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Five Things: Housing Staggers Toward a Bottom...


But the road is a long and winding one.

1) Housing Staggers Toward a Bottom...

"The people who demand pity of you hate you afterward for giving it."
- William Gaddis, "The Recognitions"

There are some weird ideas on the streets these days, and not all of them come from the Federal Reserve or Treasury Department... or the President and his apoplectic opponents, or even from reality television shows. Some of them stir up recognition from within, faint whispers of a shared collective consciousness, a silent drumbeat that throbs deep in one's veins.

I'm talking about the Case-Shiller Home Price Index, of course, as if you needed that wholly unnecessary information. But editors are people too, and mine insisted that I tie that first paragraph to at least one thing that is vaguely related to the economy. The Case-Shiller Home Price Index. Why not? It's fresh, just out today, and Case-Shiller sounds like a vaguely threatening Austro-German detective agency.

It says here on Bloomberg that the Case-Shiller Home Price Index posted its first monthly gain in three years. Prices rose 0.5% in May, the first monthly gain since July 2006. And so some kind of shared internal flashback mechanism was triggered on a wide scale. Scientists can't really explain it; this is, after all, the point where the pseudo-science of economics breaks down and life as a Maurice Sendak drawing begins.

"The fact that home prices may be finding some semblance of stability is good news that things are not likely to get worse," a senior economist at a large securities firm told me while trying to feed his cell phone into a paper shredder in between gnawing on some kind of animal bone.

Under ordinary circumstances, when the good news is that "things might not likely get worse," the only thing left to do is hunker down in storm cellar and pray for a quick and timely end. And to gnaw nervously on animal bones. The first part goes without saying. The second is for connoisseurs of fine economic horror... the kind of grim realism that flashes like a high-white electric charge up the spine culminating in a point near the top of your skull. Let's face it; it's a lot for the average person to handle. Which is why most people have packed it in by the time the bottom comes. In anything.

2) The Road is Long and Winding

Yesterday was light compared to Case-Shiller. The news that inventories of new housing were slashed by nearly six weeks' of supply, to 8.8 months' supply versus 10.2 months' was tempered by a continued decline in pricing. The Case-Shiller Home Price Index, however, adds the recognition of an element of stabilization to the mix. And that's what's heavy.

But this is all econo-speak. Let's add some on-the-ground perspective. According to Julie Crenshaw, writing for Newsmax, if we assume four people per household, the U.S. currently has enough surplus housing to provide shelter for the entire populations of the United Kingdom and Israel combined. That number includes foreclosures, homes for sale, and vacation homes.

It's true, housing is staggering toward a bottom; but it's doing so on a treacherous path carved out between two lanes on an interstate highway.

3) Man Without a Plan... Much Like All Men of a Certain Ilk

"As Federal Reserve chairman, Ben Bernanke has committed serious sins of commission and omission - and for those many sins, he does not deserve reappointment," is how Anna Jacobson Schwartz promisingly began an opinion piece in the New York Times that ran over the weekend. After that, things came unglued.

The piece is a must read. After all, the source is credible. Schwartz is an economist at the National Bureau of Economic Research and the author, with Milton Friedman, of "A Monetary History of the United States, 1867 to 1960." And to be sure, as a piece discussing the Fed's easy money policy and its role as the "manager of markets," as Schwartz puts it, there are valid criticisms throughout.

What's problematic is Schwartz making Bernanke the scapegoat of these criticisms.

Essentially, after we helped the Federal Reserve lay down railroad tracks right up to the edge of a cliff, and then willingly hopped on board the train fully knowing where we were headed, making the claim that Bernanke is a terrible Fed Chairman just because he happened to be the engineer on the last leg of the trip is ridiculous.
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