It’s my business to blow peoples’ bubbles to smithereens when they are not focused on the ball in play. Those primary elections and runoffs in five states Tuesday, well, the outcomes don’t mean a hill of beans.
The real news — the stuff that counts — is the housing market continues to collapse if it already isn’t gasping its last breath.
Sales of existing homes plunged 27.2% nationally in July. Mark my word, it will be adjusted downward — meaning worse — as was June and May.
It was April 30 that the government’s stimulus tax credit of $8,000 to qualified first-time home buyers expired that sales turned sour. One way of looking at this is the tax credit was no more than a method of artificial insemination.
Usually, I consider the news affecting the stock market as fickle as a teenage girl experiencing puberty. Today, I’m not so sure. Early reports showed blue-chip Dow Jones industrial average fell more than 1%, as did the S&P 500, a broader measure of stocks.
The National Assn. of Realtors said that the seasonally adjusted annual rate of sales was 3.83 million units in July, a drop from the downwardly revised 5.26-million-unit rate in June and a 25.5% drop from the 5.14-million-unit level in July 2009.
It was the lowest sales level since 1999. The sales rate for single-family homes — which accounted for the bulk of sales — was at its lowest level since May 1995.
Translation, courtesy of the Los Angeles Times:
“From our vantage point, the first-time home-buyers credit pulled forward demand — by definition this is what stimulus measures achieve — however the issue this time is that there was so little demand to be pulled forward, the credit has left no demand for the summer,” Dan Greenhaus, chief economic strategist for Miller Tabak + Co., wrote in a research note Tuesday morning. “The result is exactly what we’re seeing: a near, if not outright, collapse in housing.”
Sales of existing homes is critical and never in generations has the price been so much in favor of qualified buyers. Many of the existing homes are in foreclosure and interest rates remain at record lows.
I’m having misgivings about the Kensyian style of economics the Obama administration has pursued as well as the tax credits and lower tax cut mantras championed by the Bush administration.
Neither is working as promised.
The popular “Cash for Clunkers” offered a momentary spurt in new car sales as well as removing gas guzzlers from our roads. New car sales, at least, did not return to rock bottom as did the sales of new and existing homes.
But, unlike cars, our homes no longer are our nest eggs and with tight credit no longer are affordable ATM machines.
The rich seem to be sitting on their cash reserves, some acquired by taxpayer bailout funds for 400 banks, because of uncertainties in the future, the excuse being a wait-and-see approach how the rules will be written under the new financial reform legislation.
The stimulus money continues to be a bad rap, targeting state and local government workers without giving them credit for making up a third of our national work force. Unions or not, they spend money into the private economy just as those receiving unemployment checks.
I have seen enough where I no longer agree with the stimulus champions in Paul Krugman and Robert Reich in that the $787 billion was not enough.
What it has done is save, temporarily, state and local government jobs and created artificial demand in some market places. It saved the economy and the major financial institutions from free falling into a Great Depression for perhaps 18 months but now that the stimulus is on its last legs, we are returning to the summer of 2008 when the bubbles burst.
As Robert Redford said in the movie “The Candidate,” “There must be a better way.”
As in the movie, Redford had no answers and neither do the politicians in Congress nor the economic gurus in the White House. Too much of it rests in the hands of the Federal Reserve and they, in the opinion of Ron Paul that I also share, are beholden to Wall Street.
And, certainly not any candidate running for federal office in Tuesday’s primaries.
(Balloon bubble courtesy of dreamstime.com)
Cross posted on The Remmers Report
Comments are welcome. Link to my blogsite or go to my email address at [email protected] . Remmers’ varied career spans 26 years in the newspaper business. Read a more thorough resume on The Remmers Report.
Jerry Remmers worked 26 years in the newspaper business. His last 23 years was with the Evening Tribune in San Diego where assignments included reporter, assistant city editor, county and politics editor.