I'm going to try and make this brief. CNN reports that there's a surprise drop in new home sales.
I don't see why this is so surprising. Some good data in the article, but it's overall misleading. I'm not blaming the reporter this time--not really.
So new home sales dropped 3.6%. They've been rising for the past five months. But here's the kicker. Nothing has changed. The article even acknowledges that the drop off is likely due to the expiry of the New Home Buyer Tax Credit. A tax credit is a nifty way to stimulate the economy, without making overt signals the free-market flag wavers.
But think of the big picture. Employment continues to worsen--the dawn may be soon, but it's still pretty damn dark. The last estimate I read, in yesterday's Times Op-Ed, suggests the rate will exceed 10% by next year. Where do they think all of that home-buying power is coming from?
Allow me to apply a little amature pyschology, without the fancy words. Late in 2008 the market craters, the banks are closing, and you've started keeping a fat wad of cash under your pillow. January, new president, new times ahead, you start coming out of your fetal position, and start looking around. You know what people say about investing, buy low sell high. You were smart, you were saving your money, you probably would have bought a house in 2007 if you'd had the money saved. Now it's 2009, you have the money, prices are down, and Obama springs a fancy tax credit on you. Great. You buy.
But demand isn't just a current measure-it's a stream. And most of the demand of the last 5 months were from people who were ready to buy in 2008 and just put it off until things settled. So where is the new demand going to come from? Middle class wages continue to stagnate, and more jobs are still being lost than created. What's the big difference? Credit has totally evaporated, and the fake credit of a housing credit (which was a very good idea at the time) is really a go along to get along measure.
Obama had a really good opportunity to change things. But I think his team really wants things to just go back to the way they were--minus the Bush nastiness, of course. Look who his financial team is--all heads of the old order.
But things weren't cool. The kids were not all right. I don't know what the answer is, but I think I have a pretty good idea. The infrastructure of this country is rotten. Bridges over a hundred years old, crumbling highways, terrible rail and freight systems. Subways in metropolitan areas, like New York, falling apart, and totally inadequate to deal with demand.
People talk about Zeitgeist too much, but I have to say it. The Zeitgeist of this country has been in the shitter for 9 years now. The powers that be, the politicians, the media, the CEOs, they don't give us enough credit. We know that the rich are taking their money and leaving the party, we've been watching it for close to a decade. We don't blame them, but then they're puzzled when they don't see economic growth? I've yet to work through a period of economic growth. The Bush Boom was a boom only for the top 1%. That hasn't changed. And it's depressing as hell.