Housing Prices are Falling faster than during the Great Depression

Good Morning!

This was quite an eye opener this morning. This graph was put together based on the Case-Shiller Index which measures housing prices. As you can see, prices are falling faster than at any time during the Great Depression.



This was from the Economist. Here is the article in its entirety:

America's house prices are falling even faster than during the Great Depression


AS HOUSE prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.

Quick Take:

That 14% drop that was headlined this week in the news is even worse when you factor in inflation. The number then jumps up to 18%.

This will go down as the biggest housing bust in history and its still showing no signs of being over!

The CNBC Pump Monkeys and the April Consumer Spending Data

I was sickened this morning watching the pigmen trying to spin the April consumer numbers as a positive sign that the economy is bottoming. I find this network to be almost unwatchable now. Be very careful when you turn on this station. Its become nothing more than a pump machine for Wall St.

When you watch these Wall St. pros calling bottoms hour after hour on "bubblevision", take what they are saying like you would if you were looking at houses and listening to a realtor tell you "You need to buy now because prices will be going up!".

You would have thought consumers were spending like Paris Hilton at a shopping mall after listening to Squawk Box this morning. Here is the data from Bloomberg:

Some highlights or should I say lowlights:

"May 30 (Bloomberg) -- U.S. consumer spending slowed in April as income gains weakened, a sign the biggest part of the economy may be faltering.

The 0.2 percent rise in spending followed a 0.4 percent increase in March, the Commerce Department said today in Washington. Incomes grew 0.2 percent, bolstered in part by the government's tax rebates, and the Federal Reserve's preferred measure of inflation moderated.

Higher fuel costs, smaller wage gains and lower home values have shaken Americans' confidence, raising the odds that spending will keep slowing. Government tax rebates may only provide a temporary boost to economic growth in coming months."

My Take:

The thing we need to focus on here is when you adjust these numbers for inflation, we are getting poorer and poorer each month.

When incomes are growing at .2% and inflation is running at an annual rate of 4%, we are in the red each month. Some believe inflation is running much higher than the 4% thats now being thrown around.

Our government inflation numbers of the mid 2% range are not even worth discussing due to the fact they exclude food and energy. Its a useless number now in my opinion.

Dow Chemical reported a 40% increase in material costs which has forced them to raise prices by 20%. None of this bodes well for the consumer which is 70% of our economy.

There was very little data released on the economy today so I expect a sideways type trading session. Stocks opened slightly higher.

Until later!