Zillow's Top Economist Nails It On The State Of The Housing Market

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This morning we got home-price data that showed slowing momentum.

Prices were up over 10% from last year, but those gains are down a bit from recent peaks. And, in general, the housing numbers have been mixed. Starts and sales, though up significantly from recent years, remain quite low by historical standards, and don't appear to be on the verge of surging higher.

In an email, Stan Humphries, the top economist at real-estate site Zillow, had the best characterization of the market that we've seen. Read this whole thing, especially the part that we've highlighted:

“There’s no doubt that these can be confusing times for ordinary people trying to read the tea leaves. Home sales are up for the month, but down for the year. Case-Shiller is way up for the year, as always, but slowing. Inventory is coming back, but not at the low end of the market. Negative equity is falling, but is still extraordinarily high in many areas ... The reality is that the market is moving from one defined by distortions including high negative equity and constricted inventory, to one defined by fundamentals like household formation rates, jobs and income growth. Unfortunately, some of these fundamentals are still fairly weak. This is a multi-year process that we are far from done with. This ride is not for the faint of heart, but we are slowly getting back to normal.”

Humphries is absolutely right about all of the distortions that have characterized the market in recent years. First there was the crash, obviously. Then the snapback. Then all the sales of distressed homes and huge investors scooping up homes in droves. All of these things are fading, and now we have something increasingly resembling a normal housing market.

The Economist explains: What was decided at the Bretton Woods summit

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ON JULY 1ST 1944 the rich world’s finance experts convened in a hotel in the New Hampshire mountains to discuss the post-war monetary system. The Bretton Woods system that emerged from the conference saw the creation of two global institutions that still play important roles today, the International Monetary Fund (IMF) and the World Bank. It also instituted a fixed exchange-rate system that lasted until the early 1970s. A key motivation for participants at the conference was a sense that the inter-war financial system had been chaotic, seeing the collapse of the gold standard, the Great Depression and the rise of protectionism. Henry Morgenthau, America's Treasury secretary, declared that the conference should “do away with the economic evils—the competitive devaluation and destructive impediments to trade—which preceded the present war.” But the conference had to bridge a tricky transatlantic divide. Its intellectual leader was John Maynard Keynes, the British economist, but the financial power belonged to Harry Dexter White, acting as American President Roosevelt’s representative.

The strain of maintaining fixed exchange rates had proved too much for countries in the past, especially when their trade accounts fell into deficit. The role of the IMF was designed to deal with this problem, by acting as an international lender of last resort. But while White, as the representative of a creditor nation (and one with a trade surplus), wanted all the burden of adjustment to fall on the debtors, Keynes wanted constraints on the creditors as well. He wanted an international balance-of-payments clearing mechanism based, not on the dollar, but a new currency called bancor. White worried that America would end up being paid for its exports in “funny money”; Keynes lost the argument. Ironically enough, now that America is a net debtor, White’s administrative successors have called for creditors to bear part of the adjustment when trade balances get out of line.

The Bretton Woods exchange-rate system saw all currencies linked to the dollar, and the dollar linked to gold. To prevent speculation against currency pegs, capital flows were severely restricted. This system was accompanied by more than two decades of rapid economic growth, and a relative paucity of financial crises. But in the end it proved too inflexible to deal with the rising economic power of Germany and Japan, and America's reluctance to adjust its domestic economic policy to maintain the gold peg. President Nixon abandoned the link to gold in 1971 and the fixed exchange-rate system disintegrated.

Both the IMF and World Bank survived. But each has fierce critics, not least for their perceived domination by the rich world. The IMF has been criticised for the conditions it attaches to loans, which have been seen as too focused on austerity and the rights of creditors and too little concerned with the welfare of the poor. The World Bank, which has mainly focused on loans to developing countries, has been criticised for failing to pay sufficient attention to the social and environmental consequences of the projects it funds. It is hard to believe that either institution will be around in another 70 years' time unless they change to reflect the growing power of emerging markets, particularly China.

Dig deeper:
The IMF suggests new rules for broke countries (June 2014)
Congress’s failure to support the IMF is shameful (March 2014)
The history of Britain's relationship with the IMF is unusual (May 2013)

Chinese and Indians are accumulating more gold than most of the rich world combined. In India, gold can be thought of as a parallel currency. The current situation is similar to that during the end of World War II when America owned 2/3rd of the world's gold. But the IMF and the World Bank continue to preserve the interests of old powers by letting them print as much as they can!

Breton woods convened subsequent the fallout of broadly attributing macroeconomic ends at the expense of microecomic realities.

It's problematic to suppose there is 'one big idea' when economics is considered, tacitly, when the 'big idea' of economics is efficiency, an error prone economy can rapidly produce chaos.

Contra competitive tensions between the erstwhile pillars of the financial complex were known to prevent this by instituting the difference of perspective as it pertains to asset classes, duration, and quality of expectations.

'Liars dice' and monetary intuitions amongst integrated financial institutions that opt for efficiency in the 'at the risk of risk of failures of durability' --- moderation of monetary policy can be seen to facilitate failures of exchange clearance, closure, and re-allocation. (Deferral of Periodicity in the exchange mechanism promotes diaphany and annihilation of time)

Strata of differentiation amongst nations, currencies and asset classes, scrutinized for real, (transferable, trade able, specie), units is the 'expected' of a functioning exchange mechanism.

All this product of the debatable extents considering 'foolishness' and 'money', given in the most basic sense that money is 'legal tender'.

It is glib to say IMF outlived its usefulness as shown in the 1997 Asian financial crisis. As a tool of the neoliberal, Chicago School-based, disaster capitalists exposed by Naomi Klein, IMF was extremely useful during the 1997 crisis.

It might be a distant memory to some outside the Asian region, but the trajectory of the 'four Asian tigers' was beyond the horizon; unstoppable, many claimed. Malaysian PM Mahathir was the IMF's pariah for instituting capital controls. Never again would Asian economies be beholden to the IMF.

As I understand, the BRICS Development Bank is to be based in Shanghai,the Financial Stability Board has taken over from IMF (underwriting only 29 too-big-to-fail banks) and the deal is done. Bretton Woods behemoths/ dinosaurs no longer have a global role, but may continue for a while, writing policy research papers which cannot be authorised by an unconstitutional Executive Board, because US Congress prevents restructuring of the Board to its authoised quota.

The penny has dropped; don't even bother starting the clock for the next seventy years. There's not one single 'tick' nor 'tock' that will issue forth.

The Economist explains: Why the first world war wasn't really

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THE world—or, at least, those parts of it that participated in the original events—has recently taken great interest in the first world war. Its almost casual beginning, between June 28th 1914, when the heir to the throne of Austria-Hungary was assassinated by a Bosnian nationalist and the first days of August, when Germany declared war on Russia and France, drawing in their ally Britain, has fascinated historians, while the horrors that followed have fascinated everyone, though in a rather different way. But does the conflict deserve its title? It was undoubtedly a world war. But it was certainly not the first. That laurel belongs to a war which broke out 160 years earlier, in 1754, and carried on until 1763. Though fighting did not start in Europe until 1756, and for this reason the conflict is known as the Seven Years’ War, it was truly global. Every inhabited continent except Australia saw fighting on its soil, and independent powers on three of those continents were active participants.

The first action of this first global conflict involved a young officer whose name may be familiar to some readers. On May 28th 1754 a small group of soldiers from the British colony of Virginia, under the command of a man called George Washington, engaged a group of French troops who were interloping from New France (ie Canada) into territory the British considered theirs. Instead of peacefully repelling them as he had been instructed, Washington ended up killing several of them, including their commanding officer. This campaign in North America then continued, with both sides in alliance with local Indian nations, until, two years later, Britain’s ally Prussia attacked the small German state of Saxony, bringing Saxony’s ally Austria, and thus Austria’s ally France (and therefore France’s enemy and Prussia’s ally, Britain), into the conflict. It is a sequence of events eerily similar to the way that in 1914 an attack by Germany’s ally Austria on the small Balkan state of Serbia brought in Serbia’s ally Russia, which then threatened Germany, which then declared war on both Russia and Russia’s ally France.

The war rapidly globalised. Both Britain and France reinforced their colonial troops in North America, and started attacking each other’s colonies in the West Indies and trading stations in Africa and India. In India, some of the princely states which had recently emerged from the dying Mughal empire also got involved, and Britain ended up taking over one of them, Bengal. The war came to South America when, near its end, Spain joined the French side and attacked one of the American colonies of Britain’s ally, Portugal.

Like the first world war, this global conflict reshaped the globe. Indeed, it is the reason why the modern world is an English-speaking one. As a colonial power, France was destroyed, and did not return seriously to the business of overseas conquest until it attacked Algeria in 1830. All of North America east of the Mississipi became British, save the city of New Orleans, which became Spanish. And the foundations of British rule in India were laid as well. As for George Washington, he ended up leading a rebel army put together by colonials who, freed from fear of French encirclement, unwilling to help pay for the war that had given them that freedom, and frustrated by British protection of the lands of their Indian allies from encroachment by colonial property speculators (including Washington himself), decided that they would rather go it alone.

Dig deeper:
Learning from the first president (June 2013)
A century on, there are uncomfortable parallels with 1914 (December 2013)
Europe's commemorations could end a 100-year haunting (November 2013)

So why does The Economist pedantically insist on calling the First World War the 'first world war', as if it were a descriptive term? Surely it deserves capitalization because it is a specific instance that everyone recognizes as a named event, not a description.
For example, if you are happy with the Seven Years War, because the seven years war might be ambiguous with other wars that lasted 7 years, and you are happy with WWI as an abbreviation, then why not the First World War and the Second World War?
If you insist on decapitalizing these two wars, I shall have to start calling you the economist. Vague and ambiguous? I hope so. If you get really opinionated about only using lower case, I shall call you the e.e.conomist.

First, believing that we do not speak French because of the Seven Years' War is a fallacy. If we spoke French at all, it was going to be because they aided us in our separation from England.

Secondly, French, also German and English (of course) were debated as being the native tongue of our new country. The people back then were far more adept at speaking multiple languages because of their foundations. We are lazy today, and think that this is just bullocks.

Third, "All of North America east of the Mississipi became British, save the city of New Orleans, which became Spanish," is entirely incorrect. New Orleans was never Spanish. Have you ever been there? Goodness son, they're the Cajun French for a reason. Texas and Florida, however, were still Spanish and Georgia was only taken to be a buffer zone between the Colonies and the Spanish, while serving doubly as a penal place for criminals to be sent.

Fourth, as an author, you should make it a point to better reference your broad statements or allow those of us who are Historians, to enlighten others on such matters. This essay/article/writing is a ridiculous opinion on something that has little to no quantitative proof, unlike WWI. This is why your thoughts are dubious at best.

The Economist: Digital highlights, July 5th 2014

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The incorporated woman
Companies make huge amounts of money from harvesting personal data. In response, an artist is trying to regain control of her own data by turning herself into “Jennifer Lyn Morone™ Inc”, a fully registered company in Delaware

Why the first world war wasn’t really

The first world war began 100 years ago this month. But the epithet should belong to a conflict which began 160 years earlier and ended in 1763. The “Seven Years’ War” was, furthermore, started by a young soldier called George Washington

Refining the palette

When a restored masterpiece by Titian was returned to the walls of the National Gallery in the 1960s critics were aghast that the previously staid canvas had turned Disney-bright. A new exhibition at the gallery helps explain why colour matters

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Technology: Emotional issues
Facebook has been secretly manipulating the type of posts that appear in users’ feeds. The revelation has sparked a furore over the website’s policies

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“...years later travels took me Tanjore, a place we grew up in. I found my old home. Kids playing on the streets called their dad who very graciously showed me the house. The Hindu religious symbols, including a statue of Lord Ganesha, were still intact. The home now belongs to a Muslim family. We will hope for peace.”—on “My swastika”, June 25th 2014