Housing And Economy Starting To Crash Hard

 Just reviewed March buyer clicks, Google’s analytics on all the sites we monitor – March is turning out to be the weakest month since last October re: Buyer interest  -                                          email from a Realtor in New Jersey to Zerohedge

For many reasons explained in earlier posts, I have been thinking that - contrary to the what is being reported in the mainstream media - the small bounce we have seen in housing was nothing more than a product of the historically record low interest rates, an easing of credit availability and - probably most significant - the implementation of Government-sponsored FHA low down-payment, low rate programs.

If you strip away the seaonal adjustments and other data manipulation methods used by the Government, National Association of Homebuilders and National Association of Realtors, the truth is that real organic single family home buyers are not buying homes.  I define "organic" as the buyers who are not distressed investment buyers.  In fact, even during the period when mass foreclosures were halted until the robo-signing fraud was settled, investment buyers represented typically 30-40% of all home sales.

Today the NAR's pending home sales index was released.  It declined .5% vs. a market expectation of a 1% increase  LINK.   Please note that the pending sales index represents contracts, not closings.  I can't find the number on the NAR website for the latest month released, but in January the cancellation rate was 33%.  Only 47% of all contracts signed even closed on time:  LINK  So even when the headline number appears to be positive and well-spun, the underlying "organic" number is abysmal.   As of the February release, the 3-month moving average of investors as a percent of total buyers was nearly 49%: 

Investors are still rushing into the market, with distressed sales making up a near-record 48.7 percent of sales in February on a three month moving average, according to a new report today from Campbell/Inside Mortgage Finance  - CNBC's Diana Olick, sourced from Zerohedge.com LINK

In addition, now that the robo-signing fraud case has been settled on favorable terms for the offending banks by the Obama Administration, foreclosure activity is already starting to pick back up:   LINK  So we will see an increase in supply as banks begin to ramp up foreclosures again.  To make matters worse, Obama has directed Fannie Mae and Freddie Mac to unload big blocks of their owned real estate (REO) LINK.   Investors are lining up as I write this to bid en masse on FNM/FRE REO.  These homes will likely end up dramatically increasing the size of the single-home rental pool, thereby putting even more pressure on home values as potential buyers choose to rent instead of buy. 

And make no mistake about it, FNM/FRE are unloading their bloated housing inventory in order to make room for more foreclosures.  A friend of mine told me about a HUD conference last fall at which a friend of his was part of the catering crew.  Apparently the conference was being conducted more like a sales pep-rally to try and stimulate HUD sales and move inventory in order to make room for the next foreclosure wave by the GSEs.    Do you really want to believe the housing inventory numbers being released lately by the Census Bureau and the NAR?  I have maintained all along that the "shadow" inventory is easily double to triple what is being reported by the Government and industry associations.

The fact is that the housing market may have "stabilized" for a brief period of time, but it was a combination of the factors in the first paragraph above that enabled the short respite from the collapse caused by the big bubble blown by Greenspan and the subsequent attempted resuscitation of the bubble by Bernanke.  If you want to know why the housing market will not recover for at least a decade, if ever, take a look at this chart sourced from Zerohedge:

(click on chart to enlarge)

That chart is brutal.  It shows the ratio of people who are actually employed to the total population.  Not only does it show a massive decrease in the number of people working and generating revenue support for Government spending and welfare, but it shows a rapidly declining base of people who could even consider buying a home.  That picture is a snapshot of the true dismal condition of the U.S. economy.

For everyone who is wondering why gold and silver made a big move this morning, Bernanke gave a speech this morning in which he re-opened the door for more QE, after seemingly closing that door at his recent testimony to Congress on the state of the economy and monetary policy. 

But the fact remains that all you have to do read through this post in order to understand that the Fed has no choice but to print money if it wants to prevent a full-scale banking and economic collapse in this country; and, more important, provide the liquidity needed to finance new Treasury bond issuance.  Got gold?