Counterparties: Your very tentative housing recovery

September 19, 2012

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Here’s the most recent round of housing data — including housing starts, existing home sales, and homebuilder confidence — in three quotes:

“Housing is clearly in recovery mode.”
“The U.S. housing recovery is for real.”
“The nascent housing recovery has deepened.”

Which isn’t to say today’s numbers are going to make your house suddenly jump in value. The Capital Spectator says the housing recovery is “perhaps downshifting a bit” and notes that newly issued building permits fell by 1% over the previous month. Bill McBride at Calculated Risk calls the existing home sales number “decent”, not because of housing starts but because of the market’s inventory dynamic.

Why should you care about the various measures of housing inventory? For one, they’re good ways of measuring how we’re recovering from the foreclosure crisis. Barclays recently estimated that the market’s “shadow inventory” — homes that are at or near foreclosure — includes some 3.25 million mortgages which are either in foreclosure or at least three months in default. McBride expects reluctant sellers to soon start returning to the market: “this new inventory will probably limit price increases.”

Peter Eavis, following up on a piece he had last month, points to another puzzling dynamic that could hold the housing recovery back. “Pricing in the mortgage market” Eavis writes, “appears to be have gotten stuck.” The spread between mortgage rates and mortgage bond yields, a rough shorthand for mortgage revenue, has jumped in the last year. Even as interest rates are at or near historic lows, Eavis writes, “banks aren’t fully passing on the low rates in the bond market to borrowers. Instead, they are taking bigger gains, and increasing the size of their cut.” — Ryan McCarthy

On to today’s links:

Bad News
Mortgage rates keep falling, and so does lending – WSJ

EU Mess
“Capital flight is leading to the disintegration of the euro zone” – Bloomberg

Will Goldman’s new CFO “chain-smoke and freak out about liquidity”? – Dealbreaker

New Normal
“The US has more than 100,000 janitors with college degrees and 16,000 degree-holding parking lot attendants” – Bloomberg Businessweek

Modest Proposals
Journalists should work for a Romney presidency — he’s their stimulus plan – Dana Milbank

Billionaire Whimsy
Wherein hedge fund billionaire Louis Bacon compares himself to Erin Brockovich and Henry David Thoreau – Forbes

Real Talk
Ezra: “the thing about not having much money is you have to take much more responsibility for your life” – Bloomberg View

Bailouts explain why it may be rational to participate in the last round of a Ponzi scheme – Science Direct

The Fed
Hawks “have not and will not have a significant impact on policy making” – Tim Duy

“We were born not to be a media company forever. We were born as a mission company forever.” – All Things D

Patent policy on the back of a napkin – Marginal Revolution

Behold, the ultra-rare fire tornado – Guardian

Grading on a Curve
Goldman is back! Or will be soon — or at least is doing better than its incompetent rivals – Dealbook

We tax income, but forget about the real meaning of class – Matt Yglesias

Dear America’s CFOs: Sell more bonds now – Distressed Debt Investing

Bold Moves
Google just bought its own Instagram – Wired


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