Mish's Global Economic Trend Analysis |
| Joke Headline of the Day: "Pending Home Sales Rise"; Five Housing Headwinds Posted: 30 Dec 2013 01:02 PM PST I was perusing online stories about today's release of pending homes sales data from the National Association of Realtors. Here are a few sample headlines. NAR: Pending Home Sales Edge Up in November CNBC: US pending home sales rise 0.2 percent Calculated Risk: Pending Home Sales Index increased 0.2% in November Forbes: Pending Home Sales Tick Up In November, First Time In Five Months Reuters: U.S. pending home sales end slide, hint at stabilization Fox Business News: Pending Home Sales Rise Slightly, Miss Street View One Headline Title Stood Out Zero Hedge: Pending Home Sales Plunge At Fastest Pace Since April 2011 It took about one second to understand the discrepancy. All but the ZeroHedge headline (not necessarily the articles) ignored the NAR statement (see first link) "The Pending Home Sales Index,* a forward-looking indicator based on contract signings, inched up 0.2 percent to 101.7 in November from a downwardly revised 101.5 in October, but is 1.6 percent below November 2012 when it was 103.3." ZeroHedge has a chart that shows just that. Pending Home Sales Year-Over-Year  It's kind of easy for sales to be up when the previous month was revised lower. But how much lower? The NAR did not even say. Let's take a look at monthly NAR reports to find out. November 25 NAR: October Pending Home Sales Down Again, but Expected to Level Out: The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 0.6 percent to 102.1 in October from an upwardly revised 102.7 in September, and is 1.6 percent below October 2012 when it was 103.8. The index is at the lowest level since December 2012 when it was 101.3; the data reflect contracts but not closings. October 28 NAR: Pending Home Sales Continue Slide in September: The Pending Home Sales Index,* a forward-looking indicator based on contract signings, fell 5.6 percent to 101.6 in September from a downwardly revised 107.6 in August, and is 1.2 percent below September 2012 when it was 102.8. The index is at the lowest level since December 2012 when it was 101.3; the data reflect contracts but not closings. September 26 NAR: Pending Home Sales Decline in August: The Pending Home Sales Index,* a forward-looking indicator based on contract signings, eased 1.6 percent to 107.7 in August from a downwardly revised 109.4 in July, but remains 5.8 percent above August 2012 when it was 101.8; the data reflect contracts but not closings. Pending sales have been above year-ago levels for the past 28 months. August 28 NAR: July Pending Home Sales Slip: The Pending Home Sales Index,* a forward-looking indicator based on contract signings, declined 1.3 percent to 109.5 in July from 110.9 in June, but is 6.7 percent above July 2012 when it was 102.6; the data reflect contracts but not closings. Pending sales have stayed above year-ago levels for the past 27 months. Note the October data (released November 25) showed the pending home sales index slipped a reported 0.6 percent to 102.1. "Pending Home Sales Rise"
With all this revisionist history, these month-over-month comparisons seem rather meaningless. The chart posted by ZeroHedge shows the real story. Lawrence Nun, the NAR cheerleader had this to say "We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014". Absolutely nothing suggests a cyclical low. The recovery has been fueled by excessively low rates, that are now rising sharply. Numerous headwinds blow strongly. I strongly disagree with Nun on jobs and household formation. Five Housing Headwinds
For further discussion of headwinds, especially the rise in interest rates, please see Average 30-Year Mortgage Rate Hits 4.47% (Not Counting Fees); Affordability Check For a report on Household Formation, please see Haircut Deficit: Kids Living in Basements a Drag on U.S. Services Spending. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Judge Bars San Jose from Imposing Voter-Approved Pension Cuts; Hollow Victory for Unions Posted: 30 Dec 2013 10:32 AM PST On December 24, a state court judge barred the city of San Jose, California, from imposing voter-approved pension cuts on current municipal worker. San Jose Mayor Chuck Reed, a Democrat, encouraged voters in his city to back municipal pension cuts he proposed as part of last year's Measure B, which drew 70 percent support at the polls. The unions challenged the measure, leading to Judge Lucas' ruling in Santa Clara County Superior Court. Her decision is likely to be appealed.Hollow Victory The pension ruling was hailed by union advocates but not the wage cut ruling. Both sides are likely to appeal aspects of the ruling. Should the ruling stand as is, unions will come to regret their victory. Voters Had Enough of Unions Reed will press the matter further, in a statewide initiative. And sentiment suggests voters have finally had enough of unions. However, one must expect the teachers' unions, the police and fire unions, and every other public union in the state to spend massive amounts of money hoping to defeat the proposition. For California public-union sentiment details, please see Voters Take Negative View of Labor Unions; Liberals in Favor of Strikes (Until Strikes Happen); Aging Population an Anti-Union Force? Should Reed's initiative pass and be struck down by the courts, Reed can shove it straight down the union's throats by declaring bankruptcy. Unlike the mayoral economic illiterates in Vallejo and Stockton (who could have and should have slashed pension benefits in bankruptcy), it's pretty clear Reed would do just that. 100% Certain Pensions Not Sacrosanct Given rulings in Detroit, Michigan; Central Falls, Rhode Island (see Central Falls Set to File Bankruptcy Exit Plan; 50% Pension Reductions, 40% Slash in Police and Fire Budgets Coming Up) and numerous cities in California, it is 100% certain that federal bankruptcy laws override state constitutions. In other words it is 100% certain that public union pensions are NOT sacrosanct. One way or another pensions must be cut, and will be cut. But how? Unions can help decide the nature of the cuts, or they can fight them every step of the way only to have cuts crammed down their throats in bankruptcy court. Unions being what they are, will no doubt choose to be force-fed cuts in numerous bankruptcies across the nation. Unfortunately, force-fed across-the-board cuts in bankruptcy court are not the fairest thing to do. Nor is it fair to ask taxpayers to pick up the tab, given the threats, coercion, vote buying, and backroom deals under which politicians rewarded their friends and themselves jobs with ridiculous pensions. For further consideration of the fairness aspect, please see Mish Template for Fair Public Union Pension Settlement. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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