
© Press TV
We have reached a profound point in economic history where the truth is unpalatable to the political class - and that truth is that the scale and magnitude of the problem is larger than their ability to respond - and it terrifies them...Bad things are going to happen. - Hugh Hendry on CNBC
Once again we're going through another wash, rinse, repeat cycle with the housing market fairy tales. People who bother to pay attention to the news woke up this morning to a
report from the Commerce Dept that housing starts rose the highest level since 2008 in June. I'm not sure why that would be considered good news, since 2008 is when the bottom really fell out of the housing market. The other anomaly that contradicts this Government-compiled data is that mortgage purchase applications continue to decline on a weekly basis. Note: the mortgage application data is compiled and released by a private, free enterprise organization so we can safely assume that the data report is infinitely more reliable than that of the Government's Commerce Department.
The other myth being propagated by the media and the economic wizards is that the housing inventory is declining. In fact, this housing inventory has largely been converted to rentals. In particular Fannie Mae and Freddie Mac have been unloading their foreclosed inventory into institutional investors using Taxpayer money to subsidize the transactions. Interestingly and anecdotally, I was perusing the home rental listings in the Denver area for a friend who may be moving to Denver and I noticed that rents had decreased by about 10% from just 6 months ago, when I was looking for a new rental. If in fact the total housing inventory, for sale + rentals, was declining then we would expect that rents would be stable or increasing.
So where's the black hole disconnect? For one, the data is highly suspect, especially since mortgage purchase applications do not correlated with sales and starts. To be sure, I'm sure home builders are taking advantage of near-zero interest rates and borrowing as much as they can to build. But, as Zerohedge crunched this morning's housing starts numbers, the number of homes actually completed is well below the
run-rate of starts. A form of "channel stuffing" for home builders is to start a lot of homes but take a long time to complete them, since the stock market and investors only care about the headline "starts" data.
Comment: See also:
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