U.S.Housing Comment
I have frequently confessed to my inability to fully comprehend the numerous economic and political influences that drive our markets. As a result I rarely attempt to dissect and comment on these often confusing issues. However, a report that came out yesterday, January 5, was so startling that it forced me to re-read it three times. I actually thought it could have been a misprint. It was not.
Pending home sales in the U.S. that were supposed to be PLUS 3.7% were in fact a staggering MINUS 16.0%. If memory serves me, this is what the Fed, Treasury, and White House have been hanging their collective hats on: HOUSING! It is failing!
Also, the Treasury recently announced an UNLIMITED bailout for Fannie Mae and Freddie Mac. The Fed has spent over one trillion dollars on this toxic mortgage debt. And the White House spent tens of billions more of your tax dollars on tax credits to 1st time home buyers. It is failing!
In addition to those distressing reports, mortgage application numbers came out yesterday January. 6,and barely raised eyebrows, especially as it confirms the information I listed above. Mortgage Applications for the week ending December 25/09 were down 22.8%. Apparently, that is the “adjusted” number, the actual unadjusted number of applications was down 46.9% from last year.
The market did not react. Can someone please help me understand how such horrendous numbers can not cause chaos in the markets? Is it simply that the market expects Bernanke to continue to flood the banks with fresh dollars. Will the U.S. not allow them to fail. Where does the insanity stop.
With these facts in place I can only expect that the housing market will make a second leg down, thus bringing homes to an affordable level in all of the country and not just a few of the current areas. But, by then the Obama administration will have already burned through all of our cash and there will be nothing left at the exact time it could have really made a difference.
