Wednesday, June 22, 2011

Morning Update/ Market Thread 6/22 - Running with the Devil Edition…

Good Morning,

Not much action to report ahead of the FOMC whipsaw to come at 12:30 Eastern… so, while we wait to be manipulated by that group of narcissists the dollar is slightly higher, bonds are higher, oil is higher, gold is passing $1,550 again to the upside, silver is also higher, and food commodities are mixed.

Yesterday Existing Home Sales reportedly fell from 5.05 million to only 4.81 million. Hello, it’s springtime, sales are supposed to be rising, not falling… and this is yet another depression era print with home sales down, get this, 15.3% year over year. Not to worry, the National Association of Realtors thinks this is the bottom… just like the last 50 times they thought it was the bottom:
The housing slide deepens with existing home sales falling 3.8 percent in May to a 4.81 million annual rate. The year-on-year rate deepens to minus 15.3 percent from April's minus 13.8 percent. Supply on the market, at 3.72 million, is falling but not enough relative to the decline in sales as months supply rose to 9.3 months vs April's 9.0 months.

The glass half full shows a rise in prices, up 3.4 percent for the median to $166,500 and up 2.0 percent for the average to $214,400. But the heavy supply doesn't point to much pricing power in the months ahead. Another plus is that sales of single-family homes, the central component in the report, fell at a slower rate of minus 3.2 percent vs minus 8.1 percent for the much smaller condo category. Also, heavy weather may have played a role as the month's contraction is deepest in the Midwest.

The National Association of Realtors is definitely looking at the bright side and is actually spilling the beans on next week's pending home sales data saying the report, though based on incomplete data, will show "solid gains." The NAR believes, and hopefully they're right, that May will prove to be the year's bottom for the housing sector. New home sales, which had been especially weak though improving in the last couple of reports, will be posted on Thursday.

NAR is another great example of a conflicted special interest who has no business reporting on important economic data pertaining to their own industry. They have already been caught red handed manipulating sales data to make the market appear better than it actually is, but of course the special interests have the money and thus nothing has changed because they have captured our government and regulators.

Here it is almost July, and we are getting close to the peak in Option-Arm resets – in fact the peak is just a couple months away:

My take is that a bottom in housing prices is no longer that far away… they now could bottom within the next year to 18 months. Remember who it is that is saying that. No, the impossible math of debt has not been fixed, and until it is the market will have difficulty moving forward, but a significant weight is about to be lifted so the next round of QE may actually produce house price inflation – I would not bet against it.

While I’m not waiving the “All Clear” flag yet by any means, I am saying that with this next wave of deflation that buying real estate into the fear this time will be appropriate… as long as it pencils out. It’s really only appropriate to own income producing property and enough to live comfortably and safely upon. Otherwise real estate should not be considered an “investment” as it is actually a liability that requires cash out of your pocket. I will say this, that here in the northwest it is still very difficult to get rental property to number out, and it absolutely must before I would consider owning more.

The corrupt and hypocritical Mortgage Banker’s Association, another fine special interest group, says that Purchase Applications fell 2.8% this week, while Refinancing Applications fell 7.2%. While a 7%+ move in one week is still completely unbelievable, it is only half of last week’s move. I personally cannot believe we let clowns such as the MBA utter a single word about the economy in public – completely corrupt, but here’s the “data:”
The number of mortgage applications fell in the June 17 week cutting into but not reversing very strong gains in the prior week. The index tracking purchase applications fell 2.8 percent with refinancing applications down 7.2 percent, which in combination pulled the composite index down 5.9 percent. Behind the pull back, at least in part, are the week's slightly higher rates, at 4.57 percent for 30-year loans for a six basis point rise in the week.

Whatever… see the Option-Arm chart above.

The FHFA House Price Index will be released at 10 Eastern this morning and will be reported inside of our Daily Thread.

Question? Who is the dumb one? The “Fed” clowns who are never right and manipulate the globe, or those who wait to parse and hang on their every ill conceived word? And, if a dollar falls in the forest, how much harder will you have to work to afford a pitchfork? Thoughts to ponder…