Ridiculing the nonsense of the San Angelo Standard Times Editorial Board since 2007

Tuesday, April 1, 2008

Back! With boring economic stuff!

I’ve been away for a while, but I’m picking up on a SASTEB trend: economic cheerleading. Here’s the sad part: some cheerleaders would be far more competent at analyzing economic data. Plus, the rest would admit they have no clue what they’re talking about.

Such paths are not for the SASTEB, though. Thus, the Mar. 27 article: “Housing Data Could be Positive Sign.”

First, a brief background on the current state of the economy. Most non-comatose humans understand we’re experiencing a significant economic drawback, probably a recession, and we might yet see a full-blown collapse. The reasons for the downturn are complicated, but I’ll make the story short.

The Fed cut interest rates to insanely low levels during the economic downturn of 2000/2001, which created a credit bubble. Lenders were falling all over themselves to give out loans at low rates to unworthy candidates. While housing prices were rising, it was no problem - people could keep borrowing against their always more valuable house to pay off debts. However, when people began to realize that their doghouse was being appraised at $200K, home prices started to fall. Soon, homeowners couldn’t pay back their loans and lenders foreclosed on their houses. Lots of financial institutions had bought the homeowner’s debt, so they weren’t getting paid, either. Soon, few had any money to lend, and the hand full that did had no idea who was a worthy recipient of funds.

Now, this credit crunch has impacted the entire American economy. Almost all sectors have been hit - financials the hardest. Some of the oldest and stablest financial institutions are in dire straits, and one giant has already fallen.

Long story short: The entire economy is on very shaky footing.

Lots of recent data has come out regarding the economy - let’s see how the SASTEB responds.

We are aware that the U.S. housing market is still slumping, but one figure stands out in the latest outpouring of statistical indicators, mostly ranging from bad to real bad, that could signal positive signs ahead.

Really? One good sign... in a sea of really nasty ones. Does that portend happy things? Because I would think the whole sea of nasty signs seems like what you should look at.

Sales of existing homes actually rose in February, 2.9 percent over January, according to the National Association of Realtors. If this is a turnaround, it is a modest one because sales were still down nearly 24 percent from a year ago.

Nice. Way to make this whole article seem completely unnecessary. A 2.9% increase? After a 24% decrease? It seems kind of paltry. Mainly because it is.

At this point, we'll take any positive news we can about a sector in the struggling U.S. economy.

Sure, but does it really warrant a full article? Seems like you might be running out of steam - there’s not much else to write about, and a full 5 or so inches left to fill.

The home sales rose as prices are still falling. The median home price, $195,900, is down 8.2 percent from $213,000 a year ago February. And home prices will likely continue to fall, although perhaps not as precipitously, until the vast inventory of foreclosed homes - currently one in nine on the market - is liquidated.

Excellent strategy to waste space - bombard us with unanalyzed and unexamined statistics. Let’s see if the SASTEB ever gets back to this statistics dump.

But some economists see the uptick in sales as a promising indicator that prices have fallen far enough to entice buyers back into the market.

Well, forget analyzing those statistics. Just uncritically and vaguely cite "some economists" - that's a good way to fill newsprint.
 
Here’s the part the SASTEB forgets, though: buyers can't be enticed back into the market unless they have creditors willing to back them. And these creditors aren't currently willing to do so. The thesis seems a bit underdeveloped, to say the least.

In the best case, these buyers would be the working families who were priced out of the market during the boom. And priced out they were.

Forget priced out - these working families have no access to capital. That’s the root of the economic downturn, not the housing market! You can’t buy a house without credit. You can’t expand a business without credit. The economy functions on free access to capital, and in a credit crunch, there’s not nearly enough to go around. That’s the problem, not working families being priced out of the market. THEY DON’T HAVE THE MONEY TO BUY HOUSES AT ANY REASONABLE PRICE LEVEL!!!!

The oft-cited S&P/Case-Shiller index showed home prices rising 74 percent from 2001 through 2006 while the median household income rose only 15 percent. These are buyers who want a home for the best possible reason - to live in it - rather than as an improbably ever-rising investment.

Q: Why is buying a house as an investment a bad idea? Real estate has been the strongest performing sector over the past 50 years - why shouldn’t people invest in such a robust market? Why are investors somehow less ideal than these “working families?” Why aren’t investors also considered workers?

A: Why do you care? This paragraph was obviously a space filler.

Q: Whoops. Sorry.

Some economists see the housing market stabilizing in the second quarter, others by the end of summer, still others by the end of the year, with the more pessimistic not seeing real improvement until next year.

Ok, so you clearly have no real prediction or analysis as to when the housing market will stabilize. And, heck, it doesn’t even matter, does it? The housing crunch hasn’t even hit San Angelo - new home sales are through the freshly-shingled roof. Existing home sales haven’t really been hit. The housing market in the only place the SAST delivers is A-OK. So... why even write this article?

This may not be the absolute bottom of the market, but maybe we can at least see it from here.

Really? You have no reason why the downturn will end. 1 out of 9 homes on the market have been foreclosed. There’s no credit available for potential home purchasers. The economists you cite clearly have no idea when the downturn will end. And, even if the housing decline ends, there’s no reason the credit crunch will also end, the economy will still be in dire straits.

Thanks, SASTEB. This article was an embarrassment to humanity. If you guys don't have anything to write about, just pay for a decent op-ed from the Christian Science Monitor or the New York Times. Save yourselves the embarrassment.

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