Financial markets have been on hold this week, the freeze a perfect reflection of widespread uncertainty about the U.S. and global economies.
Long-term Treasury and mortgage rates have held their dramatic, near-half-percent drops of the last month, but the declines themselves tend to prevent any further downward movement.
A deeper slide will require something new: weaker data here, or Europe finally cracking (see Morgan Kelly’s commentary in the Irish Times), or a China slowdown.
The small-business survey at www.nfib.com weakened slightly in April but broadly, with seven of 10 components falling, and confirmed the dive in the March survey.
New claims for unemployment insurance improved from last week’s odd surge, but the four-week moving average is the worst since last November. April retail sales picked up a thin 0.5 percent, but 0.3 percent of the gain was the price of gasoline alone.
Housing is the obvious catalyst for a weaker economy, with all of the various measures of prices showing a half-year, sustained decline, near 1 percent per month. However, it is no longer polite to speak of housing.
The Fed does not, the White House does not, and the Treasury secretary is busy droning at visitors from China. (Draw the short straw in Beijing, be sent to listen to Timothy Geithner?)
There are lots of different home-price measures, now — it’s a growth industry, after all. Do pay attention to the CoreLogic Home Price Index, RealtyTrac and the Federal Housing Finance Agency’s House Price Index.
CoreLogic’s newest is a fascinating snapshot that separates prices of distressed sales from nondistressed. The gap between the two is much less than I would have thought: nationwide, a 7.5 percent decline for distressed sales in the last year (most of it in the eight-straight monthly declines), but nondistressed prices dumped 5.8 percent.
The dispersion of price declines in the last year says there is a lot more going on than just the collapse of the bubble zones. Nondistressed price declines in 32 states include: Idaho (-8.8 percent), Minnesota (-5 percent), South Dakota (-4.8 percent), Wisconsin (-4.3 percent), Delaware (-2.9 percent), New Hampshire (-3.9 percent), Massachusetts (-4.5 percent), and Maine (-6.6 percent).
Maine? Maine?! If there was a "Lobstah Bubble," I missed it. What might explain such a diverse, "nonbubble" list of states? Unemployment, for one, although we’re all supposed to believe that’s getting better. The second factor is mortgage credit, tighter than ever before — tighter in every state.
After discovery of Osama Bin Laden’s compound in Abbottabad, Pakistan, our language has a new noun: an "Abbottabad" is a bad thing hiding in plain sight, concealed by authorities who were supposed to do something about it.
The abandonment of housing, to succumb to credit drought, is an American Abbottabad, the worst since Hoover’s people allowed runs on banks to continue for three solid years.
In the movie "The Untouchables," Kevin Costner’s character, Ness, after assembling his band of straight cops, asks helplessly, "How will we find the booze?"
Sean Connery snaps, "Everybody knows where the booze is!" and marched across the street to the post office where, sure enough, there was booze to the rafters.
Tell a nonborrowing civilian, a reporter or a government official that credit is too tight, and they say, "Whaddya mean?"
Example: The income of every applicant must be established strictly by tax return, no matter how much money the applicant has or how big the down payment — no exceptions for unusual but legal underreporting of income. "Well, it’s about time, right?"
Try not to lose temper. No, better to lose it: General Electric has no taxable income, and so Fannie wouldn’t loan it a dime. That’s not restoration of prudent underwriting; that’s Fannie forted-up in an "Abbottabad."
More new data: Fannie and Freddie, at the end of 2010, owned 287,184 foreclosed homes (they report late … takes awhile on fingers and toes?). In February the Federal Housing Administration owned another 68,801, rising 5,000 per month. New delinquencies are slowing, best shown in a thorough but optimistic consumer credit report at the New York Fed.
However, when this decomposing bank-owned property (REO) pig leaves the python and hits what’s left of markets — it’s going to be ugly. To absorb that pig, buyers need credit, not Abottabad.