HI-TRANSFER

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for January showing that pending home sales improved with the seasonally adjusted national index climbing 2% since December while increasing 8% above the level seen in January 2011.

Meanwhile, the NARs chief economist Lawrence Yun suggests that today's results indicates "stabilization" for prices and increased activity for the year.

“Given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year. With a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations.”

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for December showing that home sales slowed with the seasonally adjusted national index dropping 3.5% since November while increasing 5.57% above the level seen in December 2010.

Meanwhile, the NARs chief economist Lawrence Yun suggests that the rice in contract activity still remains high compared with the past few years and that homebuyers are persistent even in light of notable contract failures.

"Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period, ... Contract failures remain an issue, reported by one-third of Realtors® over the past few months, but home buyers are not giving up."

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that, nationally, home prices increased 0.94% since August but declined 2.52% below the level seen in September 2010.

The FHFA monthly HPI are formulated from home purchase information collected from mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac.

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for July showing continued weakness with slumping sales and an elevated monthly supply.



Single family home sales declined a notable 4.0% from June but rose notably compared to the level seen last year's post-tax scam weakness while the median selling price declined 4.5% below the level seen in July 2010.



Further, inventory of single family homes declined 5.4% from June and 8.6% below the level seen in July 2010 which, combined with the relatively slow pace of sales, resulted in an still elevated monthly supply of 8.9 months.



The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.

QE3 is in the offing…

Consensus expectations just seems to demand it as a generation of gambling speculators, swindlers, government policy junkies and others with short attention spans and a psychopathic indifference for the soundness of the financial system panic at the least sign of slowdown and line up for another dose of the Feds easy money.

Looking at some of the latest trends, a slowdown of sorts would not be so surprising.

The economy is still being seriously impacted by the evolving housing decline, unemployment remains at 9%, oil prices are near $100 a barrel with gasoline prices reflecting that fact, the Federal Government is toying with the debt ceiling, China is likely overheating as it inches ever closer to parabolic residential real estate prices and likely an ugly crash, other notable leading emerging markets like India and the Russian Federation are continuing to slow, Greece and other European countries are moving closer to debt restructuring… the list of negative externalities runs long yet they all carry the telltale ring of the Great Recession about them.

This is the point at which one, having been schooled by the Fed over many years, must begin to ask the question “What will the Feds response be?”… as if a response by the Federal Reserve is nearly a reflexive action to a consensus expectation of looming slowdown.

The answer to that question should not require such a stretch of imagination… the simple short answer is QE3… no more, no less.

Why would the Fed stop now? Should a slowdown materialize, it will ultimately been seen as an offspring of the Great Recession and treated as such.

Recognize that during last month’s historic Fed press conference, “Helicopter” Bernanke made no quibble of the fact that the Fed will continue the principle reinvestment function that they have been carrying out ever since they acquired such a sizable bounty of mortgage securities, a clear sign that pumping liquidity is not only the response de jure but the de facto response.

Like a pair of dysfunctional sweethearts, the Fed knows no different course of action then easing and the consensus expects it, so easing it will be.

But as we move further and further from the point where the Feds intervention is viewed as “pump priming” and nearer a more accurate perception of it as the “pump”, one has to wonder when consensus will begin to lose faith and worry that this scheme has no merit.

Only then will we ultimately realize the true consequence of the years of Fed actions.

Today, the U.S. Census Bureau released its latest nominal read of retail sales showing an increase of 0.5% since March bringing the total increase since last year to 7.6% on an aggregate of all items including food, fuel and healthcare services.

Nominal discretionary retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales, on the other hand, declined 0.64% from March falling 1.44% below the level seen in April 2010 while, adjusting for inflation, “real” discretionary retail sales actually declined a notable 4.39% over the same period.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.