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January 27, 2006

U.S. economy hits the wall, Fri., Jan. 27, 2006, 10:57 AM

The Gross Domestic Product (GDP) measure of U.S. economic activity was reported this morning to be growing at a disappointing +1.1 pct annual growth rate in 4Q05, down from a consensus +2.8 pct, which is itself significantly lower growth than the actual numbers shown in any quarter in the past several years.

But Treasury Secretary John Snow smiled his way through a difficult interview on Bloomberg TV with Kathleen Hays. Kathleen, who holds BA and MA Economics degrees from Stanford did not let him off the hook.

Kudos to Kathleen for her outstanding work, this morning. It was the best I have seen for a couple years. It probably caught John Snow off guard, anticipating another CNBC soft ball.

The upshot of her questioning was, if the U.S. economy is in the good shape claimed by the Administration, why are the Little People so unhappy.

I think I have an answer: most people would rather be working at General Motors and Ford than McDonalds or in a SOHO "consulting" business. But that's another story. The big story of the day is found at Haver Economics (powered by Econoday).

As to the GDP growing at +1.1 pct, if you have been listening to me, I don't think you are too surprised.


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Posted by Posted by Bill Cara on January 27, 2006 10:57:55 AM | Category: Economics

Discourse

http://news.yahoo.com/s/ap/20060127/ap_on_bi_ge/home_sales
"New-Home Sales Hit All-Time High in 2005 "
Such spin happens at the end of bull markets.
Looking in the fine print:
"The National Association of Realtors, in a report Wednesday, said that sales of existing homes fell by 5.7 percent in December, marking the third straight monthly decline — something that had not occurred since early 2002."
The spin continues...

Posted by: FirstConsul [TypeKey Profile Page] at January 27, 2006 11:11 AM [link]

New home sales have been boosted by incentives ie lower prices. Existing home owners have not yet caved to lower prices to move their 'used' product. Reality will likely set in as arm adjustments come into play this year.

Posted by: stockman [TypeKey Profile Page] at January 27, 2006 11:21 AM [link]

I asked someone in real estate.
"The prices are really high, hard to qualify for existing but since new construction has generally easier terms with banks, people are going there.
So for the same amount of money it's easier to get in preconstruction."
Not the most coherent, but this took place on AIM :D.

Posted by: FirstConsul [TypeKey Profile Page] at January 27, 2006 2:07 PM [link]

people are getting 80/20 loans....meaning they get conv. financing on 80% (which keeps them out of mortage insurance) and get a second on the 20%.... 100% financing....like magic they are into a house with nothing down....and maybe no savings....and maybe that 80% is an interest only loan....wow....maybe there is a credit bubble....but, i think stockman is right that builders are offering incentives in some parts of the country, but in other parts the housing market is still hot....but if inflation does get out of control real estate can go right up with it....holding through that period while having a great rate will probably be rewarding in the long run....the market housing has a strong arguement for pro and con.......your guess is as good as mine.

Posted by: Bullring [TypeKey Profile Page] at January 27, 2006 3:26 PM [link]