House Price Hell
Posted
Dec 31 2008, 06:18 AM
by
Bernhard Warner and Matthew Yeomans
Rating:
This article comes from partner site The Big Money.
Tuesday was not a happy day for data on the U.S. economy. One of the major ways of measuring housing prices—the Case-Shiller index—"fell 2.2% in October from September and 18% from a year earlier, the sharpest declines in the data's two-decade history," as the Wall Street Journal crisply summarized it.
While earlier surveys had shown some signs of flattening prices, the October report hinted that the real estate market is as anemic as ever. All of the 20 cities measured by Case-Shiller showed a decline, and in six of them—Atlanta; Charlotte, N.C.; Detroit; Minneapolis; Tampa, Fla.; and Washington, D.C.—the monthly decline from September to October was the highest ever. "The only thing selling is foreclosures if you're on the south side of town," a broker told the Atlanta Journal-Constitution. "It has absolutely gotten worse."
As you might imagine, if people have the sense that their homes are worth less, they have a gloomy feeling about the economy in general. And lo and behold, consumer confidence as measured by the Conference Board hit 38 in December. While that number is, of course, arbitrary, it was at 90.6 a year ago, the Journal notes.
Even amid all the numerical carnage, the papers seem to want us all to go out and buy American cars. The $6 billion federal infusion into GMAC has the financier ready to lend again, says the New York Times. GMAC has dropped the minimum credit-rating score it needs to make a loan to 621 from 700; the median American score, according to the Times, is 723. In addition, GMAC's co-parent GM "said it would offer a new round of low-rate financing, including zero percent interest on some models." No doubt this means that some car-buyers are going to get a great deal, but the notion of taxpayer money being used to prop up car loans to borrowers with credit well below the national median does not instantly inspire confidence.
In the meantime, there's plenty of fresh Madoff meat to chew on. Today is the date that Judge Louis Stanton assigned "as the deadline for Mr. Madoff to provide federal securities regulators with a full accounting of his and his New York firm's assets—from real estate to art works to bank accounts," the NYT notes, though it's not clear that Madoff will make his deadline. The NYT also informs us that the focus of the Madoff investigation has turned to whether or not he and some of his investors used offshore tax havens (based on the history of former frauds from Enron to Parmalat, it would be shocking if Madoff didn't take advantage of the casual financial scrutiny available in some countries). And the Journal forces a little humility onto Henry Kaufman, the famed "Dr. Doom" of Wall Street, whose trademark financial pessimism was not enough to keep him from being one of Madoff's victims (along with Kevin Bacon and Kyra Sedgwick, who have little directly to do with the Journal story but make for a slightly more eye-catching photo than 81-year-old Kaufman).
And finally, if the pending midnight ball-drop has you contemplating what a high-pressure year you've had, spare a thought for old Henry Paulson, who gave a reasonably candid interview to the Financial Times. He decries the weak regulatory tools that the U.S. government had to handle the financial crisis that became apparent in September and says that even with his newfound authority, "I am sure I am going to look back ... and think of all kinds of things I wish I had done differently." Asked to describe the last year for himself personally, the outgoing Treasury secretary says, "It has been unusually intense."
Today's Business Press will take a break on Jan. 1, and return on Jan. 2. Happy New Year.
This post was written by James Ledbetter, editor of The Big Money.
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