Paper Economy - A US Real Estate Bubble Blog: The Almost Daily 2¢

Friday, July 25, 2008

The Almost Daily 2¢ - Lost His Marbles?

Larry Kudlow has simply lost touch…. and possibly his marbles too.

Typically, I tune in to Larry’s show for a dose of his trademark “Keeping America Great” or “Goldilocks Economy” Bullhoooey sentiment or even a segment or two including those complete fools Jerry Bowyer and Don Luskin, which, paradoxically, taken together seems to motivate me to keep blogging the data behind this epic crisis but last night’s show just seemed to cross the line into Kookyville.

First, Larry presented a couple of charts which, he alleged, showed that housing was in a process of bottoming and further, he suggested that this development was being ignored (with the implication of purposely ignored) by the media.

His charts appeared show what he termed a “sequential rise” in both national existing home sales and existing home selling prices and dramatically smaller year-over-yea percent declines.

Upon closer inspection though, it appears that Larry mishandled the sales numbers and is taking a very short view of the selling price data.

It’s important to understand that the National Association of Realtors (NAR) has not yet published their quarterly existing sales results for Q2 2008 so Larry is likely using an average of the monthly data that has been published to date.

As PaperEconomy readers are already well aware, nationally, existing home sales have been falling steadily for several years now, forcing NAR economists to continually revise down their full year estimates so how is it that Larry’s chart shows that quarter-over-quarter existing home sales are only down just slightly?

The answer is… I don’t know… I can’t imagine where Larry got that data…

By every existing home sale measure that the NAR publishes (single family, condo, combined) sales are way down compared to last year.

The following is the NAR monthly national single family existing home sales (Seasonally adjusted annual rate - SAAR) plotted since November 2005 AND a quarterly average of the monthly results since Q1 2006.

As you can see, year-over-year, sales are still off nearly 15% compared to last year.

As for median selling price, Larry’s chart correctly captures the increase the median has seen since February but extending the data back a couple more years puts this rise in its proper context.

What we are seeing is simply the typical seasonal pattern of rising prices during the spring market and if past years are to be a guide, prices will resume their descent even more aggressively starting with either the July or August results.

Last night’s segment then goes on with Larry getting a bit nutty himself…

Has Larry reached some sort of breaking point?

Labels: cnbc, economy recession, housing bubble, larry kudlow

6 Comments:

I love Larry Kudlow.

If American sentiment can contribute to (or actually create) a recession then why not have a few voices that see the glass half full?

I love your analysis as well.

Historically humans, especially Americans (IMHO), have proven that they are so resilient that if they believe things will be ok things will be.

Sure there is also the lemming quality to some of us (i.e. the my friend is buying a house at $650K so I will too) but I believe we still have more people capable of independent thinking than not.

Markets rise and then they fall. Kudlow knows that. The real estate market is no different.

Your charts and analysis are interesting because, I believe, you accurately evaluate the down side and that is interesting. It's also helpful to try to judge how long and/or deep this correction will be.

I believe that Kudlow is simply giving the other side of the story. I mean, potentially you are both correct. This may be a longer and/or deeper correction, but it is not the end of the American Real Estate market by a long shot.

And when it does find it's bottom, as Kudlow knows well, it will be a great opportunity to buy.

I guess I'm saying, I like reading your posts to keep my eye on the cooling and I like to listen to Kudlow to keep my eye open for the correction.

Maybe you two should do a 'Hannity and Colmbs' type show on the housing market. You've earned that spot by your early predictions about the problems in the mortgage industry.

By Anonymous, at 8:02 AM
Larry Kudlow is a long-time promoter for Arthur Laffer's supply-side theories. Since he's almost certainly intelligent, this tells us that he is comfortable using charts and graphs to lie to the public.

That word lie, maybe I should circumlocute and say he's not entirely forthcoming and he sometimes stretches the truth. It's not like he's the only one -- every politician lies all the time, as do many op-ed writers and TV talking heads.

I suspect in private Larry is a rational hard-headed libertarian who wants to reduce govt and regulation and let economic- and business-savvy people create a lot of wealth. As for the non-savvy people, well, he realizes there are a lot of them and accepts that they have to be lied to and manipulated so they don't wreck everything with idiotic laws and revolutions.

SATT, you are committed to discovering and telling the truth. But Larry probably feels that there's a time and place for truth, and his show is not it.

By Dagger, at 11:49 AM
Anonymous says above "Markets rise and then they fall. Kudlow knows that. The real estate market is no different."

But the real estate market is different. At least it is with govt guaranteed loans.

The stock-market bubble of the 1920s was caused in large part by margin trading. Which meant the little guy could borrow a money with maybe 5% down and use that money to buy stocks. It's just like mortgages, 5% down gets you a house.

Margin trading is regulated today, and I think you have to put something like 50% down. Does this mean people buying a house should also be required to put 50% down?

You can see how a govt guarantee would encourage margins to decrease. Does anyone know what kinds of down payments were common before Fannie/Fred were created?

By Dagger, at 12:05 PM
If we're lucky we might make the turn in summer 2012

By easy$, at 1:42 PM
Kudlow and Ben Stein are just shills. I for one am tired Kudlow's never-ending rants for the elimination of the corporate income tax.

oh, yeah, just what the world needs (i) an artificial person, (ii) with rights, (iii) and representation without taxation.

how about this, Kudlow: ONLY tax the corporations. Think of all the INDIVIDUALS with extra money to spend - cause ya know, as americans, we ain't gonna save a dime of it.

By Anonymous, at 2:49 PM
Ahh.. thats what I like... spirited e-conversation.

Well all I have to say is that I simply don't feel like its in anyones best interest to have their head in the sand.

The economy is sinking fast and individuals will, believe it or not, really have to plan in order to position themselves best for the future.

So this really entails forgetting all this "America is great" jargon and really start facing the facts.

Americans WAY overdid it financially .... they truly believed the distortion that is now in the process of unwinding and they took risk without full consideration and preparation of any downside.

We are a long way from a bottom of a disaster that has no inherent end... its a process and the trough will be determined, in real time, by the typical American's abilities to cope.

And "Typical American" isn't meant to single out low earning middle and lower class folks... it runs the whole food chain all the way up to "wealthy" dual income upper-middle class elites.

Thats the whole charade ... that there are any "real" differences in character and quality of people distributed throughout the strata that makes up the American lower and middle class.

"wealthy" upper middle class folks really think they are better off, better educated, and likely just plain old better than the rest of the lot but this is a mythical state of mind.

The whole lot is in the same boat.

This will be an EXTREMELY interesting study in human nature as the economic conditions simply grind down peoples sense of self.

With Kudlow-esc pride and ego still the predominant collective concept, this will be a slow process indeed!

By SoldAtTheTop, at 9:24 PM