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Bernanke No Genius; Homes Drop to 1963 Levels
Townhall.com ^ | September 9, 2011 | Mike Shedlock

Posted on 09/09/2011 7:36:41 AM PDT by Kaslin

It does not take a genius to understand why consumer spending is weak.

1.      Unemployment rate is 9%

2.      Real wages are falling

3.      Income advances go to the wealthy

4.      Middle class is shrinking

5.      Jobs hard to find

6.      Approval ratings of Congress and Obama at record lows

7.      Consumers have high debt ratios

8.      Home prices are still falling

9.      Homeowners are trapped in their homes, unable to refinance

10.  Boomers need to save for retirement


However, those simple facts are far too complicated for a PhD like Fed chairman Ben Bernanke to figure out.

Please consider Bernanke puzzled by weak consumer spending

Federal Reserve Chairman Ben Bernanke says he is surprised by how cautious consumers have been in the two years since the recession officially ended. But the Fed chief offered no hints of any steps the Fed would take to boost the weak economy.

Bernanke says a number of factors are keeping consumers from spending more, including high unemployment, a temporary spike in energy prices, falling home prices and high debt burdens.

Bernanke said the Fed will consider range of policy options at its next meeting later this month without offering any clues to what it might do. His comments were familiar to ones he gave last month in Jackson Hole, Wyo.

Note that Bernanke even cited some of the 10 factors I mentioned, yet he is still surprised. What a dunce.

Is it any wonder his policies are so counterproductive when he cannot figure out simple things the average person can see clearly?

U.S. 30-year mortgage rates are at record lows but it does not matter. Too few want to buy and many cannot refinance because they are underwater.

Fixed mortgage rates fell this week to the lowest levels in six decades. But few Americans can take advantage of the rates to refinance or buy a home.

The average rate for the 30-year fixed mortgage fell to 4.12 percent, down from 4.22 percent, Freddie Mac said Thursday. It's the lowest level on records dating back to 1971. Freddie Mac said the last time rates were cheaper was 1951, when most long-term home loans lasted just 20 or 25 years.

The average rate on a 15-year fixed mortgage, a popular refinancing option, fell to 3.33 percent from 3.39 percent. That's the lowest on records dating to 1991 and likely the lowest ever, according to economists.

Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. That compares with five years ago, when the average 30-year fixed rate was near 6.5 percent.

Yet sales of new homes are on pace to finish the year as the lowest on records dating back a half-century. The pace of re-sales is shaping up to be the worst in 14 years.

Many Americans are in no position to buy. High unemployment, scant wage gains and large debt loads have kept them away.

Others can't qualify for the lowest rates. Banks are insisting on higher credit scores and 20 percent down payments for first-time buyers. Many repeat buyers have too little equity invested in their homes to meet loan requirements.

Roughly 40 percent of U.S. households have the necessary credit scores above 700 to get a prime mortgage rate, according to an Associated Press analysis of Fair Isaac Corp., or FICO, data.

A bigger issue is just half of Americans say they'll ever be able to save enough money for any type of down payment, let alone one as high as 20 percent, according to a survey by the National Foundation for Credit Counseling.

Nearly a third of homeowners have nearly zero equity or are underwater in their mortgage, according to the real estate research firm CoreLogic. That leaves then unable to refinance because of lender-imposed limits and the cost of extra fees.

These findings should not be surprising. I discussed the setup in Five Rules to Remember When Dealing with Real Estate Agents; Why are New Home Sales So Low? How Big is the Pool of Eligible Home Buyers?

How Big is the Pool of Eligible Home Buyers?

Here is a set of questions that will explain what is happening now.

How many people ....

1.      Don't have a house?

2.      Want a house?

3.      Can afford a house, upkeep, and property taxes?

4.      Have a needed cash cushion in the bank?

5.      Have a decent down payment for a house?

6.      Have a salary that can support interest and principal payments even at these low rates?

7.      Are not scared s*less about the loss of a job, assuming they do want a house and meet the rest of the conditions?

Someone needs to meet all of those conditions before they will buy a new house. How many is that?

I just happen to have the answer.

New Home Sales at 1963 Levels

The Los Angeles Times reports New home sales drop to six-month low

Sales of newly built homes fell in July to the lowest level in six months, as the nation's housing market continues to struggle.

Newly constructed single-family homes sold at a seasonally adjusted annual rate of 298,000, putting the industry on a pace to post the lowest annual sales since the Commerce Department began keeping data in 1963.

Is the eligible buyers' pool getting bigger or smaller?

The trend says smaller, in spite of falling interest rates and falling prices. Many items on my 7 point list are more important than interest rates, notably 1, 2, 3, 5, and 7.

That is the psychology of the situation and I see little reason for it to change until the labor market changes first.


TOPICS: Business/Economy; Culture/Society; Editorial
KEYWORDS: bernanke; fail; fedbashing; housingthefed; idiocy; mortgagethefed; obamanomics

1 posted on 09/09/2011 7:36:43 AM PDT by Kaslin
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To: Kaslin

“We has found the enemy, and he are us....” ERRR, who was it elected this trash?


2 posted on 09/09/2011 7:41:41 AM PDT by arrdon (Never underestimate the stupidity of the American voter.)
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To: Kaslin
The article misses energy costs as THE main factor in why people aren't spending more.

And it targets Bernanke for criticism for what? All he said was that the Fed would try to help the economy, which is what the Fed is supposed to do.

Articles like this are a distraction from the true problems and those really responsible.


3 posted on 09/09/2011 7:44:03 AM PDT by DannyTN
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To: Kaslin

Every extra cent I get goes into precious metals. I have also been stockpiling ammo lately. I still need to get a pistol. And the garden is a top priority. My wife is starting up the canning mill. And I’m getting the bicycles into good repair.

Don’t laugh, but it is all actually a lot of fun. Maybe those Amish are on to something, when they are not flying planes into buildings, that is.


4 posted on 09/09/2011 7:47:25 AM PDT by cuban leaf
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To: Kaslin

“””Federal Reserve Chairman Ben Bernanke says he is surprised by how cautious consumers have been in the two years since the recession officially ended”””


Here are some reasons people are cautious:

1. They are unsure how much ObamaCare is going to cost when it gets fully implemented or they are already seeing huge increase in their medical insurance premiums.

2. They see Obama spending billions on “green energy” projects that are going bankrupt and wonder if the craziness of spending money on money losing projects will ever stop.

3. They see Obama constantly increasing the size of government and making sure the government employee unions get bigger.

Is there any wonder people are cautious? And this is but a very short list of the concerns held by people.

Obama must go!!!!!


5 posted on 09/09/2011 7:47:30 AM PDT by Presbyterian Reporter
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To: Kaslin

Is Professor Enema Ben still living in that river that flows through Cairo, Egypt? Starts with a “D” - - - ? I’ll think of it.

Anyway it might, just could be the right time to admit that THE KEYNESIAN PLAYBOOK has once again been proven wrong.


6 posted on 09/09/2011 7:48:26 AM PDT by Graewoulf ( obamatrauma"care" violates the 1890 Sherman Anti-Trust Law.)
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To: Kaslin

Is Professor Enema Ben still living in that river that flows through Cairo, Egypt? Starts with a “D” - - - ? I’ll think of it.

Anyway it might, just could be the right time to admit that THE KEYNESIAN PLAYBOOK has once again been proven wrong.


7 posted on 09/09/2011 7:48:26 AM PDT by Graewoulf ( obamatrauma"care" violates the 1890 Sherman Anti-Trust Law.)
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To: Kaslin

A few years ago, my eldest son put over $40,000 down on a $215,000 home. This was after prices started falling and he thought he had a bargain. He has a decent loan and has no problem making the payments, but now he is about a $100 grand underwater and his employer has asked him to transfer 100 miles away.

He can’t sell, refi or even rent it out for the monthly payment. He’s stuck and I’ll bet their are many in his predicament.


8 posted on 09/09/2011 7:49:31 AM PDT by umgud
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To: DannyTN

Sorry Danny, the article is very correct. You make a few points but have some flawed assumptions about “all he” is doing and saying.

Bernanke’s policies and misunderstanding of what motivates businesses and consumers due to his faculty lounge theoretical assessments are in fact demonstrating him to be ignorant and his policies a drag on the economy.

China is not “stealing jobs” - they are taking advantage of our own stupid regulations and taxes in the real world of supply and demand. We can’t control China. We could get our government the hell out of the way of businesses and get a sound dollar policy back in place - all of which would make China far less of a problem.


9 posted on 09/09/2011 7:53:01 AM PDT by C. Edmund Wright
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To: Kaslin

Bernanke and Gates - two Bush/Rove and Obama “triumphs”.


10 posted on 09/09/2011 7:53:36 AM PDT by ZULU ( Non nobis, non nobis, Domine, sed nomini tuo da gloriam)
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To: Kaslin

Tonight I’m gonna party like it’s 1963!


11 posted on 09/09/2011 7:53:51 AM PDT by Jack Hydrazine (It's the end of the world as we know it and I feel fine!)
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To: Kaslin

12 posted on 09/09/2011 7:56:17 AM PDT by dead (I've got my eye out for Mullah Omar.)
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To: Kaslin

The article is BS. Unemployment is well past 9% and closer to 30%. “Income advances”, whatever the Hell that really means, is not going strictly to the “wealthy”. The “Middle class” is not shrinking. Consumer debt spending is at a low right now. Consumers are spending less on debt and more with cash. Why is this “unable to refinance” even an issue? Why do they need to refinance? What the author is probably saying is that they cannot get the federal government, read: Me the taxpayer, to paydown what they owe on a house.

This is all liberal tripe, nothing more.


13 posted on 09/09/2011 8:01:31 AM PDT by CodeToad (Islam needs to be banned in the US and treated as a criminal enterprise.)
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To: umgud

Is California a non-recourse state?

If it is, have him explain to his situation to his boss about the reason he wants to give the keys back to the bank.

Such a decision has nothing to do with morality; it’s a financial decision. The bank knew the law permitted him to walk away at any time, and there is nothing immoral about taking advantage of the terms of a contract; and especially one written by the lender. Your son took a risk, but so did the bank.


14 posted on 09/09/2011 8:04:15 AM PDT by SeaHawkFan
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To: Kaslin

This is why I don’t worry too much about inflation. House prices falling and interest rates falling are not compatible with inflation. However, given this idiot’s ignorance of economics (is there any evidence that he ever took an economics course?) and ability to blunder, I don’t rule it out. He makes Jimmy Carter look as statesmanlike as Bismarck.


15 posted on 09/09/2011 8:13:15 AM PDT by arrogantsob (Why do They hate her so much?)
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To: C. Edmund Wright

A “sound” dollar would profit China as much or more than us. It would lower US exports and increase imports.


16 posted on 09/09/2011 8:16:13 AM PDT by arrogantsob (Why do They hate her so much?)
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To: SeaHawkFan

Wouldn’t that destroy his credit rating?


17 posted on 09/09/2011 8:19:49 AM PDT by arrogantsob (Why do They hate her so much?)
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To: umgud

Sorry to hear about your boy’s dilemma, but it may be the least costly alternative to rent. Losses are tax deductible and depreciation on the house should run about 20Gs per year so those factors alone should cut his losses somewhat.

While I have often said you should have your head examined if you are considering being a landlord, he may have no choice. Prices will not recover for a decade as far as I can see. Have him look into IRS rules with regard to rental real estate.


18 posted on 09/09/2011 8:24:10 AM PDT by arrogantsob (Why do They hate her so much?)
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To: Kaslin

Home prices are a double edged sword... they are still to expensive to sell but if they lower the asking prices that will just trigger more foreclosures as more loans are put under water and that will finish off the banks that are holding on...


19 posted on 09/09/2011 8:40:17 AM PDT by tubebender (She was only a whiskey maker, but he loved her still.)
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To: Kaslin
Photobucket

20 posted on 09/09/2011 8:49:49 AM PDT by Dick Bachert (The 2012 election is coming. Seems we have MORE TRASH TO REMOVE!)
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To: Kaslin
3. Income advances go to the wealthy

Actually, they are being sucked up by the government using the wealthy as a middleman. Reaping what progressive taxation has sowed.

21 posted on 09/09/2011 8:51:53 AM PDT by SampleMan (Feral Humans are the refuse of socialism.)
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To: CodeToad

The middle class is not shrinking?? Tell me, then, who do you you think is applying for all that food stamp money? People who were middle class, hard working Americans! Who do you think is joining the ranks of the unemployed every month? Not the lower class! It’s the middle class! We are watching the destruction of America’s middle class right before our eyes.


22 posted on 09/09/2011 8:55:33 AM PDT by ChocChipCookie (PRAY FOR TEXAS!)
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To: ChocChipCookie

You mean the upper class and lower class are not also unemployed? Just because the entire country is suffering doesn’t mean the middle class is shrinking. A class of people is not just based on their income but their ability to generate an income. Being broke is not the same as being poor. A welder still has welding skills and will find income at some time. He is not “destroyed” because he is out of work. Besides, this mentality that government should “create jobs” is stupid. Government doesn’t create a single job, never has. Government needs to get out of business, stop taxing and regulating to death, and business will come back just fine.


23 posted on 09/09/2011 9:00:30 AM PDT by CodeToad (Islam needs to be banned in the US and treated as a criminal enterprise.)
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To: C. Edmund Wright
"China is not “stealing jobs” - they are taking advantage of our own stupid regulations and taxes in the real world of supply and demand."

You could remove every government regulation and every tax and we still can't compete with Communist china's slave labor rates.

Chinese workers don't get most of the money their products earn, the communist chinese government does. And that communist government instead of letting people buy American goods to improve their lives and equalize the trade, buys U.S. debt with the intent to enslave us.

China is one area where government should be putting up import tariffs. Not on all Chinese goods, but certainly the high dollar, high tech electrical and electronic stuff that accounts for 1/3 to 1/2 of Chinese imports.

U.S. import tariffs are at an all time low as a percent of Federal revenues. And unemployment is at an all time high.

24 posted on 09/09/2011 9:12:24 AM PDT by DannyTN
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To: tubebender
"Home prices are a double edged sword."

Almost every recession looks like a "real estate bubble". Because people take out mortgages when they have jobs and then a recession hits and they can't pay the mortgage and the banks foreclose.

The mortgage crisis didn't cause this economic downturn, it's just a symptom of the downturn.

25 posted on 09/09/2011 9:17:11 AM PDT by DannyTN
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To: C. Edmund Wright
China is not “stealing jobs” - they are taking advantage of our own stupid regulations and taxes in the real world of supply and demand. We can’t control China. We could get our government the hell out of the way of businesses and get a sound dollar policy back in place - all of which would make China far less of a problem.

You might be right but I doubt it. At this point a complete elimination of ALL unions, regulations and taxation would not even slow down the tide of off shoring and out sourcing our means of production.

26 posted on 09/09/2011 9:29:08 AM PDT by central_va ( I won't be reconstructed and I do not give a damn.)
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To: central_va

You can’t be serious. A complete roll back of all unions and regulations and taxations would be a huge boon and would bring many jobs back on shore and bring some that never were here to our shores. Now, would it bring every job back? Of course not. But it would be huge.


27 posted on 09/09/2011 9:49:18 AM PDT by C. Edmund Wright
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To: central_va

You can’t be serious. A complete roll back of all unions and regulations and taxations would be a huge boon and would bring many jobs back on shore and bring some that never were here to our shores. Now, would it bring every job back? Of course not. But it would be huge.


28 posted on 09/09/2011 9:49:56 AM PDT by C. Edmund Wright
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To: arrogantsob

I think you’re close to correct but not totally. You are right that a stronger dollar than it is now would hurt exports - BUT - it would help imports. AND it would help oil and gas prices which would be like a tax cut to every single American.

I am not advocating a huge immediate change, but the best balance is to have a sound dollar that does not fluctuate wildly in either direction quickly, meaning businesses can plan with confidence. Cuts both ways, and my druthers are that those cuts stay consistent and to the strong side to reduce energy costs.


29 posted on 09/09/2011 9:52:39 AM PDT by C. Edmund Wright
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To: arrogantsob

Not for long. Turning the keys over to the bank while still current on you payments may be a bit of a hit for a couple of years, but prices have not hit bottom and if he saved 20% for a down payment, a lender pretty much isn’t going to care. After all, they also need to get rid of houses. Isn’t like a bank doesn’t k.ow what happened these past few years with the housing bubble.

If you have 20% down in two years, lenders will be standing in line to make a loan.

My CPA son role me that banks are asking people who want to default to just pay the taxes, utilities, and insurance until the bank has time to get arouse to their case file, and the bank is not moving very fast.


30 posted on 09/09/2011 10:37:18 AM PDT by SeaHawkFan
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To: C. Edmund Wright

A floating exchange rate adjusts monetary values on a daily basis and means we are using an obsolete vocabulary when discussing foreign trade. There is no such thing as a “balance of payments” anymore since there are no transfers of specie between nations. No more devaluations or revaluations.

Declines in the exchange rate are inflationary and increases are deflationary. There are means of mitigating these impacts when policy makers know what to do.

Now I am not aware of what the difference in the multipliers for exports and energy price changes. But the export multiplier is the largest one I am aware of. For those who are unfamiliar with the term, multiplier, it is the measure of how much something impacts the economy. In other words an increase in exports of 1% will increase the economy overall by say 2%. (BTW I am sure you are aware of this concept.) Now the energy price change impact may be through elasticity rather than a multiplier.


31 posted on 09/13/2011 12:33:22 PM PDT by arrogantsob (Why do They hate her so much?)
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To: DannyTN

“You could remove every government regulation and every tax and we still can’t compete with Communist china’s slave labor rates.”

Utter nonsense. “Slave” labor exists only in your head.

“Chinese workers don’t get most of the money their products earn, the communist chinese government does.”

Let’s see the figures on this.

“...buys U.S. debt with the intent to enslave us.”

Lol so China is smart enough to create a new method of enslavement? China buying our debt is no different than you buying it or Canada buying it. Our government decides to sell debt and, since it has historically been the safest in the world since Hamilton, the rest of the world recognizes its value.

Apparently you are unaware of just what China is buying and selling and who is doing it.

“U.S. import tariffs are at an all time low as a percent of Federal revenues. And unemployment is at an all time high.”

So? Ten years ago tariff rates were at the same level and unemployment at its lowest point in my lifetime. Tariffs do not increase overall employment in the long run but actually lower it. Employment in import-competitive industries may increase after a tariff rate is increased but then foreign nations retaliate with increased tariffs of their own so our exports decline as a consequence.

So what a tariff ultimately does is increase employment in one sector of the economy (import competitive) at the expense of another (exporters). You can review a little US history for an idea of the political nature of a tariff or just use your common sense. Tariffs was always a big political battle all through the 19th century even to the extent of being a factor in secession.

As to the “high tech” electronics, all you are suggesting is to increase prices to Americans since we don’t make this stuff anyway but Japan, Korea and Singapore does. In fact, the latter two are becoming big competitors with China in these and other industries. And, I would argue, that if production has shifted outside this country, it is not particularly “high tech” in any case.


32 posted on 09/13/2011 1:18:25 PM PDT by arrogantsob (Why do They hate her so much?)
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