Case-Shiller: Home Prices Weaken Further in October

How immigrant amnesty would affect housing markets – I’ve long suspected that immigration amnesty would be a boon to housing markets. The idea is that illegal immigrants could be deported and so will be less willing to make the fixed investment of homeownership, and illegal status holds down wages which should also decrease the demand for housing.  However I haven’t seen any persuasive studies on this issue. Today I discovered a new paper by Catalina Amuedo-Dorantes and Kusum Mundra that provides some evidence: We address this gap in the literature and find that legalization raises immigrant homeownership by 20 percentage-points even after accounting for a wide range of individual and family characteristics known to impact housing ownership.  Note that this does not address the question of whether legalization increases the demand for housing or just the type of housing. For instance, legalization may simply lead illegal renters to buy houses that are identical to the ones they were renting, which aside from potential externalities to homeownership shouldn’t affect prices.
 

Crude Oil Trades Near Two-Year High on Speculation U.S. Inventories Shrank – Crude traded near a two-year high in New York on speculation that cold weather in the U.S. and Europe will boost demand in industrialized nations.  New York, the biggest city in the world’s largest oil consumer, suffered the heaviest December snows in six decades as storms spread across the eastern U.S. Oil fell yesterday after China raised benchmark lending and deposit rates.  “Oil is more or less balanced between positive data from cold weather in Europe and the U.S., and negative data from China’s latest interest rate hike,” “I don’t expect a big move in one or the other direction this week as volumes are very low. When traders return in the New Year, we’ll get a better picture of the price direction.”

Shoring Up Banks So None Fail
- The “too big to fail” problem among banks will be partly fixed in 2011.  Global regulators are expected to reach an agreement that would make a select group of megabanks hold higher levels of capital. That requirement will make them safer, while removing some of the benefit they get from being big. But eliminating the taxpayer guarantee enjoyed by large lenders will require more fundamental measures, which will take years to achieve.  Regulators seem to agree that banks deemed too big to fail are dangerous. Large lenders enjoy implicit government support because of their importance, and as a result, they tend to have higher credit ratings and pay less for deposits and wholesale financing. That, in turn, encourages them to become even bigger and more interconnected.

 
Borrow Like There’s No Tomorrow – The silence lately about America’s public debt problem has been deafening. When nobody wants to talk about a problem, avoidance is always a solid indication that we’ve gone into deep denial about that problem. The public debt is the well known "elephant in the room" that nobody wants to see. Thus I am and am not surprised at the tepid response to the Huge Jidette (a word play on "huge debt") for president campaign. So-called liberals like Paul Krugman or Dean Baker rationalize debt problems away, saying interest on the debt doesn’t matter in the long run. This is a very deep form of denial. So-called conservatives pretend to care about debt and the size of goverment, but then they run up the debt as fast as they can whenever they get the chance, or they create brand new agencies we don’t actually need—see Homeland Security. Again, this is another deep form of denial. My aphorism is politics makes you stupid.

 

Number Of Uninsured Americans Soars To Over 50 Million –  As the Great Recession has sown unemployment and downgraded work even for those people who have held on to their jobs, the number of Americans lacking healthcare has swelled beyond 50 million, according to a sobering new report from the Kaiser Foundation.  Among the report’s most troubling findings: The number of Americans without any health care coverage grew by more than four million in 2009. That left almost one-fifth of non-elderly people uninsured. Among those between 19 and 29 years old, nearly one-third lacked coverage. The study underscores the degree to which the recession has accelerated the loss of basic elements once viewed as inextricable pieces of a middle class life. The number of Americans lacking medical coverage now exceeds the population of Spain.
 
U.S. Health Premiums Outstrip Income Gains: Chart of the Day – U.S. health-insurance costs are rising more quickly than the ability of U.S. families to pay and the gap is widening, according to the Commonwealth Fund.  The CHART OF THE DAY shows that private-insurance premiums for families rose three times faster than median household income over six years, the New York-based non-profit fund said in a report. Deductibles, the amount that policy holders have to pay before insurance coverage kicks in, rose almost five times faster, the fund said.  “Families are being priced out of the market,”  “The consequences are less adequate insurance coverage, costlier insurance coverage, higher rates of no coverage and growing stress on the family.”  In 15 states, health-insurance premiums are the equivalent of at least 20 percent of median household income for people under 65, according to the report.
 
Consumer confidence unexpectedly falls in Dec. (Reuters) – Consumer confidence unexpectedly deteriorated in December, hurt by increasing worries about the jobs market, according to a private report released on Tuesday. The Conference Board, an industry group, said its index of consumer attitudes slipped to 52.5 in December from an upwardly revised 54.3 in November. The median of forecasts from analysts polled by Reuters was for a reading of 56.0. The expectations index declined to 71.9 in December from 73.6 in November. The present situation index fell to 23.5 from 25.4. Consumers’ labor market assessment worsened. The "jobs hard to get" index rose to 46.8 percent in December from 46.3 percent last month, while the "jobs plentiful" index dropped to 3.9 percent from 4.3 percent.
Car sales: China takes pole | The Economist – More vehicles will be sold in China than anywhere else in 2011 – THE world’s auto industry is expected to suffer a fourth year of poor sales in 2011. Demand in America will rise only slightly: with the housing market still in the doldrums and cash-for-clunker subsidies at an end, consumers will be wary about buying big-ticket items. In Europe, without subsidies and with government spending cuts due to come into force, demand will fall further. Sales in Japan will dip again. And although sales will rise in China, the pace will slow. Demand for cars will grow in other developing countries such as India, but their volumes will not be enough to make up the shortfall.
 
Case-Shiller: Home Prices Weaken Further in October – S&P/Case-Shiller released the monthly Home Price Indices for October (actually a 3 month average of August, September and October). This includes prices for 20 individual cities and and two composite indices (for 10 cities and 20 cities).The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000). The Composite 10 index is off 30.7% from the peak, and down 0.9% in October(SA). The Composite 20 index is off 30.5% from the peak, and down 1.0% in October (SA). The second graph shows the Year over year change in both indices. The Composite 10 SA is up 0.2% compared to October 2009.  The Composite 20 SA is down 0.8% compared to October 2009. This is the first year-over-year decline since 2009. The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Credit Cards’ Cash Rewards Prompt Higher Spending, More Debt – Credit cards that give cash back prompt consumers to spend more and accrue more debt, according to researchers at the Federal Reserve Bank of Chicago. The initiation of a 1% cash rewards program yielded, on average, a $25 reward each month — and an increase in spending by $68 a month and in credit-card debt of $115 a month, the economists say in a paper to be presented at the American Economic Association meetings next week. The three economists looked at 12,000 credit card accounts at a financial institution whose identity they don’t disclose over a two-year period ended June 2002. Some of the customers were offered cash-back rewards; others weren’t. That debts grew faster than spending among those offered cash rewards likely means people reduced their monthly payments more than they increased spending.
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