Thursday, May 18, 2006

Bernanke on Housing

Following a speech about proposed banking regulations, Ben Bernanke had this to say during a question & answer session:
"It seems pretty clear now that the U.S. housing market is cooling," Bernanke said in a question-and-answer session following a speech he delivered on banking in Chicago. He noted that home sales are slowing as is housing construction.

"Our assessment at this point ... is that this looks to be a very orderly and moderate kind of cooling," Bernanke said

"In combination with rising interest rates affordability is becoming much more difficult and therefore as you would expect you are seeing some cooling in those markets,
The term 'cooling' which Mr. Bernanke uses to describe the housing market is a euphemism. It is an inappropriate term as it implies pleasant connotations. It is not pleasant for the housing industrial complex or recent home purchasers. The correct term should be 'declining' or 'falling.'

Furthermore, does Bernanke really believe that "this looks to be a very orderly and moderate kind of cooling"?

It is NOT an 'orderly and moderate kind of cooling':
  • The surging number of homeowners who are being foreclosed on
  • Flippers who are trying to sell there recent purchases
  • For thousands of mortgage brokers who have been fired in recent months
  • The real estate agents whose transactions are declining
  • For the many construction workers who are about to get fired
  • This is just the start of the decline. The boom lasted 5 years. The decline has only been about 9 months.
Ben Bernanke will NOT admit the extent of the declining housing market. He is afraid that if he does it would trigger a panicked market.


  1. "Our assessment at this point ... is that this looks to be a very orderly and moderate kind of cooling,"

    Next time you see a picture of Ben Bernanke, look really close, maybe you will see some strings attached to him. The next question is, who is pulling these strings?

  2. Home Depot is not experiencing a decline in sales:

    "Home Depot's net income rose 19 percent, to $1.48 billion, with sales up 13 percent, to $21.5 billion. The stock fell $2.05, or 5 percent, to $38.45 yesterday, in part because the chain missed analysts' revenue forecast."

    So sales are way up, but just not what the traders were hoping for.

  3. anon,

    I stand corrected. :-) I'll fix that.

  4. Anon 10:15

    "Home Depot is not experiencing a decline in sales:"

    I don't think there is a strong correlation between home sales and home depot revenues. Not all home depot customers are new home buyers. In fact some customers are apartment dwellers buying shelving, closet systems, tools or even plants. Current homeowners could be shopping there for a hugh variety of reasons. Maybe home prices are so unfeasible, home improvement becomes more attractive.

  5. sure doesn't sound like a man that wants to raise interest rates again though. Obviously its not in his interest to jump up and down waving his arms about a housing crash, but given that the bond market is COMPLETELY ignoring the housing swan dive, its good of Ben to point it out explicitly, and not for the first time, either.

  6. "The surging number of homeowners who are being foreclosed on"

    "Thousands of mortgage brokers who have been fired in recent months"

    "Many construction workers who are about to get fired"

    "This is just the start of the decline"

    It would be nice to have some attribution and support for these statements.

    But that would be to expect too much from a very biased source who seems to be hoping and praying for a real estate meltdown, no matter how many people it affects.

    What a miserable way to live.

  7. fritz,

    This is what is happening, I wish it did not happen this way. I have been here for almost a year warning people about the destructive nature of this speculative episode. I do have pity for those the agony that this speculative episode is causing.

  8. You know what? I hope Bernanke yells soft landing until the cows come home. That just means he's not gonna stop raising the FF rates just to save it. I am not sure if he's deluded himself into actually believing that it's gonna be a "soft landing", or if he's saying that to give everyone a heads up that even in the face of all the data indicating a pretty severe slowdown in sales volumes all over the country,it's not enough to overtake inflation concerns, and so housing is toast. I guess you could call that Fedspeak for "Sell now while you can!"?

  9. Fritz,

    Perhaps you missed the link to Ameriquest's announcement of closing it's branch offices and laying off 3000+ workers?

    Perhaps you missed NAR's statistics on the nationwide decline in the number of housing sales?

    Perhaps you missed the article on less than 50% occupancy of new condo developments in San Diego?

    Sure some of David's statements are off the cuff but he's not making ridiculously unfounded claims.

    My $0.02.

  10. Quit feeding the trolls who come and ask for evidence to support predictions and opinions. Many forecasts are made on anecdotal information and expectations from smaller bits of related data--you can't have data already to prove what may happen in the future. That's why it's called a "prediction". There are more floreclosures in April 2006 than in 2005--google it. He linked to the mortgage comment, and it's not hard to figure that fewer housing starts means fewer construction jobs...

  11. There were more foreclosures in April 2006 than in April 2005...

  12. Sorry Nikki. Didn't mean to feed the trolls. :)

    My $0.02.

  13. Look, 600 square feet of generic "McApartment" for rent in McArlington, starting at only $1600!

  14. You're forgiven... :) The trolls are fewer every day, however, and have less data to support their bubble denial, so prepare yourself for ridiculously petty and insignificant whining about the "number of trees left as the forest collapses around them."

  15. What will happen is precisely what has been happening for many years without fail: The Fed is a gonna be right and the bubbleheads is a gonna be wrong.

    You know it's true.

  16. Wait wait wait!

    Here is an apt. rental in Arlington. It is an ultra hip 1 bedroom for only $2100!

    Heck, I bet they'll settle for $1950 given the crushing that the housing market is taking lately!

    I love you David!

  17. From The Washington Post Apartment Life Discussion Forum:

    "Germantown, Md.: Apartment life stinks. Rents are way too high relative to average earnings for the region. Service is lousy. Rental agents act like they are doing the tenant a big, big favor by listening when a tenant has a concern.

    Construction quality is pitiful. Noise is a real problem in most places. Some communities have degenerated into third world drug dens. Yet, the tenant must keep paying and paying and paying, more and more and more. What is happening? Do apartment managers belong to an association or two where they agree to help each other lock the tenant out of any customer empowerment?

    Sara Gebhardt: Sounds like you needed to vent. I don't think there's some major conspiracy, but if you think landlords have a pact to keep you down, you need to form tenant associations or organizations to fight back."

  18. Ditto from the Wash Post concerning Apartment Life:

    "Rockville, Md.: Yikes! I love my apartment but I just got a notice saying my rent is going up six percent when I renew. Is this standard in the region right now? Is there anything I can do to bring it down a little?

    Sara Gebhardt: A six percent increase is not uncommon. In fact it is probably a low end on the spectrum of the increases renters around the region are facing. You can try to negotiate a longer-lease term with your landlord as a way to avoid the increase."

  19. Fritz is in a dreamworld where he constantly states over and over 'all is well, all is well'.

    This meltdown will not affect everyone to the extreme but for those it does, it will be totally traumatic. A fellow employee was supposed to get in their new house months ago. Now the builder near Tampa (Coral Bay)has gone into bankruptcy. The house sits unfinished. Yeah, all is well. So now builders are going bankrupt. Too many of them.

  20. From WaPo Apartment Life:

    "King of Prussia, Penn.: Do you know if neighbors have the right to slip notes underneath your door complaining over food smells? Is this legal? I consider this harrasment.

    Sara Gebhardt: I am not a lawyer, but I don't think somebody slipping a piece of paper under your door is illegal. Harrassment would mean papers all the time, etc. Before you consult a lawyer, my advice is to have a conversation with the neighbors who are doing this."

  21. Follow this link, and you'll find that the majority of people who rent in the DC area are dissatisfied with their experience. And these are only the people who go out of their way to rate their apartment choice.

  22. "the majority of people who rent in the DC area are dissatisfied with their experience"

    I wonder how many homeowners who aren't in over their heads (the majority, I imagine) are similarly dissatisfied with being a homeowner?

  23. did Bernake forget how fast inventory is growing?

    look here:

  24. Hmm, it seems that the majority of renters in Silver Spring who care enough to express and opinion, are dissatisfied with their living accomodations:

  25. HaHaHaHa...Heeeee Haa...Haaa...Haaa...Haaa!!!!

    I live in a rental apartment with a month-to-month lease; rent only gets raised once a year though. My rent and utilities cost me $1,150 per month and I live in downtown Silver Spring. Not bad. I have no bugs and no mice in my apartment.

    Hmmmm, I wonder how the condo owners are doing with their wallets with the sky-high mortgages in the $1,400-$2,000 territory for one-bedroom condos. Add the condo fees which cost you $300-$400 per month. Oh wait...don't forget the insurance and property taxes!!!!!

    Haaaah Haaaah Haaaah!!!!! LMFAO!...What did PT Barnum say once, "There's a sucker born every minute". Those suckers happen to be people who bought condos in the DC area during the past two years! Haaa Haaa Haaa Yeaaaaaaah!!!!!!!!!!! Hubba Hubba have a nice day you Real Estate industry ass holes!

  26. I am a happy renter for a couple reasons:

    1 - I feel secure not having to worry about my house's value decreasing and am happy that I won't one day regret not selling and losing out on thousands.

    2 - I don't think or worry about anything breaking or needing replacement. It's not my concern.

    3 - This is just me personally, but I feel that renting helps limit my own materialism. I know if I had place I would spend a lot more on decorating, furniture, etc. I am glad this is not part of my life right now.

  27. IMO Nikki is correct. Bernanke has little wiggle room. He would like to stop raising rates because of the housing problems, but he cannot do so because of the falling dollar and the fear of inflation. If he keeps raising rates to protect the dollar and to keep inflation under control, he will hurt housing and could subject the country to a recession. The alternative is worse, 1k gold, high demand for everything, and major inflation that could go out of control. I just don't know how this guy will be able to navigate these very dangerous waters that Greenspeak left for him.

  28. Does it surprise anybody that has lived in an apartment that the poor slobs are unhappy? Listening to the people upstairs stomp around, hassels over parking or your pets, the list goes on and on.

    I would rather live in a used trailer house on a paid for beautiful piece of property, all paid for, than an apartment. In fact, I do. Debt free. Worry free. Anybody that has to rent an apartment may want to consider why they live / work in that area of the country.

    The house can wait until I have the money to build it free and clear.

  29. "The house can wait until I have the money to build it free and clear."

    You may already have enough. Look at the cost of building supplies at Home Depot. From wood to concrete to insulation, you can probably build a nice house for under $90,000. HOWEVER, the cost of land is expensive, and the cost of skilled labor can be pricey too. How do you overcome those? By paying another $210,000 on top of the cost of materials.

  30. My land is PAID FOR . I have NO DEBT. Gosh, that sounds and feels really good!

    The labor and materials may be cyclical. Hurricanes have a huge influence. So does the local house building situation. If I time the labor and materials just right, saving up and hopefully making good stock picks (I am a lousey trader) in the interim then things will probably be OK for pulling the trigger.

    But there is no hurry since this batchelor has a roof over his head and beer in the fridge. And no gray hair at 50.

  31. No no no. It works like this.

    The offshore Caribbean "hedge funds" suddenly beginning buying up the debt again. The Bank of England leases more gold into the market to pound down the price ( gotta keep that gold canary quiet ) .. for a little while.
    The IMF jumps in under its new authorization to do its surreptitious handywork.

    Meanwhile Bernanke is slowing raising rates .. while oddly the interest rates on loans don't rise .. he is pumping away M3 and credit like the madman he is. At the same time the hedonically adjusted CPI and other inflation gauges register almost no inflation.

    That is until the one thing they can't control >> derivatives do a central core meltdown.

    Whoo baby .. this freak show and magicians circus is ready to roll out the really big acts. Grab a cold one, sit back , and watch the show.