If Spin were Reality - We'd have a Recovery

Wouldn't it be awesome if spin could actually solve problems? Then, you could just say the word 'recovery' every time you gave a speech, ignore any negative data, assume the markets are up because of general economic health and not a mass infusion of cheap money, and it would be so.

It wouldn't matter that New Home Sales are at their lowest rate since reporting began in 1962.

It would be fine that Existing Home Sales (the number of completed transactions) were down 9.6% over the month, and 2.8% since last year.

It would be cool that Pending Home Sales were down 2.8% over the month, and 1.5% over the year.

It would be a symptom of recovery that the average Sale Price for non-foreclosed homes is $246,358  - below 2003 levels, and for foreclosed homes, is $169,965.

It would just be a coincidence that 39% of homes sold in February were distressed (sold at a discount), many of those to investors, not to end-home-dwellers, up from 35% last February.

It wouldn't have anything to do with people's housing situations, that Realty Trac, 'the leading foreclosure online market' maintains a top ten 'Hot' foreclosure property states list. (Ohio leads the list, with a 43% 'foreclosure savings' rate for 'investing' in a foreclosed property vs. paying up for a non-foreclosed one.)

You could be the Treasury department, and announce an 'orderly' sell program to get rid of 'up to' $10 billion per month of your $142 billion agency-guaranteed mortgage-backed securities portfolio (and yes, you would still be backing the agencies guaranteeing those securities which has nothing to do with propping up their value) - the one you bought as part of a multi-trillion financial market bailout, ur 'stabilization' program - when you became a hedge fund on behalf of the taxpayers. You wouldn't have to mention, ANYWHERE, IN ANY SPEECH, ANYTHING about the $4.1 trillion of Treasury and other government debt you issued since September, 2008, because, what's $4 trillion when you're stabilizing the market - on behalf of the taxpayers.

You could be a mega bank, with a CEO that is also a Class-A NY Fed director (or Jamie Dimon) and impress your new soon-to-be-higher-dividend-receiving shareholders, with your ability to reduce loan loss provisions, and it wouldn't have anything to do with accounting rules that don't require you to acknowledge the tremendous gap between the notional value of your loans, and their underlying collateral (the real home values) or Fed support.

You could be a mega bank (as say, above), pass your second stress test with flying colors, be assured by the Fed that no details of the test will be disclosed, and act coy about whether you want to disclose them or not. 

You could be the Fed Chairman, and disregard the idea of inflation, because if you don't count the cost of food or gas or health insurance or clothes or anything else sporting a price that has inflated, there is no inflation, and you can carry on buying, holding or subsidizing, the various forms of debt sustaining the 'recovery'.

Well, actually, if you looked at the housing market or the financial condition of the majority of borrowers, there wouldn't be any inflation. Maybe spin is reality. But, let me know if I'm missing something.

Non-recovery News: July Existing Home Sales Plummet

With the summer approaching an end, and August a traditionally slow month for home sales even in the best of times, the National Association of Realtors (NAR) released their figures for July existing home sales today. They were ugly, down by 27.2%, from June (which was revised downward from initial estimates), 25.5% from last July, and setting a dramatic new record low for this index that was created in 1999.

Single family home sales are at their lowest point since May 1995. The NAR suggested the silver-lining in their report was that the homes that are selling are doing so at higher prices. That's because the more expensive homes purchased by the wealthiest buyers tend to skew the average. Separately, the amount of time that houses are remaining on the market increased to 12.5 months from June's rate of 8.9 months. That's a very worrying number.

One of the more prevalent reasons cited for this plunge is that the government's tax credit for home buyers disappeared. But, while losing the additional $8000 tax break per home may certainly be a factor, the underlying problem remains the fact that most people (millionaires and billionaires excluded) can't buy new homes because:

a) They can't afford the loss they'd have to take on their current home.

b) They can't get new credit, or negotiate old credit despite low prevailing mortgage rates.

c) They don't have the job stability, or increasingly - a job at all, to consider taking on a new mortgage.

Unfortunately, there is little on the horizon to indicate this will change any time soon.