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Existing Home Sales – Lying Is a Time Honored Sales Tactic

OK, so by now you have heard that existing home sales were up 10% in August. At least that’s what the NAR and the mainstream media reported. Yes, there were some qualifications added to those media reports. Here are a few facts, or as Paul Harvey would say, “The rest of the story”.

Sales were down 8.5% month to month. The seasonal hocus pocus is particularly misleading this month because sales were already extremely depressed for this time of year. The fact is that the market is getting worse. Volume was 379k in September, down from 414k in August. This compares with 498k in August 2009, and 468k in September 2009. Sales are down 19% y/y. This is the worst September in at least the last 10 years.

Median prices were down a whopping 4% m/m and are now down 6.5% since June. This reflects the removal of the artificial price distortion caused by the homebuyers’ tax credit. This is a return to a real market based price, rather than one artificially and falsely inflated. Or at least it’s market based to the extent that it is also skewed by the Fed’s mortgage rate subsidy via its purchases of Treasuries.

In addition to the other seasonal hocus pocus, the NAR also adjusted August inventory up from 3,982,000 to 4,117,000. That enabled them to report an inventory decline to 4,040,000. Inventory is up 330k units, or 8.9% y/y. The inventory to sales ratio stands at 10.66 vs. 7.93 last September.

Any way you look at the real numbers, they are catastrophic. The idea that there’s any improvement at all here is just completely false.

So given that things are already catastrophic, what happens when the Fed finally stops subsidizing mortgage rates? Of course the operative word is “when.” Who knows? My guess is when the commodity futures vigilantes force the Fed’s hand via raging commodity price appreciation (inflation) that gobsmacks consumers into ratcheting down discretionary spending again. I imagine that will come within 6 months.

The amazing thing is that the huge drop in mortgage rates over the past 6 months has not boosted sales one iota. The Fed has wasted our money trying to achieve something that just can’t be achieved. What else is new?

Fact is, you can not stabilize an oversupplied market by artificially propping demand. Such moves are always temporary, and always leave behind a demand vacuum.

They have to remove supply from the market permanently to cope with the now embedded high levels of unemployment. The fact remains that the total number of employed remains in a downtrend. That means household formation remains negative, even though the census bureau has yet to make it official. It will when the 2010 data is finalized. Most economists are still assuming that the number of households is still growing in the US. That’s just another one of their lies.

These Wall Street chief economists are all pathological liars. They lie so much, they actually believe their own BS. Their job is to move inventory, not to provide honest forecasts freely to the public via the mainstream media. To them the media like WSJ and CNBS are just infomercial channels Never forget, Wall Street is just a wholesale to retail distribution machine. Lying is just a time honored sales tactic.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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