Housing Recovery Continues … Sort Of

For the economy to recover, the housing market must recover.  When consumers can barely pay their mortgages, they’re unlikely to spend money on other things – and when consumers don’t spend money, the economy stagnates.

There have been signs of recovery in the housing market in recent months, as we’ve reported, and now there’s more good news:

  •  The Case-Shiller Index, a composite of statistics from 20 cities, showed that housing prices rose 4.3% from October 2011 through October 2012.
  • It appears that housing prices will see their first gain for the year since 2006.
  • The National Association of Realtors’ Pending Home Sales Index is at its highest level in five years and has risen for 18 consecutive months.  At the end of October, it was at 104.8, up 13.2% from a year earlier.

While these are positive trends, statistics can be misleading.  Many current buyers are investors, who are purchasing homes to rent out, not to resell.  If investors believed that housing prices were going to continue rising, they would buy and resell.

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From Goldfinger to Groundhog Day

Tick.  Tick.  Tick.

It’s like that scene in “Goldfinger,” where the seconds are ticking down and James Bond is trying to defuse the bomb.  He succeeds, of course, just in time.

Of course, John Boehner is not James Bond and real life is far more complicated than the movies.

Tick.  Tick.  Tick.

The real problem is not a cliff, but a chasm.  The degree of separation between Democrats and Republicans in Congress has never been wider.

On one side, President Obama and his Democratic supporters are hell-bent on raising taxes on the wealthy, which may not do much to tame the deficit, but may achieve the goal of moving toward class equality.  Democrats believe that more spending is needed to stimulate the economy, even though spending is at an all-time high and the economy is still in dismal shape. read more

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Ignoring the Cliff

The fiscal cliff beckons and, as previously predicted, a resolution is unlikely.  So let’s ignore the cliff this week and consider what’s happening elsewhere.

Viva Europe!

Last week was a good week for Europe – at least in comparison to most weeks.

The Eurozone is in a recession; unemployment continues to rise, and both industrial production and retail sales have dropped even further than had been predicted.

So where’s the good news?  Well, for starters, European leaders were given the Nobel Peace Prize.  While we’re not sure what the sovereign debt crisis has to do with war and peace, at least Europe is not the Middle East.  In what other continent do neighboring countries lend billions of dollars to each other when they have no hope of ever getting it back? read more

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The Black Cloud in the Silver Lining

All I want for Christmas is a new economy.  Ours is broken.

While there are a few positive signs that optimists can latch onto, it appears that either the country will go over the fiscal cliff or virtually no cuts will be made in the $3.8 trillion federal budget.  If nothing else, current spending should prove that Keynesian economics doesn’t work.  With a fourth consecutive deficit exceeding $1 trillion, optimists take as good news a drop in the unemployment rate from 7.9% to 7.7%.  Considering the federal spending that has taken place in recent years, wouldn’t the economy be booming now if Keynesian economics really worked? read more

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