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No recovery in US housing as sales drop again

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The global financial crisis was driven by US housing and subprime lending, and until that sector recovers there can be no meaningful recovery.

Yesterday data showed sales of existing homes falling for a third month in February and the number of properties for sale hitting a two-year high. Actual house sales were running at their lowest level in eight month at an annualized five million sales.

Inventories rocket

Oversupply is still choking the US housing market, and it is getting worse not better. The number of homes on the market jumped 9.5 per cent, increasing the time it would take to sell all properties at the current pace up to 8.6 months from 7.8 months at the end of January. House prices fell 1.8 per cent to $165,100 from $168,200 a year ago.

Existing home sales comprise 90 per cent of sales activity in the US housing market so these figures are particularly significant.

The expectation in these circumstances is that price falls will continue and inventories continue to rise. Besides over the next two years some three to four million mortgage resets threaten a new wave of foreclosures, increasing the oversupply of property still more.

This was the story that Wall Street did not want to hear yesterday and it was largely brushed over by TV commentators as more ‘boring’ housing data. That was perhaps a defining moment in the annals of superficial television commentary.

What recovery?

For without a recovery in the housing market the US economy is doomed to a double dip. And without a recovery in the housing market it has to be said what does a ‘fragile recovery’ actually mean? Is it just a lot of hot air and profit increases from firing people?

Businesses that downsize are survivors perhaps, but they are not signals of economic recovery. That comes much later when the credit cycle resumes. There is scant sign of that, and interest rates are so low that the next move will still have to be up.

Financial television is peddling make believe by ignoring the evidence right in front of our faces. How much longer can this absurd comedy run? US housing led us into the downturn and is just not leading us out.

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Written by Peter Cooper

March 24, 2010 at 9:36 am

One Response

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  1. The long boom in US housing, which was facilitated largely by fraud at many levels, is over folks. (Making ANY false statement in any financial document is a CRIME, as is knowing about it, and doing nothing to alert law enforcement authorities. It is called ‘misprision of felony’. We, here in Louisiana, have just had two New Orleans police officers plead guilty to it, in a Federal civil rights violation plea deal, in a case where cops killed innocent people on the Danzinger Bridge during Hurricane Katrina in 2005. It is all in the New Orleans Times Picayune newspaper site (nola.com) if you want to read something shocking. Check out the story of the 42 year old alcoholic that the cops shot dead, and later told his family that he had been murdered!)
    If the housing fraud bubble ever returns, the next time it pops will probably take down the entire US financial system, because Congress is afraid of voting for another bailout.
    In places like Louisiana, where the real estate lending standards were rarely lowered, prices haven’t dropped much. They send you to State prison for fraud here (Napoleonic Code). We have the highest percentage of out citizens in jail of any US State! An identical home to mine, right down the street (1 story, all brick, 1730 sq. ft. living area with enclosed double garage, on a 70X125 foot lot, middle school in the same block, noisy I-12 Highway 300 meters away) just sold for a little more than the $140,000 (cash sale) that I paid for mine in Sept. 2008. No real estate collapse north of Slidell, (yet).
    A local TV station just discovered that big real estate developers aren’t paying their fair share of real estate tax here in Saint Tammany Parish, Louisiana, (Louisiana was heavily French Catholic, hence ‘parishes’, which are divisions of the Catholic Church, instead of ‘counties’, like in the rest of the USA). That is probably why my tax is $980 a year.
    This whole housing mess was largely created in only a handful of the US States, mostly in the southern half of the USA. People were actually re-financing their houses every year to pay their credit card bills! And now they want to to use my tax money to lower their mortages! Sure.
    Others were buying several homes at once by lying about their income, hoping to flip them as the prices went up. Crooks made many millions originating such fraudulent mortgages, which Wall Street banksters sold worldwide as CDOs to unsuspecting investors because they were rated AAA by the rating agencies, who were being paid by the banksters. The Wall Street banksters went home rich too. We are left with the tax (Wall Street bailout) bill. They keep the yachts, private jets, and Caribbean retreats.

    Bill Simpson in Slidell

    March 24, 2010 at 10:52 pm


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