Housing Market Can't Get Going

It's hard to understate just how much damage the Federal Government and its proxies have done to the U.S. real estate market. One of the reasons is that we still don't know how much worse it will be or for how long. Zillow has some new stats:

Home values fell three percent in the first quarter of this year, marking a pace of decline not seen since 2008 when the housing recession was at its worst. Home values fell one percent between February and March and 8.2 percent from March 2010. The cumulative decline in home values since the market peak is now 29.5 percent (see Figures 1 and 2).

Nearly three-quarters (74.5 percent) of homes in the United States lost value from Q1 2010 to Q1 2011. That’s up from Q4 2010, when 69.2 percent had lost value, but is down substantially from a peak of 85.5 percent in Q1 2009.

A record (37.7 percent) number of homes sold in March were sold for a loss. The rate of homes selling for a loss has steadily increased since June 2010.

Negative equity in the first quarter reached new high with 28.4 percent of all single-family homes with mortgages underwater, from 27 percent in Q4.

As your humble real estate expert, I can tell you with complete certainty that I don't have the foggiest idea when the market will begin to stabilize and anyone who tells you they do is full of it.

No one knows how long it will take for all the foreclosures to work their way through an already overwhelmed system. Nor is it clear how many non-performing loans are still on lenders books at full value that are being slowly liquidated lest they go belly up if these securities were liquidated and marked to market today. Those balance sheets are just smoke and mirrors and that's why the Fed is lending them money at 0% and selling them treasuries at 4%. You're paying the bill for this and all the government's other reckless spending through inflation from a debased dollar and debt as far as the eye can see.

Killer Combo of High Gas, Food Prices at Key Tipping Point

From CNBC

The combination of rising gasoline prices and the steepest increase in the cost of food in a generation is threatening to push the US economy into a recession, according to Craig Johnson, president of Customer Growth Partners.

Johnson looks at the percentage of income consumers are spending on gasoline and food as a way of gauging how consumers will fare when energy prices spike.

With gas prices now standing at about $3.90 a gallon, energy costs have now passed 6 percent of spending—a level that Johnson says is a "tipping point" for consumers...

"The combined increase in the necessities of food and energy creates a harsh double whammy for already stressed consumers," Johnson said. The last time this happened was in the recession that lasted from 1973 to 1975.

Johnson estimates that food and energy eat up about 15 percent of consumer spending at today's prices, compared with about 12.7 percent two years ago.

Of course, at lower income levels, these percentages are much higher.

Yes they are. Inflation is the most regressive tax there is when it's caused by rampant government spending paid for in phony dollars hot off the Fed's printing press. The people hurt most are those who voted in the highest percentages for a hopey changey world run on unicorn farts.

Recovering Without Washington

Did you know we had a major recession in 1920? Did you also know that the Government did virtually nothing in response and that we recovered quickly and stronger than ever? Amity

Shlaes reminds us in this column that markets are usually best left to sort themselves out. Her widely acclaimed book, The Forgotten Man also describes in great detail how government meddling actually prolonged the Great Depression by several years.

"In 1919, as in 2007, the country was on a roll. Unemployment was 1.4
percent. The Dow Jones Industrial Average hit 119, almost double what it had
been in 1917. The young Fed and the Treasury had been inflating the money supply
in order to pay off World War I debt.
Then the Fed began raising the
discount rate. Also, gold was leaving the U.S., another contractionary
force...

The recession was sharp. Unemployment moved up to 5.2 percent in 1920
and 11 percent in 1921. The Dow lost almost half its value. Political anxiety
was part of the story. A wave of strikes was hitting the country...

Washington, for its part, didn't do much bailing. Nor did it attack Wall
Street, as Democratic House Speaker Nancy Pelosi and, for
that matter, Republican presidential candidate John McCain, are
doing...

Recovery arrived as suddenly as recession had. By 1923,
unemployment was down again, to 2.4 percent. The Dow climbed back, although
taking longer to do so. The economy spent the rest of the decade growing in
exemplary fashion. "

Democrat Fiddling While Money Burned

Fox News has put together a timeline that shows us who saw the financial meltdown and tried to do something about it. It also shows us who stood in the way.

If Barney Frank, Chris Dodd, Chuck Schumer et al had any shame, they would resign immediately. Instead they're asking us to trust them to fix a disaster they created and refused to recognize until it was too late.

At the very least they should get out of the way and just vote yes on whatever plan the responsible, competent adults decide is best to clean up their mess.

Housing Bailout Almost Done: Taxpayers Prepare To Grab Ankles

Congress is nearing completion of the massive and meddling government solution to government created problems. As Thomas Sowell puts it: "We don't look to arsonists to help put out fires but we do look to politicians to help solve financial crises that they played a major role in creating. "

I haven't read all the details of the bill, but it's clear that taxpayers will be stuck with the check for the private profit of the quasi-socialist, useless and corrupt Fannie Mae and Freddy Mac. No one knows how much that will be so congress just gave them an open ended line of credit. Common sense dictates that these two organizations should have been broken up and completely privatized years ago. But the money and power that the trillions these companies control confers on Washington is too much for the venal denizens of Washington to ever give up.

It also raises the federal debt ceiling by about $800 Billion to $10.6 Trillion.

In addition the bill provides for up to $300 billion for insured loans to bail out "struggling" homeowners, regardless of how irresponsible or fraudulently they behaved in putting themselves into that position in the first place. Many of those paying for this will be citizens who acted more prudently and resisted the lure of quick riches regardless of risk. Is there going to be a proposal of a windfall profits tax on the millions more who made out like bandits during the housing boom? Just asking.

Of course, no massive spending bill would be complete some pork so we have at least $600 million for "affordable housing", a perennial rat hole of corruption which showers money on parasites like ACORN, one of the largest members of the Marxist grievance industry; a group that worked hand in hand with Barack Obama when he was a "community organizer" (see Al Sharpton, Jesse Jackson)

I'll have more as this monstrosity is fleshed out.


Government "help" to business is just as disastrous as government persecution... the only way a government can be of service to national prosperity is by keeping its hands off. Ayn Rand

A Windfall of Idiocy

Hillary Clinton has is the latest entrant in the stupid economics tricks contest with her own version of a windfall profit tax on oil companies. Caution: If you don't know the difference between profit and profit margin, stop reading and go educate yourself. You'll be doing a great service to the country.

Hillary correctly counts on the fact that most people don't remember how this same policy not only didn't work in the 1980's, but reduced domestic production and increased dependence on foreign oil.

But she doesn't stop there in her demagoguery disguised as policy. She also wants to crack down on mythical price gouging and further regulate commodities markets with Soviet style command and control economics that have such a long record of failure that only fanatical collectivists and democrats fail to recognize it.

Remember folks: Every tax and regulation imposed on anyone is ultimately paid by individuals one way or another in the form of higher prices, shortages or any number of other costs. In short it means less freedom and more government.

Of course, no Democrat proposes to increase our own production in ANWR, the outer continental shelf or the Gulf of Mexico, where the Cubans and Red Chinese are exploring right now. Build our first new refinery in 30 years? Forget it. How about cutting down on the dozens of special blends required for dubious environmental reasons that cause refineries to shut down and drive up prices every spring and fall? No way. Expand nuclear power? Don't make me laugh. More coal production and gassification? You must be kidding.

No, The left's only solution to supply is the government mandated use of inefficient alternative sources of energy. That subsidized and tariff protected ethanol thing is working out great isn't it? There's a reason why no other civilization in history has burned its food for fuel. Because it's a really dumb idea. When an alternative fuel can replace oil on a level playing field, I'll be the first to use it. When they are forced on people artificially, you get what we have now. Higher food prices, starvation, riots and yes, deaths.




Related Note: The Fed reduced interest rates again yesterday, which will raise the cost of oil imports further as our dollars buy even less on the world markets. If the dollar was worth what it was five years ago, oil would be at least a third cheaper than it is now.