Annual Fundraising Appeal

The US Geological Survey recorded a minor earthquake this morning with its epicenter near Wasilla, Alaska, the probable result of Sarah Palin opening her mail box to find the latest issue of CounterPunch magazine we sent her. A few moments later she Instagrammed this startling comment…

Ayers

The lunatic Right certainly has plenty of problems. We’ve made it our business to not only expose these absurdities, but to challenge them directly. With another election cycle gaining steam, more rhetoric and vitriol will be directed at progressive issues. More hatred will be spewed at minorities, women, gays and the poor. There will be calls for more fracking and war. We won’t back down like the Democrats. We’ll continue to publish fact-based critiques and investigative reports on the shenanigans and evil of the Radical Right. Our future is in your hands. Please donate.

Day10

Yes, these are dire political times. Many who optimistically hoped for real change have spent nearly five years under the cold downpour of political reality. Here at CounterPunch we’ve always aimed to tell it like it is, without illusions or despair. That’s why so many of you have found a refuge at CounterPunch and made us your homepage. You tell us that you love CounterPunch because the quality of the writing you find here in the original articles we offer every day and because we never flinch under fire. We appreciate the support and are prepared for the fierce battles to come.

Unlike other outfits, we don’t hit you up for money every month … or even every quarter. We ask only once a year. But when we ask, we mean it.

CounterPunch’s website is supported almost entirely by subscribers to the print edition of our magazine. We aren’t on the receiving end of six-figure grants from big foundations. George Soros doesn’t have us on retainer. We don’t sell tickets on cruise liners. We don’t clog our site with deceptive corporate ads.

The continued existence of CounterPunch depends solely on the support and dedication of our readers. We know there are a lot of you. We get thousands of emails from you every day. Our website receives millions of hits and nearly 100,000 readers each day. And we don’t charge you a dime.

Please, use our brand new secure shopping cart to make a tax-deductible donation to CounterPunch today or purchase a subscription our monthly magazine and a gift sub for someone or one of our explosive  books, including the ground-breaking Killing Trayvons. Show a little affection for subversion: consider an automated monthly donation. (We accept checks, credit cards, PayPal and cold-hard cash….)
button-store2_19

or use
pp1

To contribute by phone you can call Becky or Deva toll free at: 1-800-840-3683

Thank you for your support,

Jeffrey, Joshua, Becky, Deva, and Nathaniel

CounterPunch
 PO Box 228, Petrolia, CA 95558

In the Dumps

All You Wanted to Know About Housing in Three Minutes

by MIKE WHITNEY

There’s a terrific video at Bloomberg News that will tell you everything you want to know about housing in just under 3 minutes. Unfortunately, the video hasn’t gotten much attention, probably because it veers from the MSMs fairytale about a housing recovery. Even so, I have transcribed the interview below so that readers can judge for themselves whether housing is really bouncing back or it’s just a bunch of baloney.

Keep in mind that Robert Shiller, who predicted both the dot.com and housing bubbles, is widely regarded as the nation’s top housing market expert. Also, the S&P Case-Shiller Home Price Index, which he co-founded, is the benchmark index for home price trends in the country’s 20 largest cities. Here’s the interview (with some commentary):

Bloomberg anchor:

“According to the latest Case-Shiller Home Price Index, which we got yesterday, home values are up over 4 percent on the year. Can this positive housing news weather the fiscal cliff and all the uncertainty into 2013?

For a closer look at what the housing recovery means for the economy, we turn to Robert Shiller of Yale University, the co-founder of the Case-Shiller Home Price Index.

Good morning Bob. You’ve been very, very hesitant to call a bottom for home prices and an all-out housing recovery, but don’t the data pretty broadly speak to the fact that housing is on the mend?

Robert Shiller: “Well, it all depends on what you mean by “on the mend” and what time horizon you are trying to forecast over. If you’re talking about the real short-run, then it’s on the way down, because the monthly data was down just a smidgen because it’s the Fall season. But, maybe, it IS on the way up in the short run. But I think homeowners care mostly about the longer run. Most people are putting their money in to invest for years, and there, the outlook is very fuzzy. I don’t know why there’s such enthusiasm for that (fuzzy) outlook right now?

(Me: Notice how Shiller dismisses the claim that housing is bouncing back. No, says Shiller, that’s not what the data say. What the data says is that the future is very uncertain.)

Bloomberg Anchor (again): What is making you say that? What is “fuzzy” in your eyes?

Shiller: We’ve seen a decline in general interest in homeownership. We’ve seen rentals rise. Our permit data shows that new construction is tilted towards multi-family. So, if you are sitting in a suburban house,–single family detached–what is your outlook now. I think it is highly uncertain. It’s risky. It could be up? I just don’t see how anybody knows.”

(Me: This is great point, but one that everyone in the media seems to miss, which is, that fewer people actually want to own a home now. That’s why the homeownership rate is actually falling. (See: “Falling homeownership rate and the housing market”, Sober Look) The reason that prices are going up, is because speculators are piling into the market thinking they can make a killing flipping houses or through property management. In other words,  investors are driving the market, not organic sales. Just take a look at this at CNBC:

“Up to now the housing recovery had been fuelled by investors buying up thousands of distressed properties, the bulk of them in western states like Arizona, Nevada and California. This helped shrink supplies in those states and boost prices by double digits.” (Mortgage Recovery Still Rocky“, CNBC)

Or this, from Investor Place:

“Housing sales aren’t being fueled by average folks looking to buy a home. Just 61% of buyers are purchasing primary residences, the lowest number since 2005 and down from 70% in 2008. Meanwhile, speculators accounted for 27% of housing sales. They’re buying homes to rehab and subsequently flip or rent.” (“Housing recovery?”, Investor Place)

Keep in mind, that speculation isn’t a sign of market strength. It’s a sign of weakness and instability.

(Back to the interview)

Bloomberg Anchor: When you look at housing in the context of many, many years, then how far are we from a “normal” housing market at this point?

Shiller: Well, in terms of real home values, it looks pretty normal, right now. We’ve come way down from the peak. We’re almost 40 percent down in inflation corrected terms. But that puts us back in the normal range. So, I think that another really plausible forecast for the next 5 years is, Hey, I think it’s going to stay where it is right now. You know, the new Zillow survey of homeprice experts came out with a forecast for the next 5 years that implied a 1.3% real increase per year. So, that’s what those experts are saying. I think they’re a little bit on the optimistic side, but it’s certainly a plausible forecast. Not exciting, but positive.”

Bingo! What Shiller means is that there’s no reason to expect prices to rise any faster. Absent another bubble, prices should continue to plod along at their historic (slow) pace, which means that –for many people–the biggest investment of their lives, is going to be a complete bust. Home equity appreciation is just not going to produce the windfall nestegg that many Boomers are going to need to avoid a life of destitution in their waning years. They’re going to have to look for other ways to increase their savings or keep punching the clock until they keel over.

And, it’s not just prices that are back to normal either. Sales are, too. Just get a load of this from economist Dean Baker at CEPR:

“Both the NYT and USA Today have convinced themselves that house sales are well below their trend level, with the latter telling us that a 5.5 million annual sales rate of existing homes considered healthy. In fact, we are pretty much back to trend levels of sales. In the mid-90s before the bubble began to distort the market, sales averaged about 3.5 million a year. A simple adjustment for the 15 percent population growth over this period would imply an annual sales rate of 4 million existing homes. That is somewhat below the current 4.5 million sales rate.” (“Housing Sales Are Back to Trend”, CEPR)

Since Baker wrote that post in August 2012, existing homes sales have shot up even higher to an annual rate of 5.04 million in November. (According to the National Association of Realtors or NAR) That means that sales are already significantly above trend and well-into bubble territory.

So, here’s the million dollar question: If prices are already at “normal”, and sales are already above trend, and President Obama isn’t going to approve another round of fiscal stimulus, (He won’t) and the Fed’s $85 billion per month QE4 program continues to have no impact on sales (it doesn’t), then what magical force is going to push the market higher?

The only way that prices can continue to rise is if the banks start issuing loans to unqualified mortgage applicants en masse like they did back in 2005-2006. Otherwise, the market’s going to stay right where it is today, in the dumps.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.