Posted tagged ‘Mark Lieberman’

Personal Income, Spending Surge in August

September 30, 2013

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It would seem that this “Surge” in income and spending could mainly be attributed to the fact that a lot of people had 5 paydays (Fridays) in August as opposed to 4 in July. This works out to, for those people that get paid on Fridays, a 20% boost in take home income for the month. Please read the article below.

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Personal income grew in August at its fastest pace since February and consumer spending grew faster than in July, the Bureau of Economic Analysis reported Friday. The growth matched economists’ forecasts of a 0.4 percent boost in income and a 0.3 percent increase in spending.BEA also revised up its estimate of both spending and income growth in July.

The report suggested strong growth in spending for the third quarter ending Monday, which would boost GDP. In the first two months of the second quarter – during which the economy grew at a seasonally adjusted annual rate of 2.5 percent – consumer outlays were essentially flat, dropping 0.2 percent in April and then increasing by the same amount in May. Spending rose 0.6 percent in June, contributing to the GDP growth.

Total employee compensation, which had fallen 0.2 percent in July, rose .04 percent or $34.2 billion in August. Wages rose an aggregate 0.4 percent or $30.4 billion in August after dropping $18.5 million. The calendar often affects wage and government transfer payments. There were four Fridays, traditional paydays, in July but five in August.

Farm income, which had struggled earlier the year due to droughts and flooding in different parts of the country, rose $7.9 billion or 6.8 percent in August, the second straight month of income growth after falling in April, May and June.

Government transfer payments – essentially Social Security and Medicare (along with a few other categories) – rose a collective 0.4 percent or $10.8 billion in August.

To read the complete article please use the link below.

Personal Income

Household Net Worth Growth Slows in Q2

September 29, 2013

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This is a great indication of how much the housing industry impacts the national economy. When home sales slow down so will the growth of net worth and vice versa. Please read the article below.

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Household net worth improved $1.3 trillion in the second quarter — half as fast as the first quarter — as real estate values grew $626.7 billion, the Federal Reserve reported Wednesday in its quarterly Flow of Funds report.

But, with a drop in mortgage debt — including home equity loans and lines of credit –- from $9.39 trillion in the first quarter to $9.34 trillion in the second, homeowner equity grew to 49.8 percent in the second quarter from 48.1 percent in the first.

Household investment in the stock market grew $265 billion in the second quarter compared with $929 billion in the first when overall net worth grew $2.8 trillion.

Owners’ equity as a percentage of real estate value has been on a steady upward trajectory since dropping to 36.3 percent in the first quarter of 2009. It rose to 45.4 percent at the end of 2012 and to 48.1 percent one quarter later. The 2.7 percentage point increase in the first quarter of this year is the fastest quarter-to-quarter growth this century. Even with the increase, though, the equity percentage remains sharply lower than 57.7 percent in 2000.

After falling $223 billion in the first quarter, disposable personal income grew $98.6 billion in the second. The first quarter drop reflected the rollback of the cut in payroll taxes which ended January 1. With the increase, second quarter disposable personal income — essentially after-tax income — was $12.39 trillion, about $130 billion less than the record $12.52 trillion in the fourth quarter last year.

To read the complete article please use the link below.

Household Net Worth

Pending Sales Index in 3rd Straight Monthly Drop

September 29, 2013

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A lack of inventory and the tougher requirements for getting a mortgage contribute as much to this drop in the pending sales index as the higher mortgage rates. New housing starts are up and that is reflected in the rise in the new home contracts. Please read the article below.

 

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Continuing to respond to higher mortgage rates, the Pending Home Sales Index (PHSI) slipped for the third straight month, dropping 1.6 percent in August to 107.7 the lowest level since April, the National Association of Realtors which compiles the index reported Thursday. Economists had expected a more modest decline, 1.0 percent, to 108.3. NAR also revised the July index down to 109.4 from the originally reported 109.5.

 

The index covered the same month in which new home sales, reported Wednesday by the Census Bureau of Department of Housing and Urban Development, improved 7.9 percent. Like the PHSI, new home sales are tracked when buyers sign contracts. The existing home sales report for, also a product of the NAR, is based on closed transactions.

 

NAR Chief Economist Lawrence Yun said the drop was expected as a consequence of buyers accelerating purchase decisions while mortgage rates were increasing. Indeed, existing home sales jumped in both July and August. The corresponding PHSI rose a sharp 5.8 percent in May – the strongest month-month increase in two years. The index dropped a scant 0.4 percent in June.

 

Yun downplayed expectations for home sales.

 

“Moving forward, we expect lower levels of existing-home sales,” he said, “but tight inventory in many markets will continue to push up home prices in the months ahead.”

 

To read the complete article please use the link below.

Pending Sales Index

August Existing Home Sales At Pre-Recession High

September 23, 2013

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This is a good sign but until new home starts are back to pre-recession leaves the recovery can not be counted as complete. Please read the article below.

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Existing home sales rose an unexpected 6.5 percent in August to an annual sales rate of 5.48 million, the highest level since February 2007 – ten months before the onset of the Great Recession — the National Association of Realtors reported Thursday. Economists surveyed by Bloomberg expected existing home sales to drop to 5.255 million from July’s originally reported July’s 5.39 million sales pace which was unchanged in today’s report.

The increase in sales came as the median price of an existing single family home in August dipped slightly from July, down $300 to $212,100. It was the second straight month-month price drop.

The inventory of homes for sale edged up to 2.25 million from 2.24 million in July, computing to a 4.9 month supply down from 5.0 in July and the lowest since February’s 4.7 month supply.

The sales increase came as mortgage rates continue to rise with buyers seeking to complete transactions before rates went up further. According to Freddie Mac, the rate for 30-year fixed rate loan in August was 4.46 percent (the average of the weekly rates), up from 4.37 percent in July.

The sales data came shortly after a the Federal Open Market Committee said tighter rates could be hindering the economic recovery and announced it would continue its monetary stimulus policy designed to “maintain downward pressure on longer-term interest rates [and] support mortgage markets.”

The NAR warned the strong sales pace might be a “temporary peak”, the association’s chief economist said “rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead.”

He warned “tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn’t as favorable as it was, and restrictive mortgage lending standards are keeping some otherwise qualified buyers from completing a purchase.”

To read the complete article please use the link below.

Existing Home Sales

No Change in FOMC Policy; Slower Growth

September 22, 2013

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At some point in time the Fed has to stop dumping money into the bond market. At that point a very large jump in interest rates can be expected. Please read the article below.

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While noting “improvement in economic activity and labor market conditions,” the Federal Open Market Committee voted Wednesday to continue its policy of near-zero interest rates and its $85-billion-per-month bond-buying program.

At the same time, the Fed’s own economic projections suggested the economy might not grow this year as fast as it expected just three months ago.

In a statement concluding its two-day monetary policy meeting, the FOMC said it “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

The Committee adopted the policy by a 9-1 vote with only Esther George, president of the Kansas City Fed, dissenting. St. Louis Fed President James Bullard, who had joined with George in her dissents earlier this year, voted in the majority as he had at the July meeting.

“The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market,” the FOMC said in its statement. “The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”

The reference to “the tightening of financial conditions” was seen as a comment on the recent increase in mortgage rates, some of which resulted from the Fed’s own discussion of tightening its monetary policy.

To read the complete article please use the link below.

No Change in FOMC Policy

July Pending Home Sales in Steepest Drop So Far This Year

August 31, 2013

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Just imagine what will happen when the government stops pouring billions of dollars into the housing market.  Please read the article below and let me know what you think.

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Responding to higher mortgage rates and higher prices, the National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) slipped 1.3 percent in July—the steepest decline this year—to 109.5, the group reported Wednesday. Economists had expected the index for July would drop to 109.8, which would have been a 1.0 percent decline from June’s 110.9. The June index was unchanged.

The index covered the same month in which new home sales, reported last week by the Census Bureau and HUD, plunged 13.4 percent to a seasonally adjusted sales pace of 394,000, the lowest rate of the year. Like the PHSI, new home sales are tracked when buyers sign contracts. The existing-home sales report, also a product of NAR, is based on closed transactions.

Although the group downplays monthly price changes when it reports closings, NAR economist Lawrence Yun cited higher prices as affecting new contracts.

“Higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West,” Yun offered as an explanation for the drop in the PHSI.

The Case-Shiller Home Price Indices for June, reported Tuesday, rose 2.2 percent to their highest levels in almost five years.

Increasing rates and prices, though, could also serve as a catalyst for contracts and sales as buyers rush to lock in prices or rates before they go higher.

The drop in the July PHSI was the second monthly decline, the first time the index has fallen for two straight months since last November and December. At 109.5, the index is at its lowest level since April.

To see the complete article – please use the link below.

Home Sales in Steepest Drop

Commentary: Solving the Wrong Problem

August 12, 2013

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This makes a lot of sense. Getting rid of Fannie Mae and Freddie Mac would be a huge mistake. Please read the article below and let me know what you think.

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“Can I help?” the Samaritan asks.

“I dropped my keys,” the man replies.

Where?

“Over there, across the street.”

“Then why are you looking here?”

“The light is better,” he says, pointing to the street lamp overhead.

Just like the man looking for his keys, President Obama is trying to solve the wrong problem by calling, as he did in his speech in Phoenix, for the end of Fannie Mae and Freddie Mac as we know it.

The White House, in its suggestions to reform the housing finance system, describes the government guarantee of “more than 80% of all mortgages” as “unsustainable” and says the president wants to “put private capital at the center of the housing finance system.” The “reform,” according to White House propaganda, will end “an era of housing bubble and taxpayer bailouts.”

He’s right about the bubbles and bailouts, but wrong to blame Fannie and Freddie, who strayed from their mission when they morphed into quasi-public companies, emulating Wall Street counterparts, all but abandoning their original objectives dating back to Fannie’s birth in the 1930s to develop and sustain a secondary mortgage market.

To be sure, Fannie and Freddie were not the hallmarks of responsibility in the mortgage meltdown, but have gotten a bad rap. For all their housing expertise, they missed all the signals of the housing bubble (but then again so did Federal Reserve chairman Alan Greenspan and his successor Ben S. Bernanke who dismissed it when the first signs of the meltdown emerged).

The fact is though Fannie and Freddie did not buy and securitize the worst of the junk mortgages generated ahead of the housing collapse. That honor goes to Citigroup, Merrill Lynch, Goldman Sachs, Lehman Brothers and other private investment banks, which eagerly swallowed the worst of mortgages that Countrywide, Ameriquest, and Washington Mutual foisted on would-be homebuyers.

To read the complete article – please use the link below.

Solving the Wrong Problem