Economic News...

Here is some of the economic news that came out this week:

http://biz.yahoo.com/ap/070515/home_prices_realtors.html?.v=22

In the latest indication of the housing market's slowdown, the NAR said home sales reached a 6.4 million annual rate compared to 6.9 million in the same quarter of 2006.

The report came on the same day that RealtyTrac Inc., an industry research firm, said mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.

Home prices are also still falling. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the NAR's quarterly survey of housing market conditions. The median is a typical market price where half the homes sold for more and half the homes sold for less.

CPI Moderates

Housing Slump Continues.

I wanted to point out couple issues, the housing slowdown is continuing and I've already beaten that horse to death. Some positive news is that CPI was lower than expected and this will be a positive force in our fight against inflation. The main reason for the lowering of CPI is that both our increased demand is being tempered and China is chilling out. I want to devote an entire entry to China changes, so I won't harp on it here. Unfortunately gasoline prices and food prices, outside of "CORE CPI" (consumer price index excluding food and energy) are still growing by levels that I'm not so comfortable with.

Well, food production and higher prices is being influenced by our age old problem with farmers, crazy subsidies, production of ethanol, and the high cost of transportation. Its kind of a crappy cycle, oil goes up, transportation cost goes up as a result, food prices go up (since they pass off the transport costs), higher oil stimulates desire to produce ethanol, farmers switch fields from food to corn for ethanol, costs of fields go up, and food goes up further. I didn't make too much sense there, but basically, our farmers are subsidized closing the market to cheaper competitors. These competitors have a better competitive advantage when it comes to ethanol. Brazil for instance has a tremendous amount of farming capacity, and ethanol producing capacity that they could use to supply the US with a variety of food stuffs and most importantly ethanol, so our farmers could go back to farming. Besides, Brazilian ethanol is made from sugar and as a result much cheaper and less environmentally problematic to produce...

We need to stop subsidized our farmers to produce ethanol and get them making food again, and allow the Brazilians to sell us ethanol if we want it.

Mortgage Market Gets Tougher

As the mortgage market gets more difficult, people are having trouble finding 0% down financing and are therefore, being forced to taper down their home desires. As buyers receive credit, demand and subsequently housing prices will come down. See AP article courtesy of Yahoo! Finance.

I like the this girl who bought a three story and has credit that won't let her refinance...

"Her 29-year-old daughter, a graduate student with an annual income of less than $20,000, qualified for a mortgage of $600,000 with no money down, split into two different loans at 8.75 percent and 12.5 percent interest rates.

With income from tenants, which didn't come right away, Beatty's daughter thought she could afford monthly payments of nearly $5,000.

But she hasn't made a mortgage payment in more than three months, and she's receiving letters threatening foreclosure."

Will we Americans ever learn?