May 25, 2005
ONLY MASS MURDER WILL REDUCE DEMAND:
Home sales hit all-time high in April (Martin Crutsinger, 5/25/05, ASSOCIATED PRESS)
The National Association of Realtors reported Tuesday that existing single-family homes and condominiums were sold at a seasonally adjusted rate of 7.18 million units last month, a gain of 4.5 percent from a revised March sales pace of 6.87 million units.The strength in sales, which was attributed to further declines in mortgage rates, put new upward pressure on prices. The median cost rose to a record $206,000, up 15.1 percent over a year ago.
That represented the biggest 12-month gain in prices since November 1980 and added to concerns that the housing industry could be experiencing a speculative bubble similar to the stock market bubble that popped in the spring of 2000. The median is the midpoint where half the homes sold for more and half for less.
The jump in home prices raised worries in financial markets that the Federal Reserve might be compelled to boost interest rates at a more aggressive clip, given that the eight quarter-point rate hikes since last June have done nothing to cool off demand for housing.
However, some of those concerns were eased later in the day with release of the minutes of the Fed's last interest-rate setting discussion on May 3. Those minutes showed that although Fed officials were worried about what high oil prices might do in terms of sparking broader inflation pressures, in the end they decided there was no need to raise rates more aggressively
What high oil prices? Posted by Orrin Judd at May 25, 2005 11:46 AM
"...given that the eight quarter-point rate hikes since last June have done nothing to cool off demand for housing."
I'm confused. Can someone explain why the Fed would want to reduce demand for housing?
Posted by: b at May 25, 2005 11:50 AMHey, mass murder would also help with miles driven, dependence on foreign oil and the environment. Let's subsidize it.
Posted by: David Cohen at May 25, 2005 12:12 PMb wrote: "I'm confused. Can someone explain why the Fed would want to reduce demand for housing?"
Well, for one, a lot of the demand represents 2nd, 3rd, and multiple homes which is pricing first time buyers out of the market.
Posted by: Bret at May 25, 2005 12:33 PMbret:
How much is "a lot"? And how would jacking up the cost of taking a loan enough to scare off speculators or the rich not price many more first time buyers out of the marke?
Posted by: b at May 25, 2005 12:44 PMb wrote: "How much is "a lot"?"
Oops. You're right, probably not "a lot", but rather "some", though I did read somewhere that that's what Greenspan is concerned with. His concept seems to be that by pricking the bubble, house price would then become more stable or even drop a little, then first time buyers would be in better shape.
On the other hand, raising short rates seems counterproductive because that crushes inflationary expectations which tends to lower long rates including mortgages, which is indeed what's been happening, which of course makes speculation in housing more likely. But the gods of the FED work in mysterious ways that are beyond our meager comprehension.
Posted by: Bret at May 25, 2005 12:55 PMin san diego 20% of home purchases are by speculators. some homes near me are empty; the owners holding them empty on purpose (bought on spec)
Posted by: cjm at May 25, 2005 2:09 PMIf the fed is serious, they need to bring back the 20% down payment.
Posted by: Robert Schwartz at May 25, 2005 4:40 PMOJ: And thus we should subsidize it. QED.
Posted by: David Cohen at May 26, 2005 8:07 AMYes, if your end is mass murder.
Posted by: oj at May 26, 2005 8:16 AMNo, mass murder is just a means to an end -- environmental purity.
Posted by: David Cohen at May 26, 2005 11:28 AMSure, if environmental purity is your end then mass murder would be a viable means.
Posted by: oj at May 26, 2005 11:47 AM