The American economy: keeping track of US economic developments.

[hmmm]

Re: The American economy

Something very interesting going on in the US the past few days, as Fed members have been consistently hinting that the next interest rate move will not be down - accordingly interest rate futures have seen yields jump. They have been talking about the balance of risks making them more concerned about inflation rather than growth. Consumer confidence is rebounding too, even whilst the housing market is tanking.

The question is whether or not the housing market will take the rest of the economy with it. If it doesn't, mortgage holders who are already squeezed are going to be rightly screwed by a strengthening consumer recovery leading to even higher Fed interest rates.

 

[Sidewinder]

Re: The American economy

But if Americans don't have any savings, and the house crash ends MEWing, and interest rates have gone up on existing debt....then how exactly are consumers going to be able to continue spending in the way they have been for the last 3-4 years?

The numbers just don't add up.

 

[room305]

Re: The American economy

But if Americans don't have any savings, and the house crash ends MEWing, and interest rates have gone up on existing debt....then how exactly are consumers going to be able to continue spending in the way they have been for the last 3-4 years?

The numbers just don't add up.

I don't think the US consumer can take on much more debt no matter what way interest rates go. Real wages aren't increasing and they have no savings so logically the only way they can repay that debt is by cutting back on spending.

Apart from the near $70bn trade deficit, there is another monstrous imbalance between record corporate profits for US companies and record debt levels for US consumers.

Something has got to give.

 

[Duplex]

Re: The American economy

US inflation is back on the agenda again.

A report the next day will show consumer prices excluding food and energy increased 2.9 percent over the 12 months to September, the fastest in more than a decade, according to a separate survey of 16 economists.

http://www.bloomberg.com/apps/news?pid=20601103&sid=akvabH3AbMlY&refer=us

 

[sunrock]

Re: The American economy

as explained previously by joe sod u. s. will inflate to ease their foreign debt etc in case of any hint of deflation
luckily for u.s. their debt is in dollars so they dont have to sell anything_just get the printing presses going
their trump card is control of oil which is why oil is sold in dollars
as long as they retain this control they can manage to unwind alot of their deficits etc
oil is the most important commodity and the u.s. with their presence/influence with middle east producers retain their power
of course they will be a recession in the u.s. and many people will suffer but thats just part of the medicene for ordinary americans
and of course we share in the americans fate
now ireland has lost control of interest rates and of printing press so in a downturn taxes will rise and also high unemployment
it will be like the 80s when our gov had a big foreign debt that had to be serviced and we will have to wait until we are buoyed up by events elsewhere

 

[turnips]

Re: The American economy

So is this good news for property buyers in the States? Will rental market be stronger as Americans will be unwilling to purchase?

 

[Duplex]

Re: The American economy

A report from a real estate agent at the coalface in Florida. His analysis of the market is sought by the Banks, Builders and Hedge Funds. Mike Morgan is refreshingly candid in his assessment, no punches pulled, no siree Bob. What strikes me about Morgan’s account of the market in Florida is the disbelief by the lenders and builders, that the market has turned so badly so quickly.

"My recent update on what we're seeing in the housing market generated a couple dozen calls from some very large financial institutions, REITs, hedge fund mangers, public builders, and a variety of financial experts. Those callers are not just callers from the U.S., but from Germany, Australia, and the U.K. I have had so many calls that I found myself on the phone 8-10 hours a day discussing the housing industry. I learned as much as I shared, if not more. So here's a little bit of what I heard.

"The Street is scared -- scared to death that we are in for a housing crash that will rock our economy to its knees. Even Cramer attempted to reconcile his bullish position on his Tuesday night broadcast when he said he did not believe we have seen the worst of the housing market, but he does believe we have seen the worst for the builders' stocks. Duh? What he and many others don't realize is that the housing industry will not recover in 2007.

"Maybe he's setting up for a flip-flop, or maybe he, like many others, simply doesn't understand the dynamics. And how could anyone understand the dynamics unless they were on the front line? How can you evaluate a market like this from the comfort of a cushy Manhattan office? No way. No how.

"So let me tell you, simplistically, what we see and hear on the front lines. On the street we are dealing with builders and sellers every single day. And both groups are trying to leap-frog the other on the way down. That means lower margins or no margins for the builders. And that means the banks that have financed the millions of homes flippers bought, as well as the ATM cash drawn down with ARMs, will wind up owning a lot of property they cannot sell. Sure, most banks sell their paper. OK, so the guys like Fannie Mae will own hundreds of thousands of homes they can't sell. The result is the same. Massive amounts of inventory flooding the market at foreclosure sales. And prices drop further.

[broken link removed]

 

[room305]

Re: The American economy

So is this good news for property buyers in the States? Will rental market be stronger as Americans will be unwilling to purchase?

Dear God no man. Prices are in freefall. Do you own property in the US?

 

[turnips]

Re: The American economy

No thank God!
But have been seriously looking at it....
or was...

 

[Foxtrot]

Re: The American economy

Dear God no man. Prices are in freefall. Do you own property in the US?

I just bought property in the States at a deeply discounted price. I had already been researching this purchase when the property market slumped. As I plan to keep it for 10+ years and already have a long term tenant, it was a terrific bargain. The level of debt, type of martgage, and length of time a person plans on holding the property make a huge difference. Condo flippers are getting the short end of the stick because they didn't do sufficient research and only wanted to make a quick buck. I've got little sympathy.

 

[room305]

Re: The American economy

I just bought property in the States at a deeply discounted price. I had already been researching this purchase when the property market slumped. As I plan to keep it for 10+ years and already have a long term tenant, it was a terrific bargain. The level of debt, type of martgage, and length of time a person plans on holding the property make a huge difference. Condo flippers are getting the short end of the stick because they didn't do sufficient research and only wanted to make a quick buck. I've got little sympathy.

I would suggest that there will be better bargains to be had next year (as all those ARMs start resetting) but everyone has to do their own homework.

 

[Maine]

Re: The American economy

I would suggest that there will be better bargains to be had next year (as all those ARMs start resetting) but everyone has to do their own homework.

Extract from Davys

"Top-ten US homebuilder MDC holdings reported a 60% fall in net income in its Q3 results on October 24th. Earnings per share fell 60% year-on-year (yoy) to $1.06, well short of the consensus target of $1.38. The company wrote off $29.4m in land impairments and project costs.New orders were off 40% yoy while the company cancellation rate soared to 48%"

Also "Dallas based Centex reported Q2 results after the bell last night (October 24th). Earnings per share fell 71% to $0.70 from $2.39 in Q2 2005"

Still think we may see a soft landing in US but clearly the contruction industry is taking a pounding.

 

[Duplex]

Re: The American economy

The September numbers are out for existing home sales. “Sales of existing homes fell for a sixth straight month in September and the median sales price dropped on an annual basis by the largest amount on record, further documenting a lukewarm housing market.”

“The National Association of Realtors reported that sales of previously owned homes fell by 1.9 percent in September to a seasonally adjusted sales pace of 6.18 million units, the slowest sales rate since January 2004.”

“The median price of a single-family home fell to $219,800 last month, a drop of 2.5 percent from the price in September 2005. That was the biggest year-over-year price decline in records going back nearly four decades. Sales of condominiums fell by 3.2 percent. Condominium prices fell by 3.2 percent”

 

[Howitzer]

Re: The American economy

As a slight aside does anyone know why the median price is always quoted by American sources in relation to house prices, as opposed to the average? I somewhat assumed it was down to a greater disparity between the top (Beverly hills mansion) and bottom (trailer park) of their housing market, so the median value is the one which is a truer reflection of what the majority of people actually buy.

Whenever you quote American prices on AAM and use median you get shot down as being a buffoon with no mathmatical knowledge whereas in fact this is the value used by American commentators.

 

[Duplex]

Re: The American economy

Der Spiegel’s take on the American economy and the dollar.

PLAYING WITH FIRE

America and the Dollar Illusion

The dollar is still the world's reserve currency, even though it hasn't deserved this status for a long time. The devaluation of the dollar can't be stopped -- it can only be deferred. The result could be a world economic crisis.
The two things investors crave most are high yields and high security. Since you can never have both at the same time, the moods of investors are like an emotional roller coaster. They shift constantly from fear to greed and back -- although major investors, like corporations and states, clearly prefer security over fancy returns. Their fear is stronger than their greed. They'll freely relinquish the really fat profits as long as the stability of their billions is guaranteed. They're afraid of political unrest, they loathe overly dramatic changes in currency value and the mere thought of creeping inflation sends them into a state of panic.

http://www.spiegel.de/international/0,1518,440054,00.html

 

[Bedsit]

Re: The American economy

Who wants to be a trillionaire? (Economist)

A really good article in this week's Economist magazine on the dilemma facing China and to some extent the rest of the world

 

[demoivre]

Re: The American economy

Howitzer said "As a slight aside does anyone know why the median price is always quoted by American sources in relation to house prices, as opposed to the average? I somewhat assumed it was down to a greater disparity between the top (Beverly hills mansion) and bottom (trailer park) of their housing market, so the median value is the one which is a truer reflection of what the majority of people actually buy."

The median is a measure of average as is the arithmetic mean ( the one used by most people ), mode , geometric mean and harmonic mean. Since an average describes central tendency then the nature and distribution of the data, along with any further statistics being calculated, will, to a large extent, dictate which average one uses. The median is often used where there are extreme values in a distrubution since the median is essentially the value of the central item in an ordered array and so is uninfluenced by those values. The arithmetic mean and median for the numbers 1,2,3,4,5 is 3. For the numbers 1,2,3,4,500 the arithmetic mean is 102 and the median is still 3.

Howitzer said "Whenever you quote American prices on AAM and use median you get shot down as being a buffoon with no mathmatical knowledge whereas in fact this is the value used by American commentators. "

A little knowledge is often a dangerous thing.

 

[Maine]

Re: The American economy

As a slight aside does anyone know why the median price is always quoted by American sources in relation to house prices, as opposed to the average? I somewhat assumed it was down to a greater disparity between the top (Beverly hills mansion) and bottom (trailer park) of their housing market, so the median value is the one which is a truer reflection of what the majority of people actually buy.

Whenever you quote American prices on AAM and use median you get shot down as being a buffoon with no mathmatical knowledge whereas in fact this is the value used by American commentators.

The easiest example of this I have seen is the following. Suppose Bill Gates walked into a bar with a hundred people. Then the average wealth for a person in the bar would be a multimillionaire.

This tells you little about most peoples wealth in the bar

 

[Duplex]

The Sacramento Bee. “To some readers, reporter Jim Wasserman is a home wrecker. That’s what happens when you chronicle the downturn in what was previously the hottest thing going: the go-go residential real estate market.”

“The market has tanked. Prices continue to slide, inventories of homes for sale are at or near record levels and new home construction has stalled. The industry, from real estate agents and developers to home sellers and mortgage lenders, is spooked.”

“‘I’m trying to sell my home and your articles are not helping (us) sellers,’ one woman said in an e-mail. ‘Thanks for eating away a large portion of my equity!!!’”

“One new home builder told Wasserman that buyers have come into his company’s sales offices, newspaper in hand, and cancelled their purchase contracts, pointing to a Wasserman story about the housing slump.”
“Wasserman and editor Wayne Davis find it amusing that at the height of the housing boom, no one called to complain about the coverage. ‘Those people who blame us today,’ said Davis, ‘they didn’t call a year and a half ago to tell us we were driving up the market.’”

 

[SLAPPY]

Just got back from Florida. Take a look at the article on the front page of the business section of the Palm Beach paper

http://www.palmbeachpost.com/business/content/business/epaper/2006/11/05/a1f_newhomes_1105.html

"The current downturn should last two to five years," housing analyst Jack McCabe says.

"Prices for new single-family homes will come down another 20 percent to 25 percent, McCabe estimates. Seiders estimates the figure at 30 percent in South Florida."

With articles like this getting more mainstream, the sentiment is getting extremely bearish towards property over there. 2007 will be a boodbath for specuvestors who bought late in the game.