Paper Money - A US Real Estate Bubble Blog

Question(s) of The Day - NAR Should Pay A Serious Price?

Posted: 19 Dec 2008 08:22 AM CST

Given that Americans likely still see their homes as their most valuable and important asset and given all the financialization and brokering that has co-opted the exchange process, shouldn't the housing industry-asset class-market be regulated like any other publicly traded security or investment?

Why should the National Association of Realtors (NAR) be allowed to make outrageous claims and growth predictions without having to disclose their inherent interest or even a "past performance is not a guarantee of future results …" statement?

Why should NAR be allowed to control all the current and historical sales, selling price, inventory, supply and listing information as well as being the main interface to the media for its interpretation?

Isn't it time we acknowledge the fact that NAR was one of the four (Wall Street [investment banks, ratings agencies, etc.], Government [Barney Frank, Greenspan, Fannie and Freddie], NAR and American "Homeowners") main perpetrators of the Great Asset Bubble?

Shouldn't NAR pay a serious price for its contribution?

Shouldn't controls be put in place to prohibit their mischief in the future?

Philadelphia Feeling: Federal Reserve Bank of Philadelphia Business Outlook Survey December 2008

Posted: 18 Dec 2008 09:15 PM CST

Today, the Federal Reserve Bank of Philadelphia released the results of their Business Outlook Survey for December showing a dramatic resumption of deterioration of the regions manufacturing sector with the current activity index indicating substantial contraction at -32.9.

The survey of the Philadelphia regions manufacturing sector has been a pretty solid leading indicator of the overall strength or weakness and recession experienced by general economy.

As you can see by the following chart (click for larger version), during the past three post-recession expansion periods, the "current" diffusion index generally vacillated between 0 and 35 while the "future" index left the period of contraction at an elevated level and eventually joining the "current" index.

Finally, as the economy pushes closer to contraction, both indices decline dramatically with a breach of -20 by the "current" index generally indicating that recession is upon us.

As you can see from the charts below, and now having been officially confirmed by the NBER, the business outlook survey again very accurately predicted the start of the current recession and further continues to indicate contraction.

Also, today's results now certainty show that any recent parallel to the stagflationary eras of the 70s and early 80 have given way to a stronger deflationary force bringing down prices, new orders and employment simultaneously.

The following chart shows the latest results of the "current new orders" "current prices paid" and "future employment" components (click for larger versions).

Notice that that current orders, future employment and current prices paid are all now trending down.

The following chart (click for larger) shows these measures during the last stagflationary era seen between 1976 – 1980. Notice the clear divergence of rising prices and falling growth.