2011 May | timiacono.com

Home Prices – How Low Can They Go?

This chart hasn’t been shown here in about six months but, given the official double-dip for the S&P Case-Shiller Home Price Index in March as reported earlier today – overall home prices falling below the prior post-housing bubble low seen in early-2009 – now seemed like as good a time as any to dust it off and freshen it up.

The March home price data was not good, that is, unless you live in Washington D.C. (where they, literally, are printing money) or if you’re wanting real estate values to fall in other parts of the country to more reasonable levels so you can buy one. As shown above, the nation’s capital was once again the only region to show a monthly increase in prices, now sporting a sizable 4.3 percent year-over-year gain.

The 20-city index dropped 0.8 percent from February to March and, on a seasonally adjusted basis, it was down 0.2 percent, distressed sales apparently having an even bigger impact on prices than normal at this time year. On a year-over-year basis, the 20-city index is now 3.6 percent lower while the 10-city index is down 2.9 percent, consistent with most other measures of home prices.

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“Generation Rent” and Inflation

Before getting back to the top economic news of the day – the S&P Case Shiller home price data for March that requires more than just a cursory review this month after it confirmed a “double-dip” in U.S. home prices that most already accepted as fact anyway – two other related housing stories are worth a closer look, both of which point to more difficulties for Anglo Saxon economies and the central banks that make policy for them.

First, in this story from The Guardian in the U.K., comes a term that is new to me – “Generation Rent” – and it laments the fading appeal of home ownership, that is, now that no one is getting rich on real estate anymore.

Two-thirds of potential first-time buyers have no realistic prospect of owning their own home in the next five years and lack the long-term saving mentality they need to get onto the housing ladder, according to a report on home ownership by one of the UK’s biggest mortgage lenders.

Owning a home has been a priority for most Britons since the 1950s when living standards began to rise, but the Halifax says that the high cost of property, strict lending rules and unwillingness of non-homeowners to save a deposit have fundamentally changed the attitudes of younger people towards home ownership.

In a survey of 8,000 people aged between 20 and 45, only 5% of those described by the Halifax as “Generation Rent” (those with no realistic prospect of getting on the housing ladder) are making spending sacrifices to save towards their first home. The remaining 95% have no spare cash, no interest in saving or are trying but failing to save.

Of course, many decades ago, nearly the entire world rented – if memory serves, even after the 1925 Florida housing bubble, the home ownership rate in the U.S. was still well below 50 percent during the Great Depression – but that’s a discussion for another day.


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Standard & Poor’s reports that home prices in the U.S. fell for the eighth straight month, dipping below their prior post-housing bubble burst low of early-2009 and providing confirmation that the housing market is now officially in a “double-dip”.

There will be more on this here in a little bit. For now, the two red arrows in the chart above marking the old and new post-crash lows for the national home price index are what markets will be mulling over. So far, they don’t seem to be too concerned.

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Tuesday Morning Links

Europe weighs options for new Greek package – Reuters
Housing Index Is Expected to Show a New Low in Prices – NY Times
Tensions Worsen Between Berlin and European Central Bank – Spiegel
Rising food prices increase squeeze on poor – BBC
Japan may face debt rating cut, Moody’s warns – LA Times
House sets vote on debt, budget talks with White House – Washington Post
Citi On The “Disastrous” Implications of a Debt Ceiling Breach – Zero Hedge
Oil Epicenter’s Sway on Prices Begins to Slip – WSJ
Gold’s currency role increasing once more – Mineweb
Enabling a Future American Dictator – Ron Paul
Bubble-debt Denialism – Krugman, NY Times

Oil climbs above $102 on weaker US dollar – AP
Gold steadies near 4-week high; Greece in focus – Reuters
Glittering Gold Need Not Set Off a Panic Over Inflation – Bloomberg
Wheat Declines as Russia Says it Will End Grain-Export Ban – Bloomberg
Small Windows in an Unfavorable Long-Term Picture – Hussman Funds
Why May was a brutal month for Silver – Commodity Online
Yuan hits record vs dollar, up 0.2 pct in May – Reuters
Indian investors bail out of silver – Mineweb
Richard Russell: Buy Silver – PragCap

A Billion Prices Now – New Yorker
Goldman downgrades U.S. growth again – Fortune
R.I.P. Reaganomics Revolution: 1981-2011 – MarketWatch
Rising Rents Risk Inflation as Fed’s Restraint Questioned – BusinessWeek
ECB’s Draghi Says Inflation Risks Are Rising – Bloomberg
Inflation eases across eurozone but rate rise ’still likely’ – Telegraph
India’s economic growth slows as rising prices hurt – BBC
‘Generation rent’ stays away from property ladder – Guardian
Government guilty of hurting housing market – Daily News
‘Real’ US Treasury yields go back to zero – FT Alphaville
Will The Fed Act? – Fed Watch


A Rather Pricey Backyard Grill

Could there be any better way to celebrate Memorial Day here in 2011 – with the gold price hovering comfortably above $1,500 an ounce, perhaps ready to go higher – than by sharing a cold beer with friends while standing beside a gold grill? This report at Bankrate.com provides the details of what is, apparently, a very real, very gold-plated, gas grill.

If you really want to pull out all the stops, the most expensive barbecue, of course, has to start with a grill that embarrasses that thing rusting in the corner of your deck. It has to simultaneously make no sense whatsoever and all the sense in the world. This why a gold-plated barbecue was made.

Introduced by BeefEater Barbecues, apparently because they can, they had the state of mind to hand-plate every square inch of this grill in 24-carat gold except for the cooking surface — just in case someone actually wants to use a gold-plated barbecue. The value of such a grill? A mere approximate $164,000.

Though no one would question BeefEater’s claim that the grill is “the ultimate in backyard bling,” perhaps you like your remarkably expensive barbecues a little more understated. Thankfully, there’s the Outdoor Kitchen Center, also from BeefEater Barbecues. Maxing out at four burners and about $50,000, there will be no mistaking that a statement is being made, in addition to burgers.

I wonder if the price of the grill goes up and down along with the spot price of gold. That second grill doesn’t sound like much of a better deal, though I do remember a guy in Southern California about six or seven years ago who may have spent about half that much on a built-in barbecue, mustering a bit of his home equity for the cause before it vanished.

Amazingly, he also added a room onto his house for his cat.

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