Saturday, May 30, 2009

CA Real Estate Market Recovery: Sales Boom, Marketing Time Falls, and Unsold Inventory Drops

LOS ANGELES (May 28)Home sales increased 49.2% in April in California compared with the same period a year ago, while the median price of an existing home declined 36.5%, the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.) reported today.“With annualized sales at 540,360 units, April marked the eighth consecutive month of home sales above the 500,000 level,” said C.A.R. President James Liptak.

Closed escrow sales of existing, single-family detached homes in California totaled 540,360 in April at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR associations statewide. Statewide home resale activity increased 49.2% from the revised 362,170 sales pace recorded in April 2008 (see chart above). Sales in April 2009 increased 3.2% compared with the previous month.

The median price of an existing, single-family detached home in California during April 2009 was $256,700, a 36.5% decrease from the revised $404,470 median for April 2008, C.A.R. reported. The April 2009 median price rose 1.4% compared with March’s $253,040 median price.

C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in April 2009 was 4.6 months, compared with 9.8 months (revised) for the same period a year ago (see chart below). The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate. The median number of days it took to sell a single-family home was 48.7 days in April 2009, compared with 51.8 days for the same period a year ago.

MP: In March, the California median home price showed the first monthly increase since August 2007, and has now increased for two months in a row with the monthly increase in April. Falling prices compared to last year are stimulating unit sales, homes are selling faster than last year, unsold inventory of homes is decreasing as the market clears excess supply. Markets are working for California real estate.

Florida Home Sales Increase for 8th Straight Month

ORLANDO, Fla. – May 27, 2009Florida’s existing home sales rose in April – the eighth consecutive month that sales activity increased in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors (FAR). April’s statewide sales showed gains over the previous month’s sales level in both the existing home and existing condominium markets.

Existing home sales rose 18% last month with a total of 13,111 homes sold statewide compared to 11,133 homes sold in April 2008, according to FAR. April’s statewide existing home sales were slightly higher than statewide activity in March. Florida’s median sales price for existing homes last month was $138,500; a year ago, it was $199,500 for a 31% decrease (see chart above).

Friday, May 29, 2009

Restaurant Activity Index Increases For 4th Straight Month; Reaches Highest Level Since May 2008

(Washington, D.C.) -- The outlook for the restaurant industry grew more optimistic in April, as the National Restaurant Association’s comprehensive index of restaurant activity registered its fourth consecutive monthly gain. The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 98.6 in April, up 0.8% from March, its highest level in 11 months (see top chart above).

“The recent growth in the RPI was driven by the Expectations component, which rose above 100 in April for the first time in 18 months, a level which indicates expansion,” said Hudson Riehle, senior vice president of Research and Information Services for the Association (see chart above). “Although the RPI’s Current Situation indicators are still in a period of contraction, the solid improvement in the forward-looking indicators suggests that the end of the industry’s downturn may be in sight.”

Thursday, May 28, 2009

Cartoon of the Day

HT: Mitch Parr

The New C Word

A cartel is an organization of producers that agree to coordinate prices and production.

Organization of the Petroleum Exporting Countries (OPEC) is a cartel of twelve countries made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. The cartel has maintained its headquarters in Vienna since 1965, and hosts regular meetings among the oil ministers of its Member Countries.

REUTERS -- An OPEC statement formally confirming the decision said the organization "reiterated their firm commitment" to their quotas — organization members under quotes are still producing more than 800,000 barrels a day above the group's overall target level of just under 25 million barrels.

MP: So let me get this straight. OPEC is not a cartel (watch the video above), but the members have just met to engage in collusion to restrict output, and they are all now firmly committed to the production quotas they
agreed to maintain?!

Unionized Companies Punished in Bond Market

NEW YORK (Reuters) - Scores of companies are being punished in the bond market as the Obama administration's policies on General Motors and Chrysler LLC create new risks for creditors, a veteran bond strategist says.

As GM teeters toward a bankruptcy filing and Chrysler attempts to restructure in bankruptcy court, the Obama administration is offering most of the recovery value of those companies to "a favored political class, in this case the United Auto Workers, leaving creditors with very slender debt recoveries," Christopher Garman, founder of Garman Research in Orinda, California, said in a report released late on Friday.

To gauge whether those cases have made debtholders wary of other companies with so-called favored political classes, Garman compared spreads, or bonds' extra yields over U.S. Treasury yields, for companies with collective bargaining agreements with the high-yield bond market as a whole. While the two performed in line with each other since 2003, they diverged sharply in February, with spreads on companies with organized labor gapping nearly 11 percentage points higher than the market as a whole, according to Garman's research. The gap in spreads has persisted and was about 9 percentage points as of mid-May, Garman said. The gap appeared shortly after strategists reported signs that bondholder negotiations with GM were unraveling.

Apart from automakers, sectors heavily influenced by collective bargaining agreements include supermarkets, construction, wired telecommunications, delivery and healthcare, Garman found. Gaming, select media and publishing companies and paper and textile companies also made his list. For years in the past, "bondholders were more than happy to hold on to the debt of these companies," Garman said in an interview. "That's come to a pretty sharp end over the past six months."

Garman's findings echo warnings from other bondholders that unionized companies will have trouble attracting cash in the bond market if the bankruptcies of GM and Chrysler give creditors substantially smaller payouts than they traditionally received.

HT: Mike LaFaive

Wednesday, May 27, 2009

Baltic Dry Index Advances 20 Days in a Row

The Baltic Dry Index came close to reaching an 8-month high today, closing above 3,000 for the first time since early October, and hitting the highest level since September 30. The shipping index has advanced for each of the last 20 sessions, and the 222 point increase today was the largest one-day increase since early July 2008.


FT.COM --Rising demand for raw materials in China has led to a sharp recovery in the Baltic Dry Index, the benchmark for freight costs for dry bulk commodities such as iron ore, coal and grains.

The Baltic Dry jumped 7.6 per cent to 3,164 points on Wednesday, pushing through the 3,000-points mark for the first time since October as shipping congestion outside China’s ports reached record levels with 80 Capesized vessels awaiting unloading.

Remember The Good Old Days?


Controversy at Univ. of Chicago: "Men in Power"

April Unemployment Rates
Male: 10%
Female: 7.6%

Note: The 2.4% male-female jobless rate gap in April is at an all-time historical high.

Job Losses During the Recession:
Male: 79% of total
Female: 21% of total

Bachelor's Degrees
Female: 57.4%
Male: 42.6%

Master's Degrees
Female: 60%
Male: 40%

Note: Women earn 135 bachelor's degrees for every 100 degrees earned by men, and by 2016 that ratio is projected to be 150:100. Women earn 150 master's degrees for every 100 degrees for men, and that ratio is expected to be 170:100 within seven years.

University of Chicago
Approved Women's Groups on campus: 11
Approved Men's Groups on campus: 0 (1 pending)

CHICAGO TRIBUNE -- A group of University of Chicago students think it's time the campus focused more on its men. A third-year student from Lake Bluff has formed Men in Power, a student organization that promises to help men get ahead professionally. But the group's emergence has been controversial, with some critics charging that its premise is misogynistic. Others say it's about time men are championed, noting that recent job losses hit men harder and that women earn far more bachelor's and master's degrees than do men (see data above).

Empire State Survey Suggests Recession is Ending

NY Fed Empire State Manufacturing Survey -- The future general business conditions index rose 11 points in May to 43.8, its highest level since November 2007 (see chart above). This index has shown a cumulative increase of more than 40 points over the past two months. The future new orders and shipments indexes have followed a similar path. The future prices paid index remained modestly above zero, while the future prices received index remained just below zero. The future employment indexes were both positive. The future index for number of employees rose for a third month, to 0.7, and the future average workweek index dipped to 4.6. The capital expenditures and technology spending indexes were little changed from last month, both holding just below zero.

MP: The last time there was a two-month increase of more than 40 points was November 2001, at the tail end of the 2001 recession.

Tuesday, May 26, 2009

Exhibit B: Tax The Rich, Lose The Rich

Maryland couldn't balance its budget last year, so the state tried to close the shortfall by fleecing the wealthy. Politicians in Annapolis created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%. And because cities such as Baltimore and Bethesda also impose income taxes, the state-local tax rate can go as high as 9.45%. Governor Martin O'Malley, a dedicated class warrior, declared that these richest 0.3% of filers were "willing and able to pay their fair share." The Baltimore Sun predicted the rich would "grin and bear it."

One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.

~Wall Street Journal (HT: Lee Coppock)

See Exhibit A here.

Read about The Laffer Curve here.

Evolution of Cell Phones: 1983-2009

Above is the 1983 model, see the rest here.

Monday, May 25, 2009

WIRED: New Digital Socialism and Dot-Communism

I recognize that the word socialism is bound to make many readers twitch. It carries tremendous cultural baggage. I use socialism because technically it is the best word to indicate a range of technologies that rely for their power on social interactions. Broadly, collective action is what Web sites and Net-connected apps generate when they harness input from the global audience. Of course, there's rhetorical danger in lumping so many types of organization under such an inflammatory heading. But there are no unsoiled terms available, so we might as well redeem this one.

When masses of people who own the means of production work toward a common goal and share their products in common, when they contribute labor without wages and enjoy the fruits free of charge, it's not unreasonable to call that socialism.

In the late '90s, activist, provocateur, and aging hippy John Barlow began calling this drift, somewhat tongue in cheek, "dot-communism." He defined it as a "workforce composed entirely of free agents," a decentralized gift or barter economy where there is no property and where technological architecture defines the political space. He was right on the virtual money. But there is one way in which socialism is the wrong word for what is happening: It is not an ideology. It demands no rigid creed. Rather, it is a spectrum of attitudes, techniques, and tools that promote collaboration, sharing, aggregation, coordination, ad hocracy, and a host of other newly enabled types of social cooperation. It is a design frontier and a particularly fertile space for innovation.

Over the past century, every day, someone asked: What can't markets do? We took a long list of problems that seemed to require rational planning or paternal government and instead applied marketplace logic. In most cases, the market solution worked significantly better. Much of the prosperity in recent decades was gained by unleashing market forces on social problems.

Now we're trying the same trick with collaborative social technology, applying digital socialism to a growing list of wishes—and occasionally to problems that the free market couldn't solve—to see if it works. So far, the results have been startling. At nearly every turn, the power of sharing, cooperation, collaboration, openness, free pricing, and transparency has proven to be more practical than we capitalists thought possible. Each time we try it, we find that the power of the new socialism is bigger than we imagined.

We underestimate the power of our tools to reshape our minds. Did we really believe we could collaboratively build and inhabit virtual worlds all day, every day, and not have it affect our perspective? The force of online socialism is growing. Its dynamic is spreading beyond electrons—perhaps into elections.

~From "
The New Socialism: Global Collectivist Society Is Coming Online" in the current issue of Wired Magazine, by Kevin Kelly

NoVA Home Sales Increase for 13th Straight Month

The Northern Virginia Association of Realtors reports that:

The number of Greater Northern Virginia region homes sold in April was 2,904, a 5.75% increase from April 2008’s total of 2,746 sales. This marks the thirteenth consecutive month of increased year-over-year sales totals for Greater Northern Virginia. The average sales price of $331,600 in April 2009 continues to lag behind the 2008 average by 18.6%. The April 2008 average sales price was $407,500 (see chart above).

Across Greater Northern Virginia, the number of listings showed a decrease from 2008 numbers, with 15,683 listings active, which is 33.2% less than this time last year, when 23,471 homes were available. The average number of days on the market (DOM) for a home sold in April 2009 was 89 compared with last year’s 112 DOM, a decrease of 20.5%.

MP: Although the average sales price in April ($331,600) was down from a year ago by 18.6%, it was up from the average price in March ($317,158) by 4.55%, which was above February's average price of $305,000. The $303,000 average price in January 2009 appears to mark the bottom of the market for Northern Virginia, followed by 3 months of increasing average prices. Now with both unit sales increasing (13 consecutive months) and average home prices increasing (three consecutive months), along with reduced marketing time by 23 days, we can probably conclude that the real estate market in Northern Virginia reached a bottom in January 2009 and is now coming back.

For some perspective, consider that in April of 2006, the average sales price was $507,585, or 53% above the April 2009 average price.

Green Shoots Are Starting to Break Through

But in Michigan??? Read about it here.

Markets in Everything: Tata's $8,000 Condos

BUSINESS WEEK -- Tata, the Indian company that made worldwide headlines with its $2,000 Nano car, now plans to build 1,000 tiny apartments outside Mumbai that will sell for $7,800 to $13,400 each. The company plans to roll out low-cost projects outside other major cities.

Tata’s housing division is targeting a segment of the market that was largely overlooked during the housing boom. India’s builders were concentrating on building shiny new high rises and mansions on golf courses. Builders were after profits, but they were also trying to justify their fast-accelerating land costs, especially in and around Mumbai (formerly known as Bombay) and other major cities.

But some business consultants (most prominently, C.K. Prahalad) were arguing that companies would profit handsomely if they target the “bottom of the pyramid” where the bulk of consumers are. It looks like Tata is taking that advice.

Sunday, May 24, 2009

Cartoons of the Day: CAFE Standards

Will The Economic Crisis Change What Material Is Covered in a Freshman Economics Course?

Not really, Greg Mankiw explains.

ECRI: Green Shoots Will Blossom This Summer

NEW YORK (Reuters) - A measure of U.S. futuree conomic growth inched higher in the latest week, while its yearly growth rate continued to climb toward positive territory. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index (WLI) edged up to a 29-week high of 111.1 for the week ending May 15 from 111.0 the prior week. The index's annualized growth rate reached a 35-week high of minus 11.5 percent from last week's rate of minus 13.6 percent. It was the highest yearly growth reading since the week ended September 12, when it stood at minus 11.4 percent (see chart above, click to enlarge).

"With WLI growth rising steadily to a 35-week high, it is increasingly obvious that the 'green shoots' will blossom this summer," said Lakshman Achuthan, managing director at ECRI.

Graph HT:
Steven Hansen