Given the circumstances in Japan, I need to apologize for the analogy I’m making but unfortunately it’s the best I can do at this point.
Dousing the markets with easy money, containing toxic “assets” through the suspension of “mark-to-market” accounting, propping up besieged mortgage security markets, rescuing “underwater” households, securing the foundations of teetering financial institutions through direct-inject recapitalization… try as they might the Feds were unable to prevent the continued meltdown of the nation’s housing markets.
It’s a sad day for those policy junkies who believe that government meddling is the solution to all the “evils” that nature stirs up.
Like the influence of gravity, nature sometimes appears susceptible to human power… just lift your leg and you’re defeating the force of gravity generated by the entirety of the mass of earth.
But as we are all well aware… you can only hold your leg elevated for so long… eventually gravity wins out as the human relents to a natural force that never yields.
Similarly, the housing collapse is a natural progression playing out in a fashion that is more akin to an organic process than we would like to admit.
The Feds mobilized in the face of the “crisis” and were able to hold back the pressures for a time with tax giveaways and propping mortgage securities but it’s looking like these efforts were in vain as the true organic trends continue to force losses while naturally flushing the mistakes from the system.
Today’s existing home sales numbers support this thesis as single family home sales declined a notable 9.6% since last month with prices falling and inventory rising.
The National Association of Realtors (NAR) Chief Economist, Lawrence Yun, blames “unnecessarily tight credit” and “contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers”... Like the Feds before him, Yun would like to believe that the current circumstances are the part of a “crisis”, an anomaly not the norm.
Yet the “tight” credit and strict appraisals are but minor examples of the true organic processes currently playing out.
The latest daily Radar Logic national home price index (RPX) indicates that prices nationally prices are continuing to fall with the index breaking below 180 for the first time since April 2003 while eleven markets tracked by the S&P/Case-Shiller are setting fresh post-collapse lows with several markets falling to levels last seen in the late 90s.
Taken together with the latest miserable showing for new residential construction, depressed level of hombuilder sentiment and estimates of buyer traffic and weak purchase applications, total housing meltdown is back on the table with the ultimate reversion to the mean (and possibly beyond) being the likely outcome of this “crisis”.