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Existing Home Sales Rise, Prices Fall

On February 22, 2012, in Housing, by Tim

The National Association of Realtors reported that sales of existing homes rose 4.3 percent last month, from a downwardly revised annual rate of 4.38 million in December to 4.57 million in January, and the inventory of unsold homes was down, along with home prices.

The months of supply metric fell from 6.4 months to 6.1 months, the lowest level since the economic recovery began, as overall inventory dropped 0.4 percent to 2.31 million units.

As expected, prices continued their descent during the winter months where the share of purchases by bargain hunting investors grows, the median home price falling 4.6 percent for the month, 2.0 percent lower on a year-over-year basis.

Foreclosures and short sales accounted for 35 percent of all January sales, up from 32 percent the month before, and the share of sales to investors rose from 21 percent in December to 23 percent with all-cash sales unchanged at a 31 percent share.

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Why Save When Borrowing is So Cheap?

On February 22, 2012, in Banks, Debt, Our Culture, by Tim

Federal Reserve Chairman Ben Bernanke is clearly winning his war against savers as the freakishly low interest rates mandated by the central bank combined with a weak economy here in the U.S. are making it either impracticable or impossible for many Americans to maintain even a tiny amount of cash set aside for a rainy day.

According to a survey by Bankrate.come that included the graphic to the right, a full one-quarter of Americans now have more credit card debt than emergency savings which, when you think about it, shouldn’t be too surprising.

But, what was surprising (at least to me) was that a full 30 percent of those earning $75,000 or more could not say that they have more savings than credit card debt and 36 percent of college grads were characterized the same way.

One could make allowances for the avalanche of zero interest rate offers from credit card companies and how recent college grads have been having a tough time in the current economy, but still, these numbers seem quite high.

As might be expected, for non-college grads and low wage earners, things are much worse with nearly two-thirds of the respondents saying they had less savings than credit card debt, but things seem to be deteriorating rapidly for the middle and upper-middle class.

Overall, just over half of Americans now have more emergency savings than credit card debt while another 21 percent either don’t know what they have or have neither.

When asked how they feel about their level of savings as compared to a year ago, only 14 percent said they were more comfortable while 38 percent said they were less comfortable.

Don’t look for any of these numbers to improve much in the years ahead – at least not until 2015 when the Fed’s low interest rate policy might finally come to an end.

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How Goldman Sachs Masked Greece’s Debt

On February 22, 2012, in Banks, Debt, Europe, by Tim

Lest we forget that everyone’s favorite investment bank played a key role in the Greek tragedy that has been playing out for over two years now, this BBC video reminds us how some complex financial engineering by Goldman Sachs helped mask Greece’s debt for years, that is, right up until a new government was elected.

The term “loan shark” comes to mind when listening to this depiction of what Goldman did and, paraphrasing former Fed Chairman Paul Volcker, financial innovation that, over the long-run, benefits the economy stopped with the ATM machine.

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Wednesday Morning Links

On February 22, 2012, in Uncategorized, by Tim

MUST READS
Fitch Cuts Greece, Says Default ‘Highly Likely’ – CNBC
Greece bailout: Large protests expected against cuts – BBC
Greece Lurches to Left Amid Radical Austerity – Spiegel
Greek Crisis Raises New Fears Over Credit-Default Swaps – DealBook
After Greece deal, Portugal and Ireland may be next – Globe & Mail
This Is Really Only The “Second” Greek Bailout? – DealBreaker
Former BOJ Official: Unsustainable Debt Risks Bond-Yield Spike – Bloomberg
Modern Monetary Theory, an unconventional take on economics -Washington Post
‘Why This Time Could Be Different’ With High Gasoline Prices – WSJ
Even on $15,000 a Year, Most Young People Buy Smartphones – Mashable
Halftime in America? More like sudden death – MarketWatch
Chris Christie to Warren Buffett: Just ’shut up’ – CNN/Money

MARKETS/INVESTING
Oil hovers above $106 as Iran tensions mount – AP
Gold eases as optimism over Greek bailout dissipates – Reuters
Dow 13,000 May Finally Lure Investors Back Into Stocks – CNBC
Rally Monkeys, self-referential vortexes, andimportant thresholds – FT Alphaville
Here Is Why The Dow Just Passed 13,000 – Zero Hedge
Oil Could Turn to Headwind as Dow Flirts With 13,000 – CNBC
Goldman Lowers Commodity Return Forecast – Bloomberg
What the Greek bailout means for gold and silver – Mineweb
India gold ETF demand doubles in 2011 – Commodity Online
Ben Graham’s Curse on Gold – FXStreet

ECONOMY/WORLD/HOUSING/BANKING
US pent-up demand, charted – FT Alphaville
Economy in recovery? Not so fast – CNN/Money
China manufacturing index edges higher: HSBC – MarketWatch
Averting the Next Greece: Portugal Needs More Money To Stay Afloat – Spiegel
BOE’s Bean Says Greek Deal Doesn’t Eliminate Crisis Risks – Businessweek
Mortgage fraud hits ‘eye-opening’ level in Canada, report says – Vancouver Sun
Shanghai Eases Home Purchase Restrictions – Bloomberg
Multi-million dollar foreclosures – CNN/Money
Will Gas Prices be the Spoiler in Housing Recovery? – CNBC
Fed’s push on housing crosses a line, critics say – Washington Post
The Secret Meeting That Launched the Federal Reserve: Echoes – Bloomberg
Romer: We Need A Regime Change at the Fed – Macro Market Musings

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