FIRE Economy | timiacono.com

It’s probably not such a bad thing that, in recent years, it has become much more expensive to get a law degree here in the U.S., at least based on the graduate school debt levels reported in this Wall Street Journal story the other day in the graphic below, but the idea that some of that law school debt may end up being forgiven is somewhat troubling.

Based on the WSJ story, there has recently been a sharp increase in college loans that have built-in maximum payment/long-term forgiveness features and these now account for almost 10 percent of the nation’s $1+ trillion in outstanding student loans.

Also see this commentary on the subject by Megan McCardle at Bloomberg.

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New Home Sales Plunge 14.5 Percent

So much for the idea that, after an unusually severe winter that kept home buyers away, the spring housing market data would show a larger than expected rebound.

The Commerce Department reported(.pdf) that new home sales plunged more than 14 percent in February, from an upwardly revised annual rate of 449,000 to just 384,000 in March, the lowest pace in eight months. This represents a year-over-year decline of 13.3 percent, consistent with the report on existing home sales as detailed here yesterday.

This item at Bloomberg indicated the March sales total was lower than even the most bearish forecast by economists they polled and it has rekindled the debate over how soft the U.S. housing market has become as a result of investors stepping back from record purchases in recent years after home prices and mortgage rates had both risen sharply.

The months-of-supply metric jumped from 5.0 to 6.0 and the median sales price of new houses sold in March was $290,000, representing a gain of 12.6 percent from a year ago, while the average sales price was $334,200, up 11.2 percent from last year at this time.

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What to Do About Secular Stagnation?

Not that it really needed it, but the debate over “secular stagnation” has been rekindled in recent days by a new paper(.pdf) by economists Gauti Eggertsson and Neil Mehrotra of Brown University that, basically, says we’ve got to save less and spend more if we’re going to achieve higher growth during a period when population growth is slowing and inequality is rising. Higher rates of inflation and more government debt is also encouraged.

Here’s Eggertson talking to the folks at CNBC a few days ago.

After he looked at the paper, Mohamed El-Erian penned this Bloomberg commentary that concluded today’s economists are, basically, lost at sea with no real idea or consensus about what caused the recent poor economic performance or what to do about it.

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No Spring Rebound for Existing Home Sales

The National Association of Realtors reported that sales of existing homes fell 0.2 percent in March to a seasonally adjusted annual rate of 4.59 million units as there appears to have been no spring rebound in home sales after the severe winter weather that saw home sales slow sharply last December. Unfortunately for buyers, home prices continue to rise.

This marks the seventh time in the last eight months that sales have moved lower, a change in direction that came just after the Federal Reserve began talking about tapering their bond purchases, talk that led to sharply higher mortgage rates last year. Of course, that’s about the same time that Wall Street investors began to lose interest in the housing market, a sector that is now clearly facing headwinds.

On a year-over-year basis, sales are now down 7.5 percent, the biggest decline since the housing bubble burst, save for the periods in 2010 and 2011 when the expiration of government subsidies spurred buying surges and subsequent slowdowns.

In contrast to falling sales volume, the median sales price continued to rise, jumping from $189,000 in February to $198,500 in March. This puts home prices up 7.9 percent from a  year ago, consistent with the 6.9 percent annual price gain reported by the FHFA earlier today. Low supply was blamed for both lower sales and higher prices, though rising inventory pushed the months of supply metric higher, from 5.0 in February to 5.2 in March.

So far, at least, it is clear that weather wasn’t to blame for the recent housing market swoon.

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