by Calculated Risk on 1/16/2006 05:03:00 PM

The Union-Tribune reports: House resales take a tumble in December

San Diego County resale house prices tumbled last month by the biggest number in 18 years of record-keeping and contributed to the smallest year-to-year rise in overall prices in six years, DataQuick Information Systems reported Monday.

The median resale price for existing single-family homes dropped $15,000 from November to December to stand at $550,000, the largest month-to-month decline since DataQuick began keeping records in 1988.

However, last month's figure was still ahead of what it was in December 2004 by $25,000, or 4.8 percent.
...
Last year was the first time since 2001 that the number of home sales fell from the previous year. The total sold last year was 55,366, down 9.1 percent from 2004's 60,886.
...
On Thursday, the San Diego Association of Realtors, which monitors about 60 percent of the housing market, reported that properties took longer to sell in 2005 than in 2004 – lingering on the market for, on average, 62 days last year compared to 54 in 2004.

And the total number of listings has been growing, reaching a peak of just over 15,000 listings in November, about five times more than at the peak of the buying frenzy in spring 2004.

Rising inventories, fewer transactions and now lower prices.

DataQuick will report on the rest of California over the next few days - it will be interesting to see if other areas are reporting falling prices - San Diego (along with Boston) has been leading the way into this slowdown. Also inventories probably declined in December as many sellers removed their properties from the market for the holidays. I expect inventories to start rising again in the January report.

by Calculated Risk on 1/16/2006 11:48:00 AM

MarketWatch reports: U.S. economy slows to below trend

The U.S. economy grew at the slowest pace in nearly three years in the just-concluded fourth quarter, economists now estimate.

Led by what could be the weakest consumer spending since 1991, the economy likely grew at about a 2.7% annual pace in the quarter after 11 straight quarters of growth above 3%, economists say.
...
Few economists expect the slump to worsen significantly. For the first quarter, economists are estimating growth at 3.6% ... Most economists do see growth slowing again at the end of the year as the housing market weakens.
...
Housing was one of the few bright spots in the fourth quarter's growth mix, along with inventory rebuilding. The weak sectors were consumer spending, business investment, exports and government spending.

"We do not believe the apparent weakness in the fourth quarter represents a clear change in the trend," said James O'Sullivan, an economist for UBS. GDP will likely slow from about 3.6% in 2005 to 3% in 2006 and 2.7% in 2007.

by Calculated Risk on 1/14/2006 02:56:00 PM

Congratulations Sasha!


Sasha Cohen is the new US Ladies Figure Skating champion.

Please excuse this off topic post: I happen to know Sasha, and in addition to being an incredible athlete, Sasha is an intelligent, warm and funny person. She is very deserving and will be a great representative for skating and America in Turin.

by Calculated Risk on 1/13/2006 01:33:00 AM

The Washington Post reports: Deficit Could Top $400 Billion

Driven by the cost of hurricane relief, the federal budget deficit is expected to balloon back above $400 billion for the fiscal year that ends in September, reversing the improvements of 2005, a White House official told reporters yesterday.

But some budget analysts cautioned that the estimate should be considered more of a political mark to inform the coming budget debate than an economic forecast.

This is the third straight year in which the White House has summoned reporters well ahead of the official budget release to project a higher-than-anticipated deficit. In the past two years, when final deficit figures have come in at record or near-record levels, White House officials have boasted that they had made progress, since the final numbers were below estimates.

"This administration has a history of overestimating the deficit early in the year, lowering expectations, then taking credit when it comes in below forecast," said Stanley E. Collender, a federal budget expert at Financial Dynamics Business Communications. "It's not just a history. It's almost an obsession."

The General Fund deficit will be close to $600 Billion this year - the White House is reporting the Enron style "unified budget deficit". But kudos to WaPo writer Jonathan Weisman for correctly describing the political game the White House has been playing with the budget for the last few years.

The bottom line is simple: the General Fund budget is a disaster and the situation continues to get worse.

by Calculated Risk on 1/12/2006 01:24:00 PM

From The Economist cover story: Danger time for America

In [Greenspan's] final days of glory, it may therefore seem churlish to question his record. However, Mr Greenspan's departure could well mark a high point for America's economy, with a period of sluggish growth ahead. This is not so much because he is leaving, but because of what he is leaving behind: the biggest economic imbalances in American history ...

Handovers to a new Fed chairman are always tricky moments. They have often been followed by some sort of financial turmoil, such as the 1987 stockmarket crash, only two months after Mr Greenspan took over. This handover takes place with the economy in an unusually vulnerable state, thanks to its imbalances. ...

How should Mr Bernanke respond to falling house prices and a sharp economic slowdown when they come? While he is even more opposed than Mr Greenspan to the idea of restraining asset-price bubbles, he seems just as keen to slash interest rates when bubbles burst to prevent a downturn. He is likely to continue the current asymmetric policy of never raising interest rates to curb rising asset prices, but always cutting rates after prices fall. This is dangerous as it encourages excessive risk taking and allows the imbalances to grow ever larger, making the eventual correction even worse. If the imbalances are to unwind, America needs to accept a period in which domestic demand grows more slowly than output.