Foreclosure Crisis

The Lehmann Letter ® Today’s San Francisco Chronicle ran an excellent article by Carolyn Said on the housing market’s current state: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/05/26/MNRB17JFHB.DTL . Its message: Don’t be too optimistic. There are plenty of conventional reasons to fear weak demand, such as rising unemployment and tight credit. But what about an historical analysis that shows that homes remain overpriced despite their recent drop? Or that recent purchases by bottom-fishers present a distorted image? The supply side has even greater problems: The end of foreclosure moratoriums, imminent mortgage-interest-rate resets, banks’ inventories of foreclosed homes and the large number of underwater homes. Read Continue reading

Consumers Confident?

The Lehmann Letter ® Today the Conference Board announced (http://www.conference-board.org/economics/ConsumerConfidence.cfm ) that consumer confidence jumped in May after making a good gain in April. Confidence now stands at 54.9. You can see that it was less than 30 earlier in the year. Consumer Confidence (Click on chart to enlarge) (Recessions shaded) Is this the light at the end of the tunnel? We’ll stay tuned. (The chart was taken from http://www.beyourowneconomist.com. [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.) © 2009 Michael B. Lehmann

Silver Lining?

The Lehmann Letter ® Today the Census Bureau announced (http://www.census.gov/const/newresconst.pdf ) that April housing starts fell to a post-WWII low of 458,000. You can see for yourself by posting this figure in the chart below Housing Starts (Click on chart to enlarge) (Recessions shaded) Where’s the silver lining in that number? It appears when you disaggregate the 458,000 starts into its single-family and apartment-house components. The single-family component seems to have hit bottom. There were 368,000 single-family starts in April, which was slightly better than any month since the beginning of the year. It doesn’t look like this number will Continue reading

Still Ground Zero

The Lehmann Letter © The stock market jumped this morning and all the indicators remain higher three hours before the market’s close. But ground zero – the foreclosure crisis – remains ground zero. Foreclosures continue to mount and about one-third of the nation’s homes are now worth less than the mortgages that financed them. That, combined with unemployment’s continued rise, spells future trouble. It’s true that buyers are swooping in to snap up troubled properties as previous owners abandon them to foreclosure. But that has not yet been sufficient to stabilize home prices or stop additional foreclosures. Since effective preventive Continue reading

Inventory Bright Spot

The Lehmann Letter © Yesterday the Census Bureau released March data for business sales, inventories and the inventory/sales ratio: http://www.census.gov/mtis/www/mtis_current.html You can see that the inventory/sales ratio has stabilized at about 1.45 after rising from around 1.25. (Click on chart to enlarge.) Both sales and inventories continue to fall, but at last business has been able to reduce inventories more than sales. That has stopped the ratio’s rise. Business doesn’t want a higher-than-necessary ratio of inventories to sales because business doesn’t want to tie-up cash in goods on the shelf. Business would rather run lean and put its cash to Continue reading

Are Things Looking Up?

The Lehmann Letter © Today the Bureau of Labor Statistics reported that private payroll employment fell by 539,000 in April. That’s better than the 600,000+ losses of the past several months but, as you can see from the following chart, job losses remain severe when compared with earlier recessions. Job Growth (Click on chart to enlarge) (Recessions shaded) Yesterday the Federal Reserve announced that consumer credit fell at a $133.2 billion annual rate in March. That maintains the negative streak evident in the chart below. Households are repaying their debts, which provides evidence of the drop in spending. Consumer Credit Continue reading

Muddling Through

The Lehmann Letter © Today the government released the results of its stress test of the nations’ banks. The Findings: Some banks will require more capital if the economy deteriorates more than forecast. Others will not. But the most important and apparently overlooked point is that the nations’ major banks have survived the crisis. The bailout worked. Moreover, the banks’ enhanced capital requirement is a safety cushion. The banks will take on more capital even if worst does not come to worst. They’ll be safe either way. That’s a much rosier set of circumstances than that perceived six months ago. Continue reading