Some good information, but not good news, on housing from reader NII:
EVIDENCE THE HOUSING RECOVERY HAS NOT STARTED.
NII COMMENT: Home sales languish near 2009 lows despite government agencies subsidizing interest rates and down payments. The below 3 graphs show these conditions clearly. I only show these graphs from time to time as a response to those who ask me if housing has bottomed. It has not.
HOME SALES: Note the 2011 “red” vertical lines are slightly ahead of the 2009 “yellow” lines for the first 5 months. The 2010 “orange” lines reflects a gov’t tax credit subsidy that ended starting July 2010.
INTERVENTIONS. And look at how dominating various government agencies were/still are since 2007 (no typo)! The private sector mortgage writing looks non-existent, meaning government terms/interest rates were really subsidies. “Real market” prices for homes do not exist yet. When (or is it if?) the private sector makes loans, then the price of a house becomes believable.
IMPORTANT. Do not overlook banks, S&LS, etc. have $2,870 billion of home mortgages on their balance sheets. Those holdings ,that are not marked-to-market, are almost twice bank reserves of $1,500 billion. Is it a coincidence that bank reserves resumed climbing rapidly in 2010 as home sales declined “unexpectedly”?(see graph below). As housing prices decline in spite of interventions, the write-offs will continue too, and the Authorities know that too.
