THE DAILY EDGE (23 March 2017)

Home Sales Slide on Tight Supply, Higher Prices Sales of previously owned U.S. homes fell 3.7% in February from the prior month to a seasonally adjusted annual rate of 5.48 million, the National Association of Realtors said.

Purchases of previously owned homes, which account for the vast majority of U.S. sales, decreased 3.7% from January to a seasonally adjusted annual rate of 5.48 million last month, the National Association of Realtors said Wednesday.

The decline followed a strong performance in January, when sales rose 3.3%. February’s sale pace was 5.4% above the same month a year earlier. (…)

Inventory increased 4.2% at the end of February from a month earlier, after December’s reading was the lowest since the Realtors association began tracking all types of supply in 1999. Inventory in February was still down 6.4% from a year earlier.(…)

The median sale price rose 7.7% in February from a year earlier, to $228,400. (…)

Rates for a 30-year mortgage rose to 4.3% last week, the highest level this year, according to mortgage company Freddie Mac. (…)

BTW, existing sales are reported at closing. So the Feb numbers provide the first reactions to the increase in mortgage rates post the elections.

Here’s the national trend:

And here are the regional trends, the sum of which resulting in the national trend from which the NAR and other economists derive their reasoning that tight supply is restricting demand (charts from Haver Analytics). Is supply so much better in the south? 

As I have written before, “limited supply” is a false problem created by realtors. Supply is limited only when compared with the bubble and post-bubble years.

• Renters Now Rule Half of U.S. Cities

• From CalculatedRisk:

Two of the key reasons inventory is low:

1) A large number of single family home and condos were converted to rental units. In 2015, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers.

2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

Here’s a real supply problem via The Daily Shot:

• US output continues to climb.

Defaults in China’s Interbank Market Raise Stakes for PBOC The People’s Bank of China’s multiple mandates—keeping risk in check, the government’s top economic priority, and steadying the yuan without triggering a cash crunch and stifling growth—are becoming harder to juggle.

The People’s Bank of China has tightened its hold on credit in recent weeks, part of government efforts to rein in financial risks. The shift has pushed up short-term borrowing costs; this week the closely watched three-month interest rates at which banks lend to each other climbed to levels not seen in nearly two years.

“The rising rates have made it much more expensive for small banks to borrow,” said one trader. “There were people begging for liquidity.”

On Monday, some small, rural banks failed to make good on short-term funds borrowed from other lenders, according to traders and banking executives. Late Tuesday, the PBOC injected an estimated 300 billion yuan ($43.6 billion) into the financial system via short-term funding facilities, the people said, in an apparent effort to prevent the defaults from evolving into a full-blown credit crunch. (…)

• Short and medium term rates are up 20% in the last 6 months. Such rapid rises seldom end nicely. (chart from topdowncharts.com via The Daily Shot)

GOP Lawmakers Struggle to Unite on Health Bill The GOP plan to replace the Affordable Care Act remained in jeopardy after a day of negotiations among Republicans that showed signs of rallying conservatives behind the bill while driving away more centrist lawmakers.

(…) A deal that was emerging on Wednesday night had the potential to win support for the bill from wavering conservatives, many of whom have said the bill doesn’t go far enough in wiping away the 2010 health law championed by Democrats. (…)

“We’re encouraged tonight at the real willingness of not only the White House but our leadership to make this bill better,” said Rep. Mark Meadows (R., N.C.), who leads a group of 30 to 40 conservatives called the House Freedom Caucus, many of whom have withheld support, even though they believe in the party’s goal of repealing the ACA.

It was the most optimistic assessment from Mr. Meadows in recent days. But he cautioned: “We’re not there yet.’’ (…)

Republicans are using a procedural shortcut that would enable them to pass the bill in the Senate with only GOP votes, requiring a simple majority, rather than the 60 votes that most legislation needs in the Senate. Republicans hold 52 seats in the chamber. (…)

But by the evening, House GOP leaders said they received new advice from Senate Republicans: While the change might not survive in the Senate, it wouldn’t enable Democrats to block the whole bill, a GOP leadership aide said. (…)

Senate Democrats said Wednesday night that Republicans wouldn’t be able to retain the provision eliminating those benefits if the bill made it to the Senate.

“It will require 60 votes to repeal these protections, and the votes just aren’t there in the Senate,” said Matt House, spokesman for Senate Minority Leader Chuck Schumer (D., N.Y.). (…)

However, some conservative interest groups remained strongly opposed to GOP bill. Organizations backed by billionaire industrialists Charles and David Koch said late Wednesday that they would spend millions of dollars to defeat the health-care bill, the Associated Press reported.

• Trump Still Negotiating in Bid to Save Healthcare Bill Before Vote

The retail apocalypse has officially descended on America

(…) More than 3,500 stores are expected to close in the next couple of months. (…)

The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia, the next two countries with the most retail space per capita, according to a Morningstar report from October.

Visits to shopping malls have been declining for years with the rise of e-commerce and titanic shifts in how shoppers spend their money. Visits declined by 50% between 2010 and 2013, according to the real-estate research firm Cushman & Wakefield. (…)

As stores close, many shopping malls will be forced to shut down as well. (…)

Not only do the malls lose the income and shopper traffic from that store’s business, but the closure often triggers “co-tenancy clauses” that allow the other mall tenants to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the anchor space. (…)

That means that nearly a third of shopping malls are at risk of dying off as a result of store closures.

Bridewater’s Dalio on populism. Including this:

Trump won’t allow you to use iPads or laptops on certain airlines. Here’s why. Hint: It may not have much to do with airplane security.