Existing Home Sales NSAfor the most part, it was a pretty slow week for news & economic data; but there was a bit of news related to housing this past week, and not just to the mortgage fraud whitewash we’ve been discussing recently…we’ll start with the existing homes sales report, which seems to be the one most often reported by the media with misleading headlines & hence has generated the most confusion…once again, the problem arose from a seasonal adjustment, which we’ve seen are ubiquitous to most of these reports, and sure enough on a seasonally adjusted basis, the NAR (natl assoc of realtors) reported existing home sales rose at an annual rate of 4.57 million homes, which was 4.3% greater than the downwardly revised 4.38 million-unit annual pace they rose at in december, (which was originally reported as 4.61 million, btw)…intuitively you should all realize that the winter months are typically the slowest for all housing reports, and this was no exception; as you can see from the adjacent chart, which includes a bar for each month’s actual home sales going back to january 2005, the red bar representing this january’s sales were actually quite a bit below december’s sales, as well as sales for most every month except winter of recent years…and over and above that, we know that this january’s weather was the mildest in the populated eastern US in a decade..yet this january’s report resulted in media headlines such as “home resales at a 1 1/2 year high“, “housing perks up” and even “home sales jump to the fastest pace in almost two years”…and a good share of these sales well may have been investors, as well, as 31% were all-cash transactions…the NAR also reported housing “inventory“, which in the sense of their report means only those houses which are on the market, ie. publically listed as for sale; combining the normal seasonal reduction of homes on the market with delays in listing foreclosed properties for resale, inventory of homes on the market fell 0.4% to 2.31 million & the “months of supply” (inventory divided by the month’s sales) fell to 6.1 months, the lowest its been at since april 2006; however, we know from the census that there are still 18 million vacant homes, so all the fuss about a new record low of homes on the market is likely just a statistical coincidence, a combination of a normal seasonal slowdown, sellers waiting for better prices, and uncertainty related to the pending mortgage fraud settlement; analysts at merrill lynch believe inventory will climb back to 8 months once the mortgage fraud settlement allows the foreclosure process to accelerate…

   new home sales for january were also reported this week at 321,000 units by the census bureau, again at a seasonally adjusted annual rate, which was down from a upwardly revised rate of 324,000 in december…and even though october & november sales were also revised upwards, 2011 still turned out to be the worst year for new home sales since they started tracking new home sales in 1963; with the end of year sales trending upward, and a shortage of rental units, a minor recovery in both home construction and sales is expected in 2012…we also got our “first look” at unpaid overdue mortages from LPS (Lender Processing Services) this week; there were 2,084,000 properties in foreclosure in january, a slight increase from december, and nearly 4 million delinquent, a slight decrease from last month; while we’ll likely look at that in more detail when they produce their full report with charts & tables next week, its worth noting now that RealtyTrac reports that the largest increase in foreclosures has been observed in the McMansion catagory, with a 115% increase in walkaways from homes valued over $1 millon, and a 273% increase in foreclosures of houses valued over $2 million…meanwhile, the number of foreclosures on homes valued between $500,000 and $1 million fell by 21%…

  there also seems to be a major glitch in the foreclosure fraud settlement, at least for those who would be getting a principal reduction in their outstanding mortgage as a result…prior to 2007, any cancelled debt or loan forgiveness had to be reported as income and was taxed; in 2007, with a large number of families facing short sales or restructured mortgages, congress passed a “mortgage debt forgiveness act” which ensured that those who took a loss on their homes wouldnt have to pay taxes on their loss…however, the provisions of this act expire at the end of this year, and since the principal writedowns & mortgage modifications amount to $17 billion of the mortgage fraud settlement, the expected cost in lost taxes amounts to an extra $2.7 billion…and since conservative members of congress have already voiced their opposition to any further bailout of homeowners, an expected attempt by the administration to get this ‘mortgage forgiveness act’ extended will likely run into opposition from them…

there has been a lot of discussion, mostly in the blogosphere, but also in a series of articles at the Brookings Institution, about the importance of manufacturing to the US economy…it seems this all started with the protectionist sentiments voiced by obama in the state of the union speech and subsequent specifics in his budget, but it really picked up steam when chisty romer, obama’s former economic advisor, pushed back against special treatment in an NY Times op-ed early this month, who said we could do well with a service centered economy, and was answered by laura tyson, the former chair of the economic advisors under clinton, the next week in an NYT economix column, wherein she said manufacturing still matters…much of the blog discussion involved the importance of innovation & the fact that manufacturing jobs are typically better paid, but not much about our balance of trade…we have been fortunate in this country as the issuer of the reserve currency, wherein we’ve been able to pay for oil & whatever else we’ve wanted from overseas with our dollars, but eventually our country will have to have something more than weapons and wheat to trade for what we want; service jobs may well support the domestic economy, but you cant sell haircuts to the saudis to pay for oil…

you probably have all noticed that gasoline prices have been slowly rising over the past several weeks, and since they suddenly spiked this week, it seems to have finally attracted the attention of  the blogs & media, as there were a plethora of posts on gas prices & US driving habits this week…a good part of the price pop, if not all of it, has been in response to tensions in the middle east stemming from our government’s attempts to influence domestic energy policies in iran with sanctions & strong arm tactics…as the week started, WTI (west texas intermediate, the domestic oil grade the media most often quotes) was priced over $103, which was already higher than it had been in recent months…but overnight monday, reacting to threats from our european allies that they would stop importing iranian crude by july unless iran dismantled their nuclear program, iran turned the tables on the closest US allies, and unilaterally announced that they would stop selling oil to both the UK & france…oil prices have been up virtually every day since, with WTI closing the week near $110, and Brent was over $125, which, if you’ll recall our previous discussions, is the price most US coastal refineries pay…moreover, crude prices hit a new all-tiime high in the UK on thursday, and also hit its all time high in euros on friday, which will likely exacerbate the recession already underway in europechart& it appears that we’re also getting into the range where the cost of energy will be impacting our economy as well, so we’re going to have to keep a eye on this going forward, as forecasts of $5 gas this summer are already appearing in the press…unsurprisingly, the rising gas prices have become a political issue as well, with republicans blaming them on obama’s energy policy, a major green blog calling for using the strategic petroleum reserve, and obama responding in a speech on thursday; obama had most everything right; no amount of domestic drilling will put a serious dent in oil prices in a world where china continues to put more new cars on the road than the US and chinese & indian demand is growing at rates exceeding 10% annually; and the only effect completing the keystone pipeline would have would be to bring WTI oil prices in line with prices in the rest of the world, which would likely raise prices in those central US states which are now benefiting from the glut of landlocked oil at Cushing (see interactive US states gas price map)…there was an interesting post with a number of charts at business insider showing the historical record of how many hours a week or year the average worker would have to work to fill his gas tank; i’ll insert a shrunk copy of one here which shows the number of hours it takes an average worker to buy a year’s worth of gas; it was less than 100 hours early in the 90s, spiked to 220 hours prior to the crisis in 2008, and is 170 hours now; problem is that an average income, which is skewed by the wealthiest, doesnt capture the impact gas prices have at the bottom of the income scale; with more employers hiring temporary workers at low wage jobs for less than 30 hours a week to avoid paying for benefits, a typical minimum wage worker at a big box store or fastfood joint might well spend an entire 6 hour day’s pay to fill a 15 gallon gas tank once a week…it was just about a year ago when food prices were also rising that i included this chart to show just how much of their total income the lowest deciles among us have to spend on just food & fuel

   while we’re on the subject, you may recall the little chart of retail gasoline sales from a few weeks ago that showed a precipitous decline in gasoline sales that didnt make any sense to me; jazzbumpa at angry bear took that up in the first of a series of three posts & by the second post in the series he included a more complete version of the same chart; Roger Chittum had pointed out to him in comments that graph only covered a subset of total gasoline deliveries; while there’s still quite a decline, its not as extreme as the chart i posted had showed; if you’re interested in more details & speculation as to why, check out his entire “Has America Lost its Drive?” series, linked here, including the comments…

(the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)