The funny thing about the escalation of the U.S.-China currency spat is that, apparently, both sides think things are going well enough that they can take something like this on.
From the Tom Toles collection at the Washington Post.
On March 16, 2010,
in Currencies,
by Tim
On March 16, 2010,
in Housing,
by Tim
Following the remarkably high 60 percent back-end debt-to-income ratio for homeowners whose loans have been made “permanent” via the government’s HAMP program as noted here a couple days ago come more scary statistics on the nation’s housing market.
From Diana Olick’s Loans Going Bad Faster Than the Fixes comes word of how long the foreclosure process is being dragged out:
More than 31 percent of loans that have been delinquent for six months are not yet in foreclosure, while 22.8 percent of loans delinquent for 12 months have not been moved to foreclosure status…
More evidence of banks being hopelessly behind or not wanting to take market prices for REOs comes in California foreclosure starts rise nearly 20% in February from the LA Times:
The number of properties scheduled for foreclosure sale also remained near record levels. However, actual sales of foreclosure properties, whether back to the bank or those sold to third parties, dropped 11.9% in February from the month prior.
Lastly, Paul Jackson at Housing Wire concludes that Housing Recovery is Spelled R-E-O after culling through yesterday’s report from Lender Processing Services:
On average, severely delinquent borrowers have gone more than 9 months without making a mortgage payment—and yet foreclosure has not yet started for them. For those borrowers who are in the foreclosure process, it’s been an average of 13.6 months—more than one full year—since they last made any payment on their mortgage.
With this kind of data piling up, it’s hard to get excited about the prospects for any sort of a near-term recovery. Based on how the banks and the government are handling the problem, we’re probably in for a housing market bottom that will take years to form.
On March 16, 2010,
in Economy,
by Tim
As expected, the Federal Reserve left short-term interest rates unchanged a short time ago at the freakishly low level of between 0.0 and 0.25 percent and the accompanying monetary policy statement was virtually unchanged in substance from the last meeting.
This marks the 30th month since the current rate-cutting cycle began back in September of 2007 and, surprisingly, when using the last move back up for interest rates that began in mid-2004 as a guide, it would appear that we’ve got a whole year to go before rates would be expected to rise.
There was really nothing new in the policy statement aside from the current date, the names of the months that were referenced, and the tense of some of the verbs.
All lending facilities are on track to be wound down as previously announced and, by summer time, we will have exited the era of quantitative easing in the U.S. – for the time being at least.
Some might say that they’ve “upgraded” their view on the economy by noting that, for example, the labor market is “stabilizing” and that business spending has “risen significantly” versus the characterization that it was just “picking up” in the prior statement.
On March 16, 2010,
in Housing,
by Tim
Skip to about the four-minute mark to hear Meredith Whitney talk about the next leg down for home prices as a result of the foreclosure pipeline emptying into the market.
It should come as no surprise that Whitney thinks banks are not prepared for home prices to go lower and that, after the Federal Reserve’s scheduled exit from the mortgage backed securities market in just two weeks, there will be a “material” correction there.
There’s more in this CNBC story including something about disappointment awaiting those who think we’re returning to the old normal – the new normal is apparently not so good.
On March 16, 2010,
in Asia,
by Tim
While it’s sometimes hard to believe any of the economic data coming from the Chinese government, the recent reports on consumer prices might be a little more suspect than other data given that complaints about inflation are rising sharply.
The Telegraph reports on the unease that the 2009 credit creation binge and rapid money supply growth are producing here in 2010 as consumers notice prices rising around them.
A record number of Chinese have complained that inflation is at an “unacceptable” level, as the Communist party warned that its very future depends on tackling rising prices.
In its latest quarterly survey, the People’s Bank of China (PBOC), the country’s central bank, said that 51pc of respondents were unhappy about inflation, the highest proportion since the survey began in 1999.
In February, China’s consumer prices rose by 2.7pc year-on-year, up from a 1.5pc rise in January. The government has set a 3pc target for inflation this year, but some analysts have said the true inflation rate is already far higher, after an enormous increase in money supply last year.
In February, Chinese broad money rose by 25.5pc, well ahead of the government’s 17pc target for the year.
In developing economies like China, food prices have a much bigger weight in the inflation statistics than here in the West and, apparently, that’s becoming a problem as was seen back in 2007-2008. What’s surprising to hear today is that complaints are higher than they were back then. Recall that there were price controls and hoarding in a number of countries for such staples as rice and, now, price controls for pork in China are set to begin anew.
A year or so removed from the worst economic crisis since the Great Depression, it looks like China is going to blaze the trail into the uncharted territory that will likely dominate much of this decade – rising inflation due to money creation on a scale that the world has never seen.
On March 16, 2010,
in Housing,
by Tim
The Commerce Department reported(.pdf) that housing starts fell 5.9 percent in February, from a seasonally adjusted annual rate of 611,000 to 575,000, while permits for new construction dropped 1.6 percent, from 621,000 to 612,000.
Homebuilding activity has been at depressed levels for almost a year-and-a-half now as distressed sales have continued to limit demand for new construction.
January housing starts were revised upward from 591,000 to 611,000 making the decline in February about twice as large as it would have been using originally reported data and the previously reported number of housing permits was also revised upward.
Inclement weather in parts of the country affected the February data, however, housing starts fell more in the South (down 16 percent) than in the Northeast (down 9.6 percent) during a month of record snowfall in the Northeast.
On a year-over-year basis, new home construction was up 0.2 percent while the number of permits issued rose 11.3 percent and, from the peak of homebuilding activity in 2005, housing starts are now down 73 percent with permits issued are a full 75 percent lower.
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