One of the most useless housing metrics ever debated has been new home sales released by the Commerce Department. The data doesn’t consider contract recisions and has a wildly high margin of error.
Privately-owned housing starts in February were at a seasonally adjusted annual rate of 583,000. This is 22.2 percent (Â±13.8%) above the revised January estimate of 477,000, but is 47.3 percent (Â±5.3%) below the revised February 2008 rate of 1,107,000.
Housing starts were up 22% over the prior month plus or minus 13%. Crazy. Yet it’s widely covered.
Every year at this time the metric is always discussed in the context of its prior month change rather than the prior year result. It’s March and this metric is based on February data. Housing starts nearly always rise starting at the beginning of the year. In all the press coverage, little or no attention was placed on the fact that starts are 47% below last year at this time, providing an illusion to the uninformed that construction is booming.
So my initial takeaway from this announcement and the ensuing buzz was, predictably, skeptical.
Last week the Dow jumped, and even though it has no direct correlation with the housing market, people were noticeably upbeat about the improvement in the stock market. This week – more of the same.
My initial takeaway was again, predictably, skeptical.
This provided some closure (not to the victims) on this horrendous financial situation. Nothing to be skeptical about.
The AIG $165M bonus debacle became the next event to focus on. It certainly appears that these bonus payments were enabled by Congress and Treasury from the beginning and feeble attempts were made to say “gee, contracts were signed and therefore we need to honor them.”
The public isn’t that stupid and responded in outrage and now suddenly every government servant from the president on down now suffers from a case of righteous indignation. The AIG audacity of paying these bonuses, along with Thain’s bathroom renovation, is clearly the symptom of a larger reality distortion and one of the reasons we are in this mess. Yet if this is a crisis of confidence and the $165M represents peanuts relative to the trillions at play, its symbolism is far more important – at least for now. Merrill Lynch bonuses are next on the radar.
Bernanke announces that he sees the recession over by the end of this year and recovery beginning in 2010. By now, skepticism reigns with the Fed chief’s intentions since the Fed was so slow in reacting to the crises in 2007 and 2008, chimed in with Paulson’s panic message last summer and Ben has clearly radiated optimism in between bleak assessments.
It seems to me that the majority of economist do not believe the recovery will begin in 2010 so I’m skeptical.
The Federal Reserve is directing $1T at credit to alleviate the log jam which is met with euphoria (financially speaking of course). Now there are signs that liquidity is starting to return to the credit markets.