by Calculated Risk on 4/01/2010 02:25:00 PM

From HotelNewsNow.com: STR: Boston leads weekly numbers

Overall, the U.S. industry’s occupancy ended the week with a 5.9-percent increase to 59.9 percent, average daily rate dropped 1.6 percent to US$98.29, and RevPAR was up 4.2 percent to US$58.89.

The following graph shows the occupancy rate by week since 2000, and the rolling 52 week average occupancy rate.

Click on graph for larger image in new window.

Note: the scale doesn't start at zero to better show the change.

The graph shows the distinct seasonal pattern for the occupancy rate; higher in the summer because of leisure/vacation travel, and lower on certain holidays.

The average occupancy rate for this week is close to 65% (during the 2004 to 2007 period), so the current 59.9% is still well below normal.

The lower than normal occupancy rate is still pushing down room rates (on a YoY basis) although revenue per available room (RevPAR) increased for the fourth straight week.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 4/01/2010 11:17:00 AM

From MarketWatch: General Motors U.S. March sales rise 20.6%

This is based on a very easy comparison: in March 2009 U.S. light vehicle sales fell 35% to 9.69 million (SAAR) from 14.9 million (SAAR) in March 2008. The sharp decline last year was due to the financial crisis, the recession, and reports of the then impending bankruptcy of GM and Chrysler (Chrysler filed for bankruptcy at the end of April, 2009, GM filed for bankruptcy on June 1, 2009).

I'll add reports from the other major auto companies as updates to this post.

UDDATE 1: From MarketWatch: Ford March U.S. sales rise 39.8% to 183,783 units

UPDATE 2: From MarketWatch: Chrysler U.S. March sales fall 8.3% to 92,623

UPDATE 3: From MarketWatch: Toyota March U.S. sales grow by nearly 41%

NOTE: Once all the reports are released, I'll post a graph of the estimated total March sales (SAAR: seasonally adjusted annual rate) - usually around 4 PM ET. Most estimates are for an increase to just over 12 million SAAR in March, from the 10.343 million SAAR in February.

by Calculated Risk on 4/01/2010 10:20:00 AM

Private residential construction spending has turned down again over the last few months. I expect some growth in residential spending in 2010, but the increases will probably be sluggish until the large overhang of existing inventory is reduced.

Private non-residential spending decreased in February, and is now at the lowest level since July 2006. The collapse in non-residential construction spending continues ...

Click on graph for larger image in new window.

The first graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

Private residential construction spending is now 62.9% below the peak of early 2006.

Private non-residential construction spending is 29.0% below the peak of late 2008.

The second graph shows the year-over-year change for private residential and nonresidential construction spending.

Nonresidential spending is off 24.3% on a year-over-year (YoY) basis.

Residential construction spending is down 3.8% from a year ago, and the negative YoY change is getting smaller.

Residential spending will probably exceed non-residential spending later this year - mostly because of continued declines in non-residential spending as major projects are completed.

Here is the report from the Census Bureau: February 2010 Construction at $846.2 Billion Annual Rate

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during February 2010 was estimated at a seasonally adjusted annual rate of $846.2 billion, 1.3 percent below the revised January estimate of $857.8 billion. The February figure is 12.8 percent below the February 2009 estimate of $970.4 billion.

by Calculated Risk on 4/01/2010 10:00:00 AM

PMI at 59.6% in March, up from 56.5% in February.

From the Institute for Supply Management: March 2010 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in March for the eighth consecutive month, and the overall economy grew for the 11th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the eighth consecutive month during March. The rate of growth as indicated by the PMI is the fastest since July 2004. Both new orders and production rose above 60 percent this month, closing the first quarter with significant momentum going forward. Although the Employment Index decreased 1 percentage point to 55.1 percent from February's reading of 56.1 percent, signs for employment in the sector continue to improve as the index registered a 10 percent month-over-month improvement, indicating that manufacturers are continuing to fill vacancies. The Inventories Index provided a surprise as it indicated growth for the first time following 46 months of liquidation — perhaps signaling manufacturers' willingness to increase inventories based on expected levels of activity."
...
ISM's Employment Index registered 55.1 percent in March, which is 1 percentage point lower than the seasonally adjusted 56.1 percent reported in February. This is the fourth consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
emphasis added

As noted, any reading above 50 shows expansion.

This suggest the expansion in the manufacturing sector increased at a faster pace in March. This was above expectations.

by Calculated Risk on 4/01/2010 08:37:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending March 27, the advance figure for seasonally adjusted initial claims was 439,000, a decrease of 6,000 from the previous week's revised figure of 445,000. The 4-week moving average was 447,250, a decrease of 6,750 from the previous week's revised average of 454,000.

The advance number for seasonally adjusted insured unemployment during the week ending March 20 was 4,662,000, a decrease of 6,000 from the preceding week's revised level of 4,668,000.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims decreased this week by 6,750 to 447,250.

The dashed line on the graph is the current 4-week average. The current level of 439,000 (and 4-week average of 447,250) is still high, and suggests continuing weakness in the jobs market. Note: There is no way to compare directly between weekly claims, and net payrolls jobs.

by Calculated Risk on 3/31/2010 10:40:00 PM

First: the buyer should find out if it is a HAFA short sale (starts April 5th). If so, the "negotiator fee" must be disclosed and be part of the agent's fee (total agent fee not to exceed 6%). From HAFA:

The amount of the real estate commission that may be paid, not to exceed 6% of the contract sales price, and notification if any portion of the commission must be paid to a contractor of the servicer that has been retained to assist the listing broker with the transaction.

As an aside, if the homeowner or buyer is an agent, they are not eligible for any commission.

Any commission that would otherwise be paid to you or the buyer must be reduced from the commission due on sale.

Second: as part of a HAFA short sale, the lender(s) must agree not to pursue a deficiency. If the lender balks on a short sale - I'd ask them about HAFA.

Third: Where are the regulators? Jim the Realtor is talking about rampant fraud in San Diego. Hello? Is anybody listening?

"There is rampant fraud and deceit being imposed by Realtors throughout the county. It's embarrassing."

by Calculated Risk on 3/31/2010 06:55:00 PM

From David Baker at the San Francisco Chronicle: State gas usage falls for 4th straight year

Driven lower by high prices and the recession, gasoline sales in California fell for the fourth year in a row during 2009, state officials reported Tuesday.
...
Annual gas sales in California peaked at 15.9 billion gallons in 2005 and have tumbled 7 percent since then.

Click on graph for larger image in new window.

This graph shows the percent change of taxable gallons of gasoline compared to the same quarter of the prior year.

In addition to gasoline usage being down for four straight years, driven by higher prices and then the recession, usage turned down again in Q4 2009 - probably because prices are up over $3 per gallon again.

by Calculated Risk on 3/31/2010 02:54:00 PM

Here is the monthly Fannie Mae hockey stick graph for January ...

Click on graph for larger image in new window.

Fannie Mae reported today that the rate of serious delinquencies - at least 90 days behind - for conventional loans in its single-family guarantee business increased to 5.52% in January, up from 5.38% in December - and up from 2.77% in January 2009.

"Includes seriously delinquent conventional single-family loans as a percent of the total number of conventional single-family loans."

by Calculated Risk on 3/31/2010 01:06:00 PM

I'd like to highlight a few key points from Atlanta Fed President Dennis Lockhart's speech today: Prospects for Sustained Recovery and Employment Gains

The normal state of affairs in the country's labor market is a dynamic mix of separations from employment and new job creation. There are two causes of separations—layoffs and voluntarily quitting a job, or so-called quits. The BLS began collecting data on these factors in 2000.

In 2008 and 2009, layoffs surged. Fortunately, the number of layoffs per month has recently returned to prerecession levels.

In addition, quits are at a decade-low level likely in part because of the uncertainty of job availability.

Today's slow pace of employment gains is due more to the slow pace of job creation, not the high rate of layoffs. Job gains, as conventionally understood, require two things: a vacancy and a worker able to fill that vacancy. For most of 2009, vacancies were relatively flat while unemployment continued to rise. This condition suggests the existence of what labor economists call "match inefficiencies."

There are two key types of match inefficiency. One is geographic mismatch. In 2008, the percentage of individuals living in a county or state different than the previous year was the lowest recorded in more than 50 years of data. People may be reluctant to relocate for a new job if the value of their house has declined. In addition, many who would like to move are under water in their mortgage or can't sell their homes.

The second inefficiency is skills mismatch. In simple terms, the skills people have don't match the jobs available. Coming out of this recession there may be a more or less permanent change in the composition of jobs. Skill mismatches require new training, and there is evidence that adult education institutions have responded to this need. For instance, officials at Miami-Dade College in Florida, which is the largest college in the country and a grantor of associate and vocational degrees, told us they have recently seen a strong increase in enrollment, especially of men in their 20s.

This evidence of retooling is encouraging, but, to be realistic, structural adjustment takes time.

Lockhart discusses two key mismatches, and the housing bubble was a direct cause of both. The first - lower geographical mobility because of the inability to sell a home - is like atherosclerosis for the economy. Usually people can move freely in the U.S. to pursue employment, but many people are tied to an anchor (an underwater mortgage) and solutions like a mortgage modification that requires them to stay in the home for 5 years doesn't help with worker mobility.

The second - skills mismatch - is partly because so many people went into the construction industry because it was the highest paying job. These workers may be highly skilled in their trade, but their skills are probably not transferable to the new jobs being created. I wouldn't be surprised to read of job shortages in some fields, while the unemployment rate remains very high because of the skills mismatch.

And more from Lockhart:

Looking forward, the consensus forecast for March is that the economy will add 200,000 new jobs. That number includes a boost from temporary government hiring for the census.

However, according to an Atlanta Fed estimate, we need to add about that number to payrolls each month for the next year to bring unemployment down a full percentage point. This estimate assumes that the growth in the labor force stays in line with the growth in the population.

This is another key point: Zero payroll jobs is not a magic number. It takes about 125+ thousand payroll jobs added per month to keep the unemployment rate steady over time, and probably close to 200 thousand jobs per month to reduce the unemployment rate by 1% over the next year.

by Calculated Risk on 3/31/2010 10:56:00 AM

This is one of several industry specific indexes I track each month.

Click on graph for larger image in new window.

The current situation for restaurants is still weak, but the index improved because of the outlook for sales growth, capital spending plans, and staffing levels.

Unfortunately the data for this index only goes back to 2002.

Note: Any reading below 100 shows contraction for this index.

From the National Restaurant Association (NRA): Positive Outlook Pushes Restaurant Performance Index To Highest Level in More Than Two Years

[T]the National Restaurant Association’s Restaurant Performance Index (RPI) rose to ... 99.0, up 0.7 percent from January and its strongest level since November 2007.

“The RPI’s strong gain in February was the result of broad-based improvements among the forward-looking indicators,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “Restaurant operators’ optimism for sales growth stood at its strongest level in 29 months, with capital spending plans also rising to a two-year high.”

“In addition, restaurant operators reported a positive outlook for staffing gains for the first time in more than two years,” Riehle added. “This bodes well for replacing the more than 280,000 eating and drinking place jobs lost during the recession.”
...
Restaurant operators reported negative same-store sales for the 21st consecutive month in February, with the overall results similar to the January performance.
...
Customer traffic also remained soft in February, as restaurant operators reported net negative traffic for the 30th consecutive month.
...
Along with continued soft sales and traffic performances, capital spending activity continued to drop off.
emphasis added

by Calculated Risk on 3/31/2010 08:55:00 AM

The MBA reports: Mortgage Refinance Applications Increase in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 1.3 percent on a seasonally adjusted basis from one week earlier. ...

“Purchase applications have increased over the past month, and are now at their highest level since last October when many homebuyers were rushing to get loans closed before the expected expiration of the homebuyer tax credit,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “We may be seeing a similar pattern now, as the extended version of the tax credit ends next month.”

The Refinance Index decreased 1.3 percent from the previous week and the seasonally adjusted Purchase Index increased 6.8 percent from one week earlier. This is the highest Purchase Index since the week ending October 30, 2009. ...

The refinance share of mortgage activity decreased to 63.2 percent of total applications from 65.0 percent the previous week. This is the lowest refinance share recorded in the survey since the week ending October 23, 2009. ...

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.04 percent from 5.01 percent, with points increasing to 1.07 from 0.76 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The recent uptick in purchase applications is probably related to buyers trying to beat the expiration of the tax credit.

I've heard from some real estate agents that activity seems to have picked up, more than the normal seasonal increase, and the MBA data would seem to suggest this is happening. However I expect any increase in activity this year to be less than the increase last year.

by Calculated Risk on 3/31/2010 08:15:00 AM

ADP reports:

Nonfarm private employment decreased 23,000 from February to March on a seasonally adjusted basis, according to the ADP National Employment Report®. The estimated change of employment from January 2010 to February 2010 was revised down slightly, from a decline of 20,000 to a decline of 24,000.

The March employment decline was the smallest since employment began falling in February of 2008. Yet, the lack of improvement in employment from February to March is consistent with the pause in the decline of initial unemployment claims that occurred during the winter.

Since employment as measured by the ADP Report was not restrained in February by the effects of inclement weather, today’s figure does not incorporate a weather-related rebound that could be present in this month’s BLS data. In addition, today’s figure does not include any federal hiring in March for the 2010 Census. For both these reasons, it is reasonable to expect that Friday’s employment figure from the BLS will be stronger than today’s estimate in the ADP National Employment Report.

Note: ADP is private nonfarm employment only (no government jobs).

This is far below the consensus forecast of an increase of 40,000 private sector jobs in March.

The BLS reports on Friday, and the consensus is for an increase of 200,000 payroll jobs in March, on a seasonally adjusted (SA) basis, because of Census 2010 hiring and a bounce back from the snow storms. The underlying trend will be much lower ...

by Calculated Risk on 3/30/2010 11:58:00 PM

The BLS will host a live chat on Friday starting at 9:30 AM ET.

You can submit questions in advance here or submit questions during the event. I'm planning on posting the event on the blog (I'm not involved), so you can (hopefully) read the Q&A and ask questions from the blog on Friday morning.

I sent an advance question asking how we should adjust the seasonally adjusted headline payroll number for the NSA 2010 Census hiring data to try to determine the underlying trend (not counting the snow storms!).

Friday, April 2, 2010 from 9:30 to 10:30 a.m. EDT. From the BLS: "BLS subject matter experts will take your questions on national employment and unemployment data, with a particular focus on the figures for March that will be released that morning at 8:30 a.m. EDT."

by Calculated Risk on 3/30/2010 08:51:00 PM

Building gated communities for young families in exurbia was a great idea ...

From Alana Semuels at the LA Times: From bucolic bliss to 'gated ghetto'

The 427-home Willowalk tract, built by developer D.R. Horton, featured eight distinct "villages" within its block walls. Along with spacious homes, Willowalk boasted four lakes, a community pool and clubhouse. Fanciful street names such as Pink Savory Way and Bee Balm Road added to the bucolic image.
...
Home foreclosures have devastated neighborhoods throughout the country, but the transformation from suburban paradise to blighted community has been especially stark in places like Willowalk -- isolated developments on the far fringes of metropolitan areas that found ready buyers when home prices were soaring but then saw an exodus as values crashed.

Vacant homes are sprinkled throughout Willowalk, betrayed by foot-high grass. Others are rented, including some to families that use government Section 8 vouchers to live in homes with granite countertops and vaulted ceilings.
...
The contrast between occupied and empty houses is evident on one block, where high grass in weedy clumps gives way to a neatly mowed lawn with handwritten signs pleading "Please do not let your dog poop on our yard."

by Calculated Risk on 3/30/2010 06:03:00 PM

One of the key questions is: Will house prices fall as the government support for housing eases? From CNBC: Housing Prices May Be Heading for a Double Dip

Anyone thinking housing prices have reached a bottom had better do some recalculating. Despite Tuesday's Case Schiller report showing smaller declines in January, housing prices may already be in another free fall.

Newly revised numbers are pointing to the decline.

The Federal Housing Finance Agency's (FHFA) adjusted figures show a housing price decline of 2 percent in December and 0.6 percent decline in January—reversing some regional price increases in 2009.

And more pricing dips are predicted.

Few people use the FHFA index anymore, but I do think prices will fall further in many areas. And I think the key housing price indexes, Case-Shiller and First American CoreLogic, have not bottomed yet - although it is possible.

Right now the Case-Shiller composite 10 index is 4.4% above the bottom of May 2009 (seasonally adjusted), and CoreLogic's index is 3.5% above the bottom of March 2009 (NSA), so it will not take much of a decline to see new post-bubble lows.

Last year I listed some of the temporary Government housing support programs (as opposed to permanent programs like tax breaks). This included:

Housing Tax Credit: Buyer must sign a contract by April 30th and close by June 30, 2010 to qualify. Real estate agents in SoCal are telling me there has been a pickup in activity lately - more than seasonal - of buyers trying to beat the deadline for the tax credit. But it is nothing like the buying spurt last November. Most economists opposed the tax credit as misdirected, expensive and ineffective at reducing the supply. Luckily the supporters have promised no extension, from the LA Times: No more extensions of tax credit for first-time home buyers

Federal Reserve MBS Purchase Program: The Federal Reserve is has purchased $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. This is scheduled to end tomorrow, March 31, 2010. It seems very unlike there will be a huge surge in rates as some feared, but I do expect the spread to Treasury yields to increase slightly.

Treasury MBS Purchase Program: This program ended Dec 31, 2009. The Treasury purchased approximately $220 billion of securities.

HAMP Trial Programs Extended: Although the most recent extension ended Jan 31, 2010, the Treasury has added more hoops and hurdles before the lenders can foreclosure, effectively extending the timeframe once again. Now borrowers might be eligible for a temporary unemployment reduction, principal reduction, or participate in the HAFA short sale program.

Support for Fannie and Freddie: This is ongoing.

FHA to tighten Lending Standards: In January the FHA announced slightly tighter standards, but the standards are still pretty loose.

Various Holiday Foreclosure Moratoria: Although this ended back in January, some lenders like Marshall & Ilsley have extended their foreclosure moratoriums:

Marshall & Ilsley Corporation (M&I) today announced it has extended its foreclosure moratorium an additional 90 days – through June 30, 2010. The initial moratorium was announced on December 18, 2008, as part of M&I's Homeowner Assistance Program. The moratorium is on all owner-occupied residential loans for customers who agree to work in good faith to reach a successful repayment agreement. The moratorium applies to applicable loans in all M&I markets.

And other lenders are clearly not been aggresive in foreclosing.

So although some key programs are ending (MBS purchase program and housing tax credit), there are still a number of temporary programs providing support for the housing market.

by Calculated Risk on 3/30/2010 02:28:00 PM

From the IrishTimes.com: Irish banks may require up to €32 billion to cover losses

Irish banks may require up to €32 billion to cover the losses from bad property loans transferred to the National Asset Management Agency (Nama), it has emerged.

The true scale of the “black hole” left in the sector by toxic property debt was laid bare today as Nama confirmed the initial tranche of bad loans would be acquired at a discount of 47 per cent, substantially more than the Government’s initial estimate of 30 per cent.

And all the details from the Minister for Finance.

	Book value of amounts transferred in Tranche 1	Price paid by NAMA for tranche 1	Haircut
AIB	€3.29	€1.88	43%
BOI	€1.93	€1.26	35%
Anglo	€10.00	€5.00(1)	50%
INBS	€0.67	€0.28	58%
EBS	€0.14	€0.09	36%

⁽¹⁾ Estimate; every 1% increase in haircut reduces price paid by NAMA for
tranche 1 by €100m

by Calculated Risk on 3/30/2010 12:41:00 PM

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. Twenty five states are showing declining three month activity. The index increased in 18 states, and was unchanged in 7

Here is the Philadelphia Fed state coincident index release for February.

In the past month, the indexes increased in 21 states, decreased in 22, and remained unchanged in seven for a one-month diffusion index of -2. Over the past three months, the indexes increased in 18 states, decreased in 25, and remained unchanged in seven for a three-month diffusion index of -14.

The second graph is of the monthly Philly Fed data of the number of states with one month increasing activity. Based on this indicator, most of the U.S. was in recession in early 2008.

Although the graph shows the recession ending in July 2009 (based on other data), just over half the country was still in recession in February according to this index.

Note: this graph includes states with minor increases (the Philly Fed lists as unchanged).

by Calculated Risk on 3/30/2010 10:44:00 AM

Finally. Every month the S&P website crashes when the Case-Shiller data is released.

IMPORTANT: These graphs are Not Seasonally Adjusted (NSA). Unfortunately this month only the NSA data is currently available. Usually I report the SA data, but that isn't available.

S&P/Case-Shiller released the monthly Home Price Indices for January (actually a 3 month average).

The monthly data includes prices for 20 individual cities, and two composite indices (10 cities and 20 cities).

Click on graph for larger image in new window.

The first graph shows the nominal not seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 30.2% from the peak, and down about 0.2% in January (media reports are an increase seasonally adjusted - but that data isn't available).

The Composite 20 index is off 29.6% from the peak, and down about 0.4% in January (NSA).

The second graph shows the Year over year change in both indices.

The Composite 10 is essentially flat compared to January 2009.

The Composite 20 is off 0.7% from January 2009.

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Prices decreased (NSA) in 18 of the 20 Case-Shiller cities in January NSA.

On a SA basis from the NY Times: U.S. Home Prices Prices Inch Up, but Troubles Remain

Twelve of the cities in the index went up in January from December. Los Angeles was the biggest gainer, up 1.7 percent. Chicago was the biggest loser, dropping 0.8 percent.

NOTE: Usually I report the Seasonally Adjusted data (see NY Times article), but that data wasn't available. So remember these graphs are NSA.

by Calculated Risk on 3/30/2010 09:04:00 AM

From Bloomberg: Home Prices in 20 U.S. Cities Increased 0.3% in January

The S&P/Case-Shiller home-price index climbed 0.3 percent from the prior month on a seasonally adjusted basis after a similar gain in December, the group said today in New York. The gauge was down 0.7 percent from January 2009, the smallest year- over-year decrease in two years.
...
“While we continue to see improvements in the year-over- year data for all 20 cities, the rebound in housing prices seen last fall is fading,” David Blitzer, chairman of the index committee at S&P, said in a statement.

Graphs soon (S&P site always crashes when this data is released).

by Calculated Risk on 3/29/2010 10:16:00 PM

As expected, sales are picking up again (contracts must be signed before April 30th to qualify for the Federal tax credit):

From David Streitfeld at the NY Times: Spurt of Home Buying as End of Tax Credit Looms (ht Ann)

After several disastrous months for home sales across the country, when volume dropped by 23 percent, the pace appears to be picking up again. The number of Des Moines homes under contract in February rose by a third from the January level. The number of pending contracts jumped 10 percent in Naples, Fla., 14 percent in Houston and 21 percent in Portland, Ore.

These deals will be reflected in the national sales reports when they become final, this month or next. There is no evidence that prices have begun to move in response to the higher volume. Indeed, so many homes are coming on the market that prices might well fall further.

And unfortunately some people are calling for an extension:

Robert Shiller, a professor of economics at Yale and co-developer of the Standard & Poor’s/Case-Shiller housing price index, is an early advocate. He thinks the credit was a bad idea that nevertheless the market cannot do without.

“You don’t make drug addicts go cold turkey,” Mr. Shiller said. “The credit interferes with the market in an arbitrary way, but ending it now would be psychologically powerful. People will be in a bad mood about buying a house.” He advocates phasing it out gradually.

Dr. Shiller is right that the credit was a bad idea, but he is forgetting that existing home sales add little to the economy - and encouraging new home sales with an excess supply is counterproductive.

I am hearing from agents that sales activity is picking up in California too. But I don't expect the increase in sales to be as significant this May and June (when contracts close), as last October and November when the first tax credit was expiring.

We must remember not to mistake activity with accomplishment (to quote John Wooden). This little extra activity does nothing to reduce the overall supply.