Continuing to examine and hold a lively discussion of the Northern Virginia Real Estate market.
Please post your local house search updates, MLS finds, on-topic ideas, and links here.
Hey, everyone (xpovos) who said yesterday that we really could be coming out of the bottom, and that the March lows won't be retested may be right!The unemployment initial claims are complicated by the fact that:"NOTE: The seasonally adjusted weekly claims numbers are being impacted by the layoffs in the automobile industry and other manufacturing sectors. Usually companies cut back production in the summer, and the numbers are adjusted for that pattern - but this year the companies cut back much earlier. This distortion is expected to last for another week or two."The unadjusted data is available in the real press release from the Department of Labor: SEASONALLY ADJUSTED DATAIn the week ending July 11, the advance figure for seasonally adjusted initial claims was 522,000, a decrease of 47,000 from the previous week's revised figure of 569,000. The 4-week moving average was 584,500, a decrease of 22,500 from the previous week's revised average of 607,000. The advance seasonally adjusted insured unemployment rate was 4.7 percent for the week ending July 4, a decrease of 0.5 percentage point from the prior week's revised rate of 5.2 percent. The advance number for seasonally adjusted insured unemployment during the week ending July 4 was 6,273,000, a decrease of 642,000 from the preceding week's revised level of 6,915,000. The 4-week moving average was 6,666,750, a decrease of 110,250 from the preceding week's revised average of 6,777,000. The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.449 million. UNADJUSTED DATAThe advance number of actual initial claims under state programs, unadjusted, totaled 667,534 in the week ending July 11, an increase of 86,389 from the previous week. There were 483,981 initial claims in the comparable week in 2008. Things are still bad, but this could really be the true sign of the beginning of the end. The downturn in seasonally adjusted initial claims has now persisted for what? At least a month if not more. It's complicated by the mismatch of the usual seasonal adjustment, but still, I doubt it's "really" going up. Although in straight numbers it still is... Wishy-washy I know, but I think there's hope for a recovery. If not actual hope for the jobless...DC, MD and VA are not mentioned in the either increasing or decreasing columns which would put us at "flat" as in no measurable movement. But an interesting tidbit was that former Federal civilian employees are hitting the rolls: Initial claims for UI benefits by former Federal civilian employees totaled 1,642 in the week ending July 4, an increase of 14 from the prior week. There were 1,870 initial claims by newly discharged veterans, a decrease of 192 from the preceding week. There were 17,471 former Federal civilian employees claiming UI benefits for the week ending June 27, an increase of 17 from the previous week. Newly discharged veterans claiming benefits totaled 28,772, an increase of 242 from the prior week. Maybe those cushy government jobs aren't as secure as everyone here seems to think.Still, overall, I'm changing my tune. The economy is pulling out of this, led by the government intervention and government sector. So, the next leg down in the housing market will be due to realistic interest rates and the continuing trickle of foreclosures from income losses in our jobless recovery. But, since the economy is recovering, I don't think there will be an overshoot.
I'm a little confused by all that. If they're applying a temporarily invalid seasonal adjustment won't that make the numbers look better than they really are? It's too early in the morning for me to look at that many numbers.
Jeff B,Yes, that's correct. The distortion is such that the seasonally adjusted numbers look better than they really are. But still, if you slosh forward some of the claims from 2-3 weeks ago into now, you'd probably still get flat claims. Or you might, anyway.The funniest comment on CR was:Rob Dawg (homepage, profile) wrote on Thu, 7/16/2009 - 5:57 am Yalt (profile) wrote on Thu, 7/16/2009 - 5:54 amIn two weeks they start seasonally adjusting up instead of down--we'll see how things look then.That's when they switch to headlining the NSA number. Still, I do think it is now possible to realistically entertain the idea that the bottom may be in (for the economy). Just because I still think the bottom will be mostly L shaped, is not the point.
Cara- I think it will be interesting to see how it plays out. My guess is either Q3 may show solid GDP growth ~2%. This will mostly be do to inventory restocking rather than true growth. I think the interesting question is will people see growth, become less afraid and go back to spending...Either way even if we start growing 2% a year it could still be rough for the unemployed. The growth will likely come from efficiencies and a longer work week. As to your comment about government jobs not being safe. My guess is it is mostly non-career people just not being retained rather than career path job being let go. This is just my hypothesis...
"Cara said...Still, overall, I'm changing my tune. The economy is pulling out of this, led by the government intervention and government sector."The idea of "government invervection" as a whole new sector made me chuckle (sad but true). I can see a news report "the dow rose 100 points today led by gains in utilities and government intervention..."
CRT,It's so true though. The peanut gallery in CR is all saying "if this is the end, which sector is leading us out of the recession?" And the only answer I can see to that is the government, they're the only ones increasing spending.As far as I'm concerned, as long as the other sectors do follow this lead, such that eventually tax revenues are up from increased profits and incomes, and the government can ramp down, and let go of short-term boosts, then all's well that end's well.It would indeed make a terrible headline though.
Cara-I could see tech leading us out of this. I would like to see infrastructure and clean energy take the lead. Although obviously it is very unlikely they will take the lead without massive government spending.
housebuyer,That could happen. But is it happening now? What I see is financials leading, which given the bailouts and accounting changes and bank holding company nonsense, is the same thing as saying "government intervention" is leading us out right now. Sustainably though, tech will certainly help, and I'd like to see green energy and infrastructure too...
Cara-Tech is definitely taking the lead. The dow jones tech etf is up over 30% in the past 6 months vs. the S&P is up less than 10%http://finance.yahoo.com/echarts?s=IYW#chart1:symbol=iyw;range=6m;compare=^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
No sector has to lead us out of the recession, the recession will end because we stopped shrinking, not when we start growing again.But, if I had to chose, I'd go with history and say financials will lead us out. I knew JP Morgan-Chase was going to be a winner. I'm surprised by how big a winner GS is appearing to be, but I guess I shouldn't be. There'll be plenty more losers, but once they're gone you've got nice survivor bias. Bonuses for everyone.In terms of my other watchlists: we had a major M&A in house builders, but only one. I'm stunned. I'm still bearish enough to expect another.New unemployment claims do appear to be peaking, we've been getting signs of this for a few weeks, and it's growing. That means unemployment will peak 6-10 months from now. Maybe as few as 4. It'll still be 10%+, but not 12%+. That's bad, but not bad enough to jumpstart its own wave of foreclosures. It will just exacerbate the current one... known factor, time to move on.Interest rates are insanely low, and they will move up. But not as fast as they ought to. The Fed is playing some kind of game there. They didn't get burned. I don't which is scarier. The blatant cheating, or the fact that they got away with it unscathed. I'm not a rate guy, though, so I can't predict where they're headed or when. But as long as they're low, there will still be people who insist housing is cheap because it's affordable month-to-month.My bottom line is that we're seeing evidence post facto that we hit a strong bottom, and it's foolish to ignore the evidence, even if it doesn't make sense, or doesn't fit with our (my) personal agenda. That bottom line doesn't take into consideration anything that could happen in the future. There are still about 10 totally plausible 'black swan' style events that will destroy all the confidence that has been rebuilt, and even failing one of those, there's a non-zero chance for a "W" shaped recession, where this will just be our leg up. It'll depend on whether the recovery only fails to materialize, or actually collapses on itself out of sheer mass.
Xpovos- I know this is semantics, but I would say it will definitely feel like a recession if we just go to zero growth. The population is growing at ~1% a year so if we produce the same amount of goods each year and spread it over more people it will sure feel like you a poorer.
housebuyer,For the same reason, growth of ~1% isn't really growth, is it?You're right, and I'm not predicting happy times and rainbows. It's going to be a very painful next two years for a large portion of the population. I am a bear, a cynic, and a blogger, after all.
I just wonder how all of those unemployed people are going to drive the economy?
I assume that when he is talking about growth he is talking about real GDP so inflation/deflation effects are taken out.
Xpovos said..."For the same reason, growth of ~1% isn't really growth, is it?"Only in nominal terms, unless inflation is negative (deflation).[sorry, had to re-type that]But if he meant in real terms, then no, it would still be growth, despite such a small amount.
If the growth is truly that sluggish, then there won't a conflict between the interest rates needed to prevent over-inflation and the interest rates needed to sustain the housing market (slow it's demise, provide a price floor, whatever you want to call it depending on your underlying picture of what it "should" do). However, if growth were to return, and the Fed were right that we see, say 3-4% GDP increases for 2010, then that would "conflict" with the low interest rates that are making buying "affordable" now on a monthly payment basis. If that were to come to pass, where the business cycle and the housing cycle have conflicting interests in terms of interest rates, in all past eras businesses won. However, this time, I foresee a much larger role being cut out for Fannie and Freddie under their new truly government agency status. I think the current administration may try to keep mortgage rates under 6% regardless of what's being charged in the rest of the business environment. This would have the effect of driving private money out of the MBS business, and might perversely lessen the money available to be loaned. (I say perversely because the idea would have been to get out more cheap money to buyers and refinancers). Then again, perhaps this is just a discussion they will have behind closed doors and they will dismiss the idea after thinking it through....
MGIC stops writing new businessIn case anyone thought that the non-FHA channels for low-downpayment loans were going to last much longer here's another little death. (FHA has government insured MI, right?)
Cara-That will be pretty amazing if mortgage insurance goes away. It will be interesting to see if PMI follows suit or if they are just able to raise their premiums and get profitable business. (As an aside MGIC is actually up 20+% based on the news it was only down for a short time in the morning)I also don't think this really changes the markets that much it instead will just force people to use FHA loans instead of PMI. In some ways it is bad. I know a lot of people who used a conventional loan with 10%, if they instead had to use an FHA loan they may have only put 3.5% down.
. The World Bank has given warning that global economy will fall into a "deflationary spiral" unless urgent action is taken to reduce high levels of excess capacity in industry.
housebuyer,Upon more close reading of the Rueters article it appears they _will_ stop writing new business _after_ they've spun off a new company to write the new business. So, it's really non-news. MI's are in tough shape and need to restructure, who knew?Sorry about the head-fake.
Federal tax recepits fall to 14-year low
Cara-Thanks for the update. I was amazed that somehow that wasn't the number one story in the market today. I am glad you noticed the non-news part before we all got too worried that the world was ending :-D
contrarian,Your scenario isn't impossible, but even you seem to be admitting that it's going to take something more than what we've seen so far. Some new piece of truth will shake the markets to the core.I find that idea attractive, but given what it's shrugged off so far, I don't think so.
Nova-I feel like I am missing something it said individual income taxes fell 64%. I totally believe that we are having super high deficits, but am just a little confused by the article. How can income taxes fall 64%. Is there some strange accounting rules where they are not counted until the end of the year or something. Maybe you can make the case that unemployment is up a couple percent and salaries are down a couple percent but numbers like that will not lower income taxes substantially. I know most of us on this board are paying the same or higher taxes than last year.Does anyone understand what the article is doing to get to these numbers?Thanks
Contrarian- I think far too little marijuana is used to make a difference in tax revenues. Also out of curiosity what do you think will kill the market. Weak earnings or multiple contractions. I think fear has subsided and people are less likely to have margin calls so without high inflation we are unlikely to see super low P/E ratios so without earnings being a disaster I think the market lows will probably hold.
"Maybe you can make the case that unemployment is up a couple percent and salaries are down a couple percent but numbers like that will not lower income taxes substantially. I know most of us on this board are paying the same or higher taxes than last year."My only guess is that capital gains/bonuses etc must be way down this year from last year.Why that would hit this month... I don't know.
housebuyer,The tax system is set up such that everyone is required to almost pay (90%) to overpay their taxes ahead of time. As many of you know the vast, vast majority of Americans get a refund. This is a good idea because we all know if everyone just paid one large chunk per year many Americans would not have kept enough savings to pay it.So the monthly amount the article refers to is the summation of income tax withholding from paychecks. A small group of Americans (generally the wealthy with large amounts on line 8 (investment income) or capital gains taxes etc) pay four quarterly estimated tax payments. I suspect the months those are due have a jump in tax receipts.Maybe you knew all of that and I misunderstood your question. But anyways, given the above, the fact that receipts are down show that the amount of income Americans earned is way down -- partly because of layoffs but also because of pay decreases. It could also be a lot of business owners (who probably pay a disproportionate amount of income taxes) are not giving themselves a salary and are going to wait until the end of the tax year to see if that's realistic.
[Catching up to Cara's first post...]Cara,It's an outdated myth that federal gov't employees are never fired. The main advantage federal employees have is that there is not a normal business cycle for federal employees. Occasionally we have Congresses that want to tame the federal budget and order RIFs but that is rare.As for firing for performance -- this does happen. It's just cumbersome. So you have to really piss off your supervisor. But they can be fired. Generally speaking, if you are a career federal employee you can appeal the firing to the Merit Systems Protection Board (or if you have a discrimination complaint you can go through the EEOC). Some people win these cases and these agencies say the managers did fire them improperly or for discriminatory reasons. Many lose these cases and are fired. Since that whole process is cumbersome and annoying many managers think "is this person so bad that it's worth all that?" Plus even if it is completely frivolous many people fear being called racist, sexist, etc.I say it's outdated because this is something managers of white collar jobs deal with as well. While there is nothing akin to the MSPB in the private sector, there is some segment of employees who sue. So most companies build up a paper record to show why they are firing someone for performance. They also fear discrimination lawsuits as well. I think just as people in the federal gov't are annoyed by dead weight so too are many in the private sector. I think public or private you have a lot of delay in firing for performances. Unless the private sector job is McDonald's or whatever. There the potential damages are so low (since wages are low) that they don't worry too much about the lawsuits because it often is not even economical for anyone to hire a lawyer. (Of course, some companies like that get hit when a class action lawsuit comes like a gender discrimination class action against Wal-Mart.)The main difference IMHO is there are fewer to no economic layoffs in the federal government.
TBW & Leroy-I still think that the numbers must be missing something. They claim that total individual taxes were $8.7 Billion. I ran some numbers and you would need something like 100MM families that make $1,500 a month($18K/year) and pay a 5% tax rate.I can't believe that the average family is only making 18K and I can't believe that the average tax rate is only 5%. Unless my math is off I think their numbers are questionable.
http://franklymls.com/DC7103893what do you guys think?big place, condition looks good,but, the hood may be a little rough, butit's close to metro and has hope the neighborhoods are getting better.
housebuyer,Can you give more detail on your math?Note that you do not want to just take the Feb money and multiply it by 12. Not all months have similar intake. Obviously the four months with estimated payments are going to be higher and April-May (given the April 15 deadline) will be high as well (as those who owe money and payments for not providing estimated payments will send checks into the Treasury.)Another thing to consider while you run the numbers is that a portion of income is offset by the standard or itemized deductions, personal exemptions, and credits although I think you know that. So taxable income always will be a little lower than real income.
pat: obviously $525k was much too high an asking price.
pat,I chuckled looking at the price history on that home. Talk about following the market down. It should have started at $300k a year and a half ago not $525k.I really wish they would update the tax assessment data on these websites. It's actually currently assessed at $354k and no longer $400k. I would be very, very reluctant to buy in that area. Months ago the Washington City Paper reviewed various areas of the city and that part of town in NE had higher homicide rates than any part of SE DC east of the Anacostia River. Trinidad (a nearby neighborhood) is where they had the police checkpoints last summer.Also the fact that they don't show the interior (and call for visionaries) means the inside almost certainly is gross. Also see that window unit A/C? That means no central A/C.
pat,Don't fall for the fallacy that a Metro means it's a good area to invest in. There are plenty of neighborhoods that have had a Metro stop for one to two decades and still suck. And there are plenty of neighborhoods that have gotten better recently and have no Metro stop.
So the DC homebuyer credit starts phasing out at $70k singles/$110k married. The federal tax credit starts phasing out at $75k singles/$150k married.Do you think they messed up? This was a hastily done tax credit thrown into the stimulus. The $70k/$110k distinction between single and married taxpayers sounds relatively reasonable to me. The doubling it for married couples in the national tax credit feels pretty discriminatory to me as a single.
just chatted to the agent, apparently it was a 3 bedroom place that he cut into a rooming house and put interior partitions to make 8 rooms that was being rented to gallauget students.so it's probably pretty rough inside, but a lot of that can be fixed up.i just like the convenience of a decent walk to metro, if i am going to be working somewhere, or, need to get to the the pentagon or national.i ran the DC crime map, 339 crimes within 1500 feet, so it's not a pristine neighborhood, but, it's about a mile from capital hill, which is a big bonus for me.
TBW-I was just trying to find some numbers that make things work. My guess is that the revnue must just be lumpy when it comes in. I checked the link below and it says the IRS collects 1.4 trillion in personal income taxes or ~100 billion a month. So even in a recession there is no way that taxes went from 100 to 8 Billion. So it must be an accounting thinghttp://www.irs.gov/taxstats/article/0,,id=102886,00.html
most IRS influxes are either in April or quarterlythey get the withholdings, and that is a big deal, and they they ge tthe rest on the quarters.
Contrarian,I enjoy the news links even more when you add your own comments. Your earlier Goldman Sacks post was more interesting than the one on Tysons.Do you really think that thousands more banks will collapse…If that happens, then isn't the FDIC just a joke on the public. Thank you.
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