By Jeffrey P. Snider
I mentioned earlier today that pretty much the only sector of the economy (outside of government run lending for university waste) acting favorably toward interest rate "stimulus" was autos. Prior to the historic credit sell-off and MBS rout in the middle of last year, you could add housing to the list. The latest figures for March 2014 from the National Association of Realtors leave no doubt that housing has disengaged over the interim.
The obsession with temperature continues, even though March was free and clear of the kind of "unusual" storms plaguing January and February. Again, such pandering is indicative of the kind of groping and pleading for something that can explain what is otherwise obvious while still preserving the monetarist view and paradigm. To accept what is obvious means either total refutation or more experimentation with the limits of rational expectations theory.
Is the enthusiasm for the real estate market built on a solid foundation? Existing home sales fell in March to their lowest pace since July of 2012. Worse yet, sales have declined for seven out of the previous eight months, ever since the the Federal Reserve signaled its intent to slow the pace of its Treasury bond purchases.
Surprisingly, a number of media reports have accentuated the positives. For example, the rate of declining home sales has slowed. Some economists interpreted this fact as a sign of stabilization. Others continued to blame the unusually harsh winter weather for the past while simultaneously expressing optimism for the spring and summer buying seasons. Still others emphasized a modest uptick in builder sentiment.
All is certainly not well with real estate, however. The fact that the average 30-year fixed mortgage is a full percentage point higher than a year ago coupled with a