Housing market, economy still deep in a post-binge hangover
Yesterday’s housing news — a July decline of 27 percent in sales of existing housing, about twice as deep as predicted — added to the sense that the economic recovery has stalled. A big part of the decline can be explained by the fact that federal tax subsidies for homebuyers ended in June. People who wanted or needed to buy a home had jumped into the market earlier, while the $8,000 tax credit was still in effect, leaving demand in July to collapse.
The fact that housing prices nonetheless rose slightly last month over a year ago, suggesting that the prices being demanded by sellers still have not come into balance with the prices that buyers are willing to pay.
(On a side note, the Christian Science Monitor has identified six cities in which housing prices are actually rising. Atlanta is not among them. In the healthiest housing market in the country, median prices actually rose 17 percent in the second quarter of 2010 compared to a year earlier. So load up your U-Haul, folks, and shuffle off to Buffalo, NY!)
Realistically, there’s not much that anybody can do to reverse the national trend. The well-intended housing credit, for example, did little more than delay the necessary correction between supply and demand. We are experiencing the inevitably painful hangover that follows a major housing binge, a disaster created by a combination of greed, corruption, bad government policies and willful, eager ignorance by almost every party involved, as the chart below illustrates.
H/T The Big Picture (http://www.ritholtz.com/blog/)
Also yesterday, the Congressional Budget Office released its latest, legally mandated estimate of the effect of the Obama stimulus package on the economy through the second quarter of 2010. As bad as things are, the CBO found, they would be a lot worse without the stimulus.
According to the CBO, the stimulus package:
Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent, Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points, Increased the number of people employed by between 1.4 million and 3.3 million, Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)
The CBO also updated its estimate of the stimulus package’s impact on the debt, estimating that it will add $819 billion through 2019. For comparison’s sake, another CBO estimate last week put the cost of the Iraq War at $700 billion between 2003 and 2010, a number that does not include interest costs.
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472 comments Add your comment
Peadawg
August 25th, 2010
9:40 am
Hopey Changey baby!
Actually just more of the same. Obama and Bush sittin’ in a tree……
George W Bush
August 25th, 2010
9:40 am
Y’all miss me yet?
Zedd
August 25th, 2010
9:42 am
Who’s/What type of math are they using this time?
HDB
August 25th, 2010
9:43 am
For those who decried the stimulus…..the results speak for themselves!! One has to SPEND money to MAKE money!! Now..if the BANKS would start lending again…..
Southern Comfort
August 25th, 2010
9:44 am
Housing and the economy as a whole will not recover for a long time. The people who are in the driver’s seat to push recovery are too scared to do anything because of “perceived” government rules and regulations. If only they had been too scared to jump into the canyon of greed, we might not even be having this discussion.
Granny Godzilla
August 25th, 2010
9:46 am
Imagine how much more quickly the hangover would have been cured if the GOP had not been so damn obstructionist?
The binge was their fault as is the pace of the recovery.
Doggone/GA
August 25th, 2010
9:47 am
“If only they had been too scared to jump into the canyon of greed, we might not even be having this discussion.”
AMEN!
@@
August 25th, 2010
9:48 am
jay, my posts are disappearing. Is there a reason why?
George W Bush
August 25th, 2010
9:49 am
“as is the pace of the recovery.”
Yup, it’s all the minority’s fault!!!
Jay
August 25th, 2010
9:52 am
None that I can see, @@. They’re not showing up here in any form.
Peadawg
August 25th, 2010
9:53 am
“GOP had not been so damn obstructionist?”
Um, Granny, haven’t the Democrats controlled both the House and Senate since 2006? Sounds like the obstructionists are the Democrats to me.
Bosch
August 25th, 2010
9:53 am
“Atlanta is not among them.”
Imagine that — hmmmm. I wonder if it’s all the dealing between GOP city commissioners and developers who gave them deals to turn a blind eye on responsible building practices and zoning. Of course, that’s just my opinion and conspiracy theory at large.
@@
August 25th, 2010
9:54 am
Alrighty din! Let’s try it in two, separate.
Realistically, there’s not much that anybody can do to reverse the national trend.
But that doesn’t stop this administration from trying to influence the malleable minds among our citizenry. As long as the government provides it, they will come.
USinUK
August 25th, 2010
9:54 am
the fact is, unless there is a new industry like the computer/internet industry from the 1980s/ 1990s, we’re looking at low growth, low income growth for a generation.
people are working longer, so there are fewer slots for young people entering the workforce. fewer entry positions means that their entry income will be lower.
as for housing, the US had a glut of housing in the 2000s – you need to have negative new house construction for a while to get your inventory back down to a manageable level.
Bosch
August 25th, 2010
9:54 am
GWB,
“Y’all miss me yet?”
Hell no.
arnold
August 25th, 2010
9:55 am
I have yet to hear of a constructive solution from either the GOP or the Tea Baggers. Nothing but complaining.
USinUK
August 25th, 2010
9:57 am
GWB – “Y’all miss me yet?”
like I’d miss a fecal impaction.
The Leg Lamp is a "major award" much like Cynthia Tucker's Pulitzer and Obama's Nobel.
August 25th, 2010
9:57 am
The Obama/Biden “Summer of Recovery” continues….
BIDEN: ‘We’re moving in right direction’…
Worries about recovery deepen…
‘Hindenburg Omen’ creator exits stock market…
Economy in ‘Depression, Not Recession’…
Dow Faces ‘Bouncy Ride to 5,000′…
Typical Slow Summer — or Something Darker?
Drop in Home Sales Renews Pricing Fears…
Investors Scatter to Safety…
Joe Biden
August 25th, 2010
9:57 am
Nothing to worry about.
No fear of a depression.
The recession is over.
We are just experiancing a rederecession.
Thank Allah and Jehovah for Obama.
Southern Comfort
August 25th, 2010
9:58 am
UnU
Even with new industry, we’re going to be moving at a turtle’s pace. I think a slow steady growth over a longer period is what we need. We’ve tried the rollercoaster economy and that didn’t work out too well. As the old parable goes, slow and steady wins the race.
The Leg Lamp is a "major award" much like Cynthia Tucker's Pulitzer and Obama's Nobel.
August 25th, 2010
9:58 am
INTEL CEO blasts Obama, Dems; USA faces looming tech decline…
Doggone/GA
August 25th, 2010
9:59 am
“you need to have negative new house construction for a while to get your inventory back down to a manageable level.”
On a report on NPR yesterday they attributed at least some of the housing numbers to existing home owners who are postponing a move to a new house. People who might have moved in the past just aren’t right now.
The Leg Lamp is a "major award" much like Cynthia Tucker's Pulitzer and Obama's Nobel.
August 25th, 2010
9:59 am
LETTERMAN TURNS: ‘He’ll have plenty of time for vacations after his one term’…
jconservative
August 25th, 2010
9:59 am
What we need to do is borrow 36 billion a year from China for the next 8 years so we can extend the Bush tax cuts.
Actually, I am waiting for someone to say “lets cut -fill in the blank- programs $36 billion a year and then extend the Bush tax cuts”.
I have a feeling that I will be waiting a long time.
The Leg Lamp is a "major award" much like Cynthia Tucker's Pulitzer and Obama's Nobel.
August 25th, 2010
10:00 am
Feds move to dismiss deportation cases; Backdoor ‘amnesty’…
USinUK
August 25th, 2010
10:00 am
SoCo – I think it would depend what the industry was – but, we need something that will create jobs IN the US, rather than create revenues for existing corporations who outsource to Mumbai and Shenzhen
Peadawg
August 25th, 2010
10:00 am
“The Leg Lamp is a “major award” much like Cynthia Tucker’s Pulitzer and Obama’s Nobel.”
I watch the Christmas Story over and over on TBS every Christmas. Love that movie!!!
The Leg Lamp is a "major award" much like Cynthia Tucker's Pulitzer and Obama's Nobel.
August 25th, 2010
10:01 am
Sen. Baucus (author of Obamacare) admits to not reading the bill!
The Leg Lamp is a "major award" much like Cynthia Tucker's Pulitzer and Obama's Nobel.
August 25th, 2010
10:01 am
Obama & Hillary ‘talk’ while Iran arms for nuclear war…
@@
August 25th, 2010
10:01 am
Thanks, jay.
A grave conservative, Walter.
Who Cares About Our Future?
In my opinion, it takes a special form of callousness and disregard for the welfare of future generations of Americans for today’s senior citizens to fight against reform. Nobody’s talking about abolition of federal senior programs. We must accept that serious mistakes were made and we must take compassionate corrective action. But what the heck! As I said in my “What Handouts to Cut?” column, “Both today’s politicians and seniors will be dead so why should they make sacrifices now to prevent an economic calamity decades off into the future?”
…and that same “special form of callousness and disregard for the welfare of future generations” is exhibited by those who have no problem with piling Obama’s spending extravaganza onto our children.
USinUK
August 25th, 2010
10:01 am
P-diddy … the best line “it says fra-geeeee-lay … it must be from Italy!”
cracks me up every time.
I'm here from the government and I'm here to help
August 25th, 2010
10:02 am
HDB
August 25th, 2010
9:43 am
For those who decried the stimulus…..the results speak for themselves!! One has to SPEND money to MAKE money!!
Dumbest POST of the YEAR! NOT OUR GOVERNMENT! They print money to spend money. Name one investment the Government has made and showed a ROI of 10% or more?
The Leg Lamp is a "major award" much like Cynthia Tucker's Pulitzer and Obama's Nobel.
August 25th, 2010
10:02 am
Peadawg
August 25th, 2010
10:00 am
One of the classics indeed!!
USinUK
August 25th, 2010
10:03 am
Doggone – “People who might have moved in the past just aren’t right now.”
our housing analyst here explained it thusly: the only people asking banks for loans are the folks they don’t want to lend to. the folks they DO want to lend to are boosting their savings, not borrowing.
USinUK
August 25th, 2010
10:03 am
“Name one investment the Government has made and showed a ROI of 10% or more?”
ahem.
TARP.
I'm here from the government and I'm here to help
August 25th, 2010
10:04 am
Granny Godzilla aka CT, How’s the beaches?
Imagine if the demo’s had listen to the GOP in 2002. This mess would have never happen.
@@
August 25th, 2010
10:04 am
grave=brave
schnirt
Normal
August 25th, 2010
10:05 am
Peadawg
August 25th, 2010
9:53 am
Horse feathers, Peadawg. The Republican Party has constantly refused to work with the Democrats, and the Democrats don’t really control a thing, thanks to the “the Republicans in Democrat clothing” like Lieberman, et al.
Bosch
August 25th, 2010
10:05 am
The Bosches too watch the Christmas Story Marathon ever year.
TM
August 25th, 2010
10:05 am
The sum of all the deficits from 2003 through 2010 is $4.73 trillion. Subtract the entire Iraq War cost and you still have a sum of $4.02 trillion
USinUK
August 25th, 2010
10:06 am
“This mess would have never happen.”
really? there never would have been derivatives?
homeowners never would have leveraged themselves up to their eyeballs?
banks never would have launched “creative mortgage products” (as suggested by A Greenspan)?
401Ks never would have invested in riskier and riskier securities, looking for return?
RW-(the original)
August 25th, 2010
10:07 am
Imagine how much more quickly the hangover would have been cured if the GOP had not been so damn obstructionist?
The Porkulous bill that’s being credited for this “amazing” recovery was passed in February 2009 and signed into law on February 17th, That’s some awfully weak obstructionism since Obama only took office on January 20, 2009.
I'm here from the government and I'm here to help
August 25th, 2010
10:07 am
USinUK
August 25th, 2010
10:03 am
“Name one investment the Government has made and showed a ROI of 10% or more?”
ahem.
TARP.
LOL
ROFLMAO 
Thanks for proving me right1
Normal
August 25th, 2010
10:09 am
The Leg Lamp is a “major award” much like Cynthia Tucker’s Pulitzer and Obama’s Nobel.
August 25th, 2010
10:01 am
Obama & Hillary ‘talk’ while Iran arms for nuclear war…
OH GAWD! It’s the boogie man again!!! Run!
Doggone/GA
August 25th, 2010
10:09 am
“the folks they DO want to lend to are boosting their savings, not borrowing.”
Yes, that was mentioned too…as well as they are paying off existing debts.
Granny Godzilla
August 25th, 2010
10:09 am
The Godzillas understand about the Bumpus’s dogs…..
I'm here from the government and I'm here to help
August 25th, 2010
10:10 am
$17 TRILLION in debt and YOU still have a checkbook?
Even mindless monkey’s could figure this shyt out!
USinUK
August 25th, 2010
10:11 am
“LOL ROFLMAO Thanks for proving me right”
you do realize that all the assets that were used as collateral to secure the loans have had returns > than the 10% you asked?
no, evidently you didn’t.
Normal
August 25th, 2010
10:12 am
Bosch, Peadawg,
I have two favorite versions of “The Christmas Story”. The 1935 one and the one in which George C. Scott plays Scrooge.
USinUK
August 25th, 2010
10:12 am
“Yes, that was mentioned too…as well as they are paying off existing debts.”
yep … all of which is good for future growth, provided that today’s economic lesson doesn’t go down the memory hole …