This report is not only carrying significant information about the "transition" ahead of us, it is carrying that information in such carefully crafted language, you'd think the mere delivery of the message would detonate this "transition".
Excellent report.
Sometimes I feel, after my morning deluge of economic and financial information, that I am ODing on euphemisms.
I find official concern about financial risks associated with credit induced asset inflation humorous when such concern is after the fact. La comedie humaine.
Economists had expected starts to slow to a 1.970 million unit annual pace, saying activity likely fell after the hurricanes disrupted construction in the Gulf Coast region.
Total single-family housing starts rose 2.6 percent to a 1.747 million unit rate while multi-family starts soared 7.8 percent to a 361,000 unit pace in September.
Permits for future groundbreaking, an indicator of builder confidence, jumped 2.4 percent to a 2.189 million unit pace - the highest rate since a matching pace in February 1973.
Low mortgage rates have supported the housing sector for more than four years. Some economists have predicted a cooling in 2006 as long-term interest rates rise and dampen demand. But earlier Wednesday, an industry trade group said mortgage applications rose even as interest rates on the 30-year home loan climbed to their highest levels of 2005.
Housing starts rose 6.9 percent in the U.S. South and 1.9 percent in the Midwest and held unchanged in the Northeast and West.
In translation this means 'more inventory... lots more inventory'.
I really believe you will see existing home sales & prices fall well before new home sales. The builders are 'manufacturing' demand just like the automobile industry has done for years... and as long as home prices are high enough that the new build margin contributes positively to builders overhead... and the burrowers can continue burrow (probably facilitated by the builders like GM-GMAC)... then the builders will continue to build... even if they lose money on 'paper'... if they can continue to cash through to cover fixed cost obligation better by building than not building... then they will continue building at all cost.
I can see this continuing even as prices fall because my guess is with immigrant labor there is a significant cushion between the cost to build & the price they can sell the homes for...
But this is a sick business model & as unsustainable as the automotive model. They would be wise to review what has happened at GM-GMAC, Delphi & others. Even with the lower labor rates & benefits in building - they can't force demand forever... And while the builders aren't as capital intense as autos - they do hold a lot of land & WIP inventory... Somewhere along the line supply has to match up with real long term sustainable demand or we have a meltdown.
The heat for that meltdown will be seen in increasing inventories...
JS makes a gentle complaint that the officials may be underestimating us sheep:
"I find official concern about financial risks associated with credit induced asset inflation humorous when such concern is after the fact."
With special training maybe (or serious blog stalking of JS), I too can climb to these heights and see the humor, not the tragedy.
I believe the trick is in the nimbleness of the footwork rather than the power of the leap. The joie de vivre inherent in those little toes rather than those heavy, trudging "financial risks associated with credit induced asset inflation " That could be it.
Maybe.
Surely if you can laugh, you are where I need to be JS. Heights, depths, any dimension you care to name, they mean little if you have a sense of humor and can put this moping in its place. Of course, I am hanging on your every word ("slapstick lens render all sights useful" the latest) in the hopes that I can find the key to escape the misery that comes from mulling over these official announcements.
I'm gonna take my socks off and read them barefoot.
It can't hurt.
I rarely read my socks, and certainly never barefoot, and they seldom help my interpretations anyway, except the green ones (a Chomskian chortle.) I think words, especially mine, are rarely worth hanging on (there is a sign near my apartment that will support a man's entire weight though.) Official announcements are a seemingly strange beast, a voice with no agency and a will with no locus. They make me feel a bit like Alice in Official Land, where meaning what one says is a rarity, and saying what one means unheard of. I remember once asking a journalist about a cover-up he had written about, and how one went about getting to the bottom of such things. He replied, looking at me as if I was deeply misguided, that you simply go and ask the people involved. That doesn't mean you shouldn't read what you wear or ware reeds, or that something is unreal if another thing is funny, but it does mean that sock wearing is real while you wear them, and that the humor or gravity of such wearing is, quit simply, the story you tell yourself about what you and everyone else is doing while you wear them.
For some reason though, every time I think something through (I'm perhaps slow this way, because I don't do it very often) and come up with a way of managing meta-information, Tyler Durden always flashes in my mind: "How's that workin' out for ya, being clever?"
Believe me, reading the reports barefoot WAS better.
My theory is that what I took to be impersonal, m e z z e r r o m i z z i n g ly dull reports was just a case of sock strangulation of my toes. (Actually foot suffocation from the ankles down.)
What a relief!
Now I can face this transition period ahead of us, the tightening, without running to the respirator for air.
bailey thinks the 10yr rate is the key:
"The longer the yield of the ten yr. Treasury stays below 5% the longer it will be before the housing market EXPLODES."
And so he must view the Fed and in particular, Mr Greenspan, as either misguided and/or mendacious. They are trying to push those very rates out to restore the yield curve, no? Their limited success so far as spawned the term, "conundrum", yes?
Could be this yield curve stuff is all a hoax and they just want to punish the little guys.
I don't think so: the record (CR has had a recent map of the recesssions with connections to yield curves with Estrella.) is pretty clear. The inverted/flattening yield curve portends recession.
This speaks of some incompetence then, from the Fed, yes?
[They are cranking up the prime rate creating the inversion, rather than avoiding it.]
Not sure about the mendacity charge --he has agreed that there are people at the margin who will be in trouble but there always are and this portion in this instance is manageable for the rest of the economy.
Here is where we need good econometrics to measure this portion, no? If that is 15% instead of 5%, I want to charge Greenspan with incompetence. If he knows and for other reasons is concealing this information, I want to charge him with mendacity.
The case can be made that he is not in a much better position if he is quiet and understates the numbers because he doesn't want to cause a panic. This is in fact the spot that I think he and the Fed (and its supporters and those who think they have benefitted so far from this 'management') are in.
And deserve the charge of incompetence and,
for failing to admit it (not failing to recognize it, because I think they do recognize their role in this debacle), of mendacity.
CR -- any comments on the new housing starts report, which looks pretty strong.
This report is not only carrying significant information about the "transition" ahead of us, it is carrying that information in such carefully crafted language, you'd think the mere delivery of the message would detonate this "transition".
Excellent report.
The higher it goes the farther it falls
The longer the yield of the ten yr. Treasury stays below 5% the longer it will be before the housing market EXPLODES.
Sometimes I feel, after my morning deluge of economic and financial information, that I am ODing on euphemisms.
I find official concern about financial risks associated with credit induced asset inflation humorous when such concern is after the fact. La comedie humaine.
From Reuters via MSM:
Economists had expected starts to slow to a 1.970 million unit annual pace, saying activity likely fell after the hurricanes disrupted construction in the Gulf Coast region.
Total single-family housing starts rose 2.6 percent to a 1.747 million unit rate while multi-family starts soared 7.8 percent to a 361,000 unit pace in September.
Permits for future groundbreaking, an indicator of builder confidence, jumped 2.4 percent to a 2.189 million unit pace - the highest rate since a matching pace in February 1973.
Low mortgage rates have supported the housing sector for more than four years. Some economists have predicted a cooling in 2006 as long-term interest rates rise and dampen demand. But earlier Wednesday, an industry trade group said mortgage applications rose even as interest rates on the 30-year home loan climbed to their highest levels of 2005.
Housing starts rose 6.9 percent in the U.S. South and 1.9 percent in the Midwest and held unchanged in the Northeast and West.
In translation this means 'more inventory... lots more inventory'.
I really believe you will see existing home sales & prices fall well before new home sales. The builders are 'manufacturing' demand just like the automobile industry has done for years... and as long as home prices are high enough that the new build margin contributes positively to builders overhead... and the burrowers can continue burrow (probably facilitated by the builders like GM-GMAC)... then the builders will continue to build... even if they lose money on 'paper'... if they can continue to cash through to cover fixed cost obligation better by building than not building... then they will continue building at all cost.
I can see this continuing even as prices fall because my guess is with immigrant labor there is a significant cushion between the cost to build & the price they can sell the homes for...
But this is a sick business model & as unsustainable as the automotive model. They would be wise to review what has happened at GM-GMAC, Delphi & others. Even with the lower labor rates & benefits in building - they can't force demand forever... And while the builders aren't as capital intense as autos - they do hold a lot of land & WIP inventory... Somewhere along the line supply has to match up with real long term sustainable demand or we have a meltdown.
The heat for that meltdown will be seen in increasing inventories...
JS makes a gentle complaint that the officials may be underestimating us sheep:
"I find official concern about financial risks associated with credit induced asset inflation humorous when such concern is after the fact."
With special training maybe (or serious blog stalking of JS), I too can climb to these heights and see the humor, not the tragedy.
I believe the trick is in the nimbleness of the footwork rather than the power of the leap. The joie de vivre inherent in those little toes rather than those heavy, trudging "financial risks associated with credit induced asset inflation " That could be it.
Maybe.
calmo,
The juxtapositions of my slapstick lens render all sights useful. If you see it as heights, take care when you return to the valleys.
Surely if you can laugh, you are where I need to be JS. Heights, depths, any dimension you care to name, they mean little if you have a sense of humor and can put this moping in its place. Of course, I am hanging on your every word ("slapstick lens render all sights useful" the latest) in the hopes that I can find the key to escape the misery that comes from mulling over these official announcements.
I'm gonna take my socks off and read them barefoot.
It can't hurt.
calmo... you bad!
I rarely read my socks, and certainly never barefoot, and they seldom help my interpretations anyway, except the green ones (a Chomskian chortle.) I think words, especially mine, are rarely worth hanging on (there is a sign near my apartment that will support a man's entire weight though.) Official announcements are a seemingly strange beast, a voice with no agency and a will with no locus. They make me feel a bit like Alice in Official Land, where meaning what one says is a rarity, and saying what one means unheard of. I remember once asking a journalist about a cover-up he had written about, and how one went about getting to the bottom of such things. He replied, looking at me as if I was deeply misguided, that you simply go and ask the people involved. That doesn't mean you shouldn't read what you wear or ware reeds, or that something is unreal if another thing is funny, but it does mean that sock wearing is real while you wear them, and that the humor or gravity of such wearing is, quit simply, the story you tell yourself about what you and everyone else is doing while you wear them.
For some reason though, every time I think something through (I'm perhaps slow this way, because I don't do it very often) and come up with a way of managing meta-information, Tyler Durden always flashes in my mind: "How's that workin' out for ya, being clever?"
Believe me, reading the reports barefoot WAS better.
My theory is that what I took to be impersonal, m e z z e r r o m i z z i n g ly dull reports was just a case of sock strangulation of my toes. (Actually foot suffocation from the ankles down.)
What a relief!
Now I can face this transition period ahead of us, the tightening, without running to the respirator for air.
bailey thinks the 10yr rate is the key:
"The longer the yield of the ten yr. Treasury stays below 5% the longer it will be before the housing market EXPLODES."
And so he must view the Fed and in particular, Mr Greenspan, as either misguided and/or mendacious. They are trying to push those very rates out to restore the yield curve, no? Their limited success so far as spawned the term, "conundrum", yes?
Could be this yield curve stuff is all a hoax and they just want to punish the little guys.
I don't think so: the record (CR has had a recent map of the recesssions with connections to yield curves with Estrella.) is pretty clear. The inverted/flattening yield curve portends recession.
This speaks of some incompetence then, from the Fed, yes?
[They are cranking up the prime rate creating the inversion, rather than avoiding it.]
Not sure about the mendacity charge --he has agreed that there are people at the margin who will be in trouble but there always are and this portion in this instance is manageable for the rest of the economy.
Here is where we need good econometrics to measure this portion, no? If that is 15% instead of 5%, I want to charge Greenspan with incompetence. If he knows and for other reasons is concealing this information, I want to charge him with mendacity.
The case can be made that he is not in a much better position if he is quiet and understates the numbers because he doesn't want to cause a panic. This is in fact the spot that I think he and the Fed (and its supporters and those who think they have benefitted so far from this 'management') are in.
And deserve the charge of incompetence and,
for failing to admit it (not failing to recognize it, because I think they do recognize their role in this debacle), of mendacity.
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