980

Consumer spending, which accounts for about 70 percent of the economy, fell at a 1.2 percent pace following a 0.6 percent increase in the prior quarter. It was forecast to drop 0.5 percent, according to the survey median.

Purchases slid 2 percent since the peak at the end of 2007 -- the most since a 2.4 percent decline in the 1980 recession.

“It’s important to put it in perspective,” Christina Romer, who chairs the White House Council of Economic Advisers, said in a Bloomberg Television interview. “We are seeing some sign the consumer is stabilizing and, of course, the tax cut that was included in the recovery act I think is going to help consumers feel more confident.”

The IMF, in an annual review of the U.S. economic outlook, today said it anticipates a “gradual” recovery.

“If downside risks materialize, additional credit easing and a strengthened commitment to maintaining a highly accommodative monetary stance could be considered,” the IMF’s board said in a statement.

Compensation Weakens

The Labor Department reported separately today that employment costs -- a measure that includes wages, salaries and benefits -- rose 1.8 percent in the second quarter from a year before, the smallest gain in figures dating to 1982.

GDP contracted a revised 1.9 percent in the fourth quarter of 2008 from the same time the prior year, compared with the 0.8 percent drop previously on the books.

The GDP report is the first for the quarter and will be revised in August and September as more information becomes available.

The economy has lost 6.5 million jobs since the recession began in December 2007, and economists surveyed by Bloomberg this month forecast the jobless rate will exceed 10 percent by early 2010.

“The United States economy has found bottom but will be slow in recovering as unemployment continues to be a drag on consumer spending,” Andrew Liveris, chief executive officer of Midland, Michigan-based Dow, said in a statement yesterday.

Second-quarter profit at Dow and at Peoria, Illinois-based Caterpillar, topped analysts’ estimates. Caterpillar, the world’s largest maker of construction equipment, said last week that stimulus programs in countries such as China were helping stabilize sales.

Trade Deficit

The trade gap shrank last quarter, preventing a steeper decline. The gap between exports and imports fell to $339.3 billion at an annual pace from $386.5 billion.

Inventories dropped at a record $141.1 billion annual pace, after a $113.9 billion decline.
Leaner stockpiles set the stage for recovery in production.

“With inventory levels in an ultra-lean state, businesses should start adding inventories in the second half of the year as the economy begins to show signs of life,” said Ellen Zentner, senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd.

Reflecting that outlook, the Institute for Supply Management-Chicago Inc. today said its business barometer increased to 43.4, the highest level since September, from 39.9 in June. Readings below 50 signal a contraction.

Auto Rebound

General Motors Co. and Chrysler Group LLC, both out of bankruptcy, are among firms set to ramp up production as government efforts lift demand.
The “cash-for-clunkers” trade-in program begun this month has spurred 16,351 new-vehicle sales so far, the Transportation Department said on July 29. The plan, which set aside $1 billion, ran through the money six days after it began, a sign of its success, Senator Debbie Stabenow said yesterday. Lawmakers had expected the program to generate about 250,000 vehicle sales and to have enough money to last to about Nov. 1.

Today’s GDP report showed the slump in business investment slowed last quarter, while residential construction kept plummeting.

Recent reports showed the housing slump, which helped trigger the financial crisis, and the decline in manufacturing have eased. Housing starts rose in June and industrial production shrank at the slowest pace in eight months, according to government reports this month.

The Federal Reserve’s preferred inflation gauge rose at a 2 percent annual pace last quarter, less than forecast. The measure, which is tied to consumer spending and strips out food and energy costs, rose at a 1.1 percent annual pace the prior quarter.

Economists project the economy will grow at an average 1.5 percent pace from July to December, according to a Bloomberg survey taken in early July.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net Last Updated: July 31, 2009 11:33 EDT