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These Charts Show Exactly How the Fed Killed the Housing Market

By , Liquidity Specialist, Money Morning -

Economic Data

Don't believe any headlines that claim there's a housing "recovery" in the United States. The truth is, there is no single family housing industry to speak of today.

What for generations was a main driver of U.S. economic growth has been brought down by the past seven years of the Federal Reserve's zero-interest-rate policy (ZIRP). ZIRP has been a disaster for the U.S. economy, the middle class - just about every facet of American economic life has suffered from this fiscal disaster masquerading as coherent monetary policy.

Today I'm going to show you five charts that tell the story of exactly how much damage the Fed has done to U.S. housing. Most are derived from this week's release of new home sales data from the U.S. Census Bureau.

You'll see how the rise in home sales since 2011 has really been a four-year dead cat bounce that hasn't helped most Americans, hasn't meaningfully contributed to U.S. economic recovery - and now appears to be stalling...

The Home Sales Market Is Dead - This Chart Proves It

By , Liquidity Specialist, Money Morning -

housing recovery

The seasonally adjusted headline number for the monthly-error-times-12-annualized version of new home sales in June was 482,000.

Wall Street analysts had guessed that the number would be 550,000. The Wall Street Journal went into apoplectic excuse-making mode, almost foaming at the mouth to try to find pundits to explain away the bad number.

The whole spectacle was silly and pointless since we have actual data and can readily see whether sales remain on trend or not. We don't need Wall Street pundits to tell us what to think.

We can see for ourselves...

Drop in New Home Sales Short Detour in Long, Slow Recovery

By , Associate Editor, Money Morning • @DavidGZeiler -

Yesterday's (Wednesday) report of a drop in new home sales for October briefly sent shudders through a housing market that has appeared on the road to recovery, but experts immediately offered assurances that the bad news was temporary.

"The new-home sales data are volatile and revision-prone and we are not changing our view that a modest recovery in home sales, construction activity, and prices is well under way," John Ryding and Conrad DeQuadros of RDQ Economics said in a research note.

New home sales fell 0.3% in October, to an annual rate of 368,000 compared to September's 369,000. Economists had expected a rate of 390,000.

Though a slight drop from the previous month, October's new home sales rate is actually up 17.2% year over year.

And while far below the peak of 1.4 million reached at the height of the housing bubble, new home sales continue to creep up from the sub-300,000 lows seen in 2010 and 2011.

That, combined with recent positive trends from just about every other housing indicator, such as existing home sales, housing starts, building permits, and the home builder sentiment index, had most analysts brushing off the negative new home sales numbers.

On Monday, for instance, the Case-Shiller index for the third quarter showed housing prices nationwide were up 3.6% from the same period one year ago, its second year-over-year gain.

"We expect new single-family housing demand to continue its modest upward trend throughout the next year, driven by record-high affordability," Yelena Shulyatyeva, an economist with BNP Paribas, said in a research note.



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Stock Market Today: Markets in the Red Ahead of Jackson Hole

By , Money Morning -

Here are the major headlines in the stock market today.

  • Consumer spending gains most in five months- Consumer spending rose for the first time in three months, increasing 0.4% in July from June but slightly below expectations of 0.5%. This follows no change in June and a slight drop in May. The gain was the best in five months for consumer activity which accounts for roughly 70% of the economy. Even though it was a good monthly gain, U.S. consumers' purchases advanced at a 1.7% annual rate in the second quarter, the smallest increase in a year. "The quarter is getting off to a decent start," Gus Faucher, a senior economist at PNC Financial Services Group Inc. told Bloomberg News. "The consumer's situation is slowly improving, but the job growth isn't there to support really big gains in future spending."
  • Jobless claims remain unchanged- The number of people filing for initial unemployment claims matched last week's upwardly adjusted figure of 374,000. Economists on average expected this week's initial claims to be 370,000 and the data suggests that hiring is not improving. The unemployment rate, which moved up to 8.3% in July, has been stuck above 8% for more than three years, the first time this has happened since the Great Depression.

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Stock Market Today: GDP, Home Sales Fail to Lift Market

By , Money Morning -

Here are the major headlines in the stock market today.

  • GDP revised slightly higher in second quarter- Even though U.S. gross domestic product (GDP) was adjusted to 1.7% from 1.5% during the second quarter, the fact remains that it was depressingly low. Since the U.S. officially exited the recession in mid-2009, GDP growth levels have been stagnant and economists do not expect the rest of 2012 to be any different. The U.S. is projected to grow 2.0% in the third quarter and 1.9% in the final three months of the year. The government will issue its third and final estimate of second quarter GDP in several weeks. "It shows slightly better government spending and consumer spending but overall the data suggest the economy stays in slow growth mode and is not likely to change," Peter Cardillo, chief market economist at Rockwell Global Capital in New York told Reuters." This certainly strengthens the hands of the Fed to aid the economy."
  • Gas prices rise 5 cents nationwide- AAA reported that gas prices will be a nickel higher on average when consumers head to the pump Wednesday, sparked by the destruction of Hurricane Isaac. Prices on average are $3.804, the highest level since May. Today's spike is the biggest one-day move since February 2011 when concerns over Libya caused prices to rise. Some states, particularly those in the Midwest who receive most of their oil or gas from the Gulf, saw the largest increases. Ohio had the largest rise with a 13.9 cent increase, followed by a 13.2 cent rise in Indiana and a 12 cent rise in Michigan.

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Stock Market Today: Europe Waits as Housing Rebounds

By , Money Morning -

The stock market today (Wednesday) climbed slightly this morning as investors waited on the much anticipated European Union summit to begin.

The two-day meeting, which involves the leaders of all 27 EU nations, starts Thursday and many are hoping for signs of deeper integration and building blocks for a new foundation of EU policies.

"What is at stake is not only the economic integration, it is also the overall economic confidence in the euro area, and indeed, our commitment to the European project," said European Commission President Jose Barroso, in a speech Tuesday. "This is why we need to be bold and define the way forward."

After Cyprus became the fifth country to seek a bailout following Greece, Ireland, Portugal and Spain, investors have become more and more pessimistic as to what can be accomplished at the summit. German Chancellor Angela Merkel stiffly opposed the idea of common Eurozone bonds proposed by Italian Prime Minister Mario Monti and preferred by Spain and France as well.

At a meeting of lawmakers from her Free Democratic coalition partners in Berlin on Tuesday, Merkel made her opinion clear.

"I don't see total debt liability as long as I live," said Merkel, a day after calling the idea of euro bonds "economically wrong and counterproductive," according to people who attended the closed-door session.

As investors awaited the summit, economic reports on durable goods orders and pending home sales spurred the markets forward today.

Orders for durable goods climbed 1.1%, the first rise in three months and far ahead of economists' expectations of a 0.5% increase. Pending home sales matched a two-year high.

The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, rose 5.9% to 101.1. The index level matched the two-year high reached in March, while the gain was the largest since October 2011.

These reports could keep the momentum going for a housing recovery, following positive home prices and new home sales reports earlier this week.

Beyond Europe and housing, here are some companies making headlines in the stock market today.

Facebook (Nasdaq: FB) stock can now receive opinions and analysis for the first time since its IPO from the 33 underwriters who handled the offering, as the "quiet period" ends today. This period is a 40-day timeframe following an IPO that prohibits the firms involved to publish recommendations.

So far there are mixed reports from many of the larger firms.

Goldman Sachs (NYSE: GS) initiated its coverage with a "Buy" rating and a $42 price target for the next twelve months, Royal Bank of Canada (NYSE: RY) offered an "Overweight" rating and a $40 price target, and Morgan Stanley (NYSE: MS) also offered an "Overweight" rating and a $38 target equal to the IPO price.

On the less positive side were Bank of America (NYSE: BAC) and Citigroup (NYSE: C), who both offered a "Neutral" weighting and price targets of $38 and $35, respectively.

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Case-Shiller Home Price Index and Home Sales: What the Latest U.S. Housing Market Data Show

By , Contributing Writer, Money Morning -

The latest U.S. housing market data released Tuesday underscore the persisting trend of uneven performance in the industry.

The S&P/Case-Shiller Home Price Index showed prices hit post-bubble lows in February, and U.S. home sales data show that while not all housing news is dismal, a strong and stable recovery is a long way off.

The U.S. housing sector has been a drag on the economy since a home price bubble burst and helped cause the 2007-2009 recession. While many economists maintain that a budding recovery is blooming in the troubled sector, recent housing market data are simply another wake-up call.

Here's a look at the numbers.

Case-Shiller Home Price Index Falls

The Case-Shiller Home Price Index of 20 cities revealed a price drop from January to February of 0.8% (on a non-seasonally adjusted basis). The 10-city index also fell 0.8%.

The 20-city index declined 3.5% from a year ago, while the 10-city composite slipped 3.6%.

"Nine housing markets and both composites hit post crisis lows," David Blitzer, a spokesman for S&P, told CNN Money. Included in the nine markets are Atlanta, Charlotte, Chicago, Las Vegas and New York.

Blitzer went on to note, "While there might be pieces of good news in this report, such as some improvements in many annual rates of return, February 2012 data confirm that, broadly speaking, home prices continued to decline in the early months of the year."

Foreclosures and other distressed property sales continue to be the main challenge for home prices, Pat Newport, an analyst for IHS Global Insight relayed to CNN.

"We still have 6 million homeowners who are late on their payments," said Newport. "We'll still have lots of foreclosures, which will depress prices."

In fact, with January's mammoth $26 billion mortgage settlement between five major banks and a group of state attorneys general, foreclosures that had been held up for a year or more are now moving forward.

"Enough homes are in the foreclosure pipeline to keep house prices falling through much of this year," Celia Chen, a housing economist at Moody's Analytics, told the Los Angeles Times.

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The "Mortgagegate" Scandal: Congratulations America, You're Now in the Title-Insurance Business

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

U.S. taxpayers already own pieces of such problem-plagued companies as General Motors Corp., Chrysler LLC, American International Group Inc. (NYSE: AIG), Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC). Now the increasingly problematic "Mortgagegate" saga could land American taxpayers in the trouble-ridden title-insurance business.

On Oct. 8, Bank of America Corp. (NYSE: BAC) indemnified Fidelity National Financial Inc. (NYSE: FNF) against any losses that Fidelity might sustain in litigation over title insurance it writes on foreclosed homes - the same homes, coincidentally, that Bank of America wants to sell to new buyers.

This arrangement amounts to U.S. taxpayers, who are the ultimate backers of the Federal Deposit Insurance Corp. (FDIC), backstopping a giant, publicly held title-insurance company, which is backstopping a huge commercial bank, so that the bank can sell properties that it might not have proper title to.

It sounds like a Wall Street version of the "Six Degrees of Kevin Bacon," but it's no game - it's a daisy-chain scheme that once again sets American households up as the biggest losers.

To understand the latest "Mortgagegate" developments - and see the steps to take - please read on...

Question of the Week: Mortgagegate Makes Investors Wary of U.S. Banking Industry

By , Associate Editor, Money Morning -

A potentially crippling crisis is flashing through the banking industry and threatening to derail the already struggling housing market and U.S. economic recovery.

But Gilani said the headlines aren't telling the full story.

Dubbed "Mortgagegate" - a nod to the earlier scandal-ridden crisis touched off by Watergate - this latest crisis involves such big lenders as Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and GMAC LLC (NYSE: GMA), which are alleged to have conducted negligent foreclosure practices. 

Money Morning Contributing Editor Shah Gilani warned about the allegedly fraudulent business practices employed by lenders and their hired "robo-signers" that led to thousands of questionably reviewed foreclosure documents.

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We Want to Hear From You: Will "Mortgagegate" Affect You?

By , Associate Editor, Money Morning -

A potentially crippling crisis is flashing through the banking industry and threatening to derail the already struggling housing market and U.S. economic recovery.

Question of the Week Dubbed "Mortgagegate" - a nod to the earlier scandal-ridden crisis touched off by Watergate - this latest crisis involves such big lenders as Bank of America Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C) and GMAC LLC (NYSE: GMA), which are alleged to have conducted negligent foreclosure practices.

Money Morning Contributing Editor Shah Gilani reported last week about the allegedly fraudulent business practices employed by lenders and their hired "robo-signers" that led to thousands of questionably reviewed foreclosure documents.

But Gilani warned that the headlines aren't telling the full story.

Read More…

What You Don't Know about "Mortgagegate" Could Crush the U.S. Banking System

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

What most Americans don't know about " Mortgagegate" is that "robo-signing" of foreclosure documents is the tip of the iceberg.

The breadth and depth of this newest mortgage crisis is so dangerous that the U.S. Federal Reserve last month pre-announced another potential round of quantitative easing (pundits are calling it "QE2") to address "potential negative shocks."

In fact, the fallout potential is so numbing and the actions that birthed it so scandalous that commentators have given the crisis the Watergate-esque title of " Mortgagegate" (or, as some prefer, "Mortgage Gate").

Here's what the news-story headlines aren't telling you.

For an investment strategy that will protect your portfolio from "Mortgagegate," please read on...

Foreclosures Continue to Stymie Housing Recovery

By , Contributing Writer, Money Morning -

Banks seized more homes in August than in any month since the housing bubble burst in 2007, even as the number of homes entering the foreclosure process dropped for the seventh month in a row, according to data compiled by RealtyTrac Inc.

In all, banks repossessed 95,364 properties last month, up 3% from July and an increase of 25% from August 2009, RealtyTrac said. August was the ninth month in a row that the rate of homes seized by banks increased on an annual basis. The previous high was in May.

Additionally, almost one-quarter of all U.S. home closing transactions involved properties that were in some stage of mortgage distress and sold at a 26% discount on average in the second quarter.

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Moribund Housing Market Threatens to Kill Economic Recovery

By , Contributing Writer, Money Morning -

The weak housing market, which has traditionally led the U.S. economy out of recent recessions, this time may put an end to the economic recovery.

Existing home sales plummeted by a record 27% to their lowest level in 15 years in July and inventories soared, the National Association of Realtors (NAR) reported yesterday (Tuesday). Home re-sales, which account for 90% of the total market, dropped to an annual rate of 3.83 million in July. And inventories rose to 12.5 months from 8.9 months in June, putting them at their highest level in more than a decade.

"Historically, July is the peak inventory month in any given year," NAR Chief Economist Lawrence Yun told The Wall Street Journal. "The question is whether this pause is a temporary pause."

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The Housing Market Still Wobbly Despite May's Home Price Improvement

By , Contributing Writer, Money Morning -

The S&P/Case-Shiller index of home prices increased more than forecast in May, but the combination of a now-expired government tax credit, skyrocketing foreclosures and deteriorating consumer confidence is expected to keep a lid on the housing market in the second half of 2010.

Home prices in 20 major U.S. cities climbed 4.6% from May 2009, the biggest year-over-year gain since August 2006. However, analysts say the increase was artificially buttressed by seasonal factors and the residual impact of the homebuyers' tax credit.

"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year" doesn't show that the housing market "is in any form of sustained recovery," David M. Blitzer, chairman of S&P's index committee told The Wall Street Journal. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level."

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Taxpayers' $3.7 Trillion Bailout Hasn't Saved the U.S. Housing Market

By , Associate Editor, Money Morning -

The amount of taxpayer dollars directed at the Troubled Asset Relief Program (TARP) continues to grow but with little economic progress being made, particularly in the housing market.

Total taxpayer support for the mortgage market rose by $700 billion in the past year to $3.7 trillion, Neil Barofsky, the Special Inspector General for TARP, said his quarterly report to Congress.

"Indeed, the current outstanding balance of overall Federal support for the nation's financial system...has actually increased more than 23% over the past year...the equivalent of a fully deployed TARP program - largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases," said Barofsky.

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