Housing, Flight Delays and Another Acronym

This week we start with a look at housing (not what you think), touch on the sequester (how can we not now that folks finally are taking this seriously) and the America Fast Forward Bonds.

When it comes to housing, we hear quite a bit these days about things getting better and, in some places, bidding wars making a fashionable comeback. While this may be true in some places, as we look at foreclosure data, we can’t help but wonder if the National Association of Realtors has some self-interest or if some of the indices that look at the largest cities might be missing the rest of America. Yes, we understand that foreclosures are not the end all. We’ve made that clear in prior commentaries. In fact, we encourage our readers to look beyond any one single data point. So, while the below highlights foreclosures, we encourage our subscribers to also contemplate Housing Prices and Assessed Values today and where they might be 12-18 months from now (assessed values lag).

With my disclaimer in place, we look at the Foreclosure percentage over the last year to see where it is higher as of January 2013 than it was 12, 9, 6 and 3 months ago. Yes, it meets the criteria for all parameters in 854 counties across 44 States.

Source: DIVER Analytics; Filter Module; RealtyTrac

The below maps have a striking similarity. While there is some improvement, 854 counties beg to differ.

Source: DIVER Analytics; Map Module; RealtyTrac

On housing, one more point worth considering. The Homeownership Rate for the fourth quarter of 2012 was greater than or equal to the rate for the same time one year ago in only 16 States – in other words, it was less in 35 States (numbers include the District of Columbia). Perhaps things are getting better in some places but we encourage our readers and users to look beyond the headlines.

Speaking of headlines, it seems folks are finally getting a little nervous in the service regarding the sequester (no pun intended). Saturday’s New York Times (front page) let us know of the impending doom of sequester by highlighting the potential for flight delays! They also ran a front page story “Fear of U.S. Cuts Grows in States Where Aid Flows.” Regular readers know we have written of our concerns for months – not flight delays but the broader implications of sequester (after all, it is so draconian it wasn’t supposed to happen). We have repeatedly focused on the level of reliance by States and counties on Federal funds and the impact of the sequester. Politics aside, our elected officials in Washington need to stop playing chicken and the game of kick the can with our future. What happens in Washington, unfortunately, does not stay in Washington. The results of too much politics may very well surface on our collective doorsteps like a bad hangover. States and local governments may be forced to make cuts and/or raise taxes to make up for excessive drinking, I mean politics. While some States can absorb the blow, others may not be as prepared.

So, if the sequester kicks in, which States have a “rainy day fund” that can help soften the blow? We look at the Stabilization Funds as a Percentage of State Expenditures.

Source: DIVER Analytics; Map Module; NASBO

Not all bad news – at least from a headline perspective. This week we learned of the introduction of President Obama’s America Fast Forward bonds program to finance infrastructure spending (who comes up with these names). Some are calling AFF the BABs II program. As reported by the Bond Buyer, while encouraging, the AFF release did not offer a subsidy rate and noted that the introduction of any such program will not “gain much momentum in Congress before lawmakers hash out a comprehensive deficit reduction plan.” “Market Reacts to Obama’s AFF Proposal”, J. DePaul, The Bond Buyer, 2/20/2013. When might that happen?

Our concern is this may very well be the quid pro quo for the 28% cap proposal. We’ll give the muni market this bone (you all loved BABs so much) in return for the cap for the wealthy (we need to keep reminding the folks in DC that the cap impacts more than the wealthy). As the quotes in the Bond Buyer article note, AFF would be nice but it should not be the substitute for muni-bond tax exemption.

Did you see Friday’s WSJ headline? “Payroll Tax Whacks Spending.” Politics aside here – some major companies across the US are adjusting their revenue and earnings numbers down as a result of the expiration of the payroll tax holiday (not a tax increase). As we discussed previously, our concern is less dollars in the consumer’s pocket lead to less spending which leads to less tax revenue. We encourage our readers to pay attention to sales tax receipts over the coming quarters.

This Week’s Data :

  • Weekly Initial and Continued Jobless Claims, State, 2/9/2012
  • Drought Intensity, County, 2/19/2013

On the Road : Gregg, Mike and Kate will be at the BDA, Bond Buyer, Florida Conference. Come visit our booth. Also, Gregg will be on a panel Tuesday morning.

Gregg L. Bienstock

CEO& Co-Founder, Lumesis, Inc.

© Lumesis

www.lumesis.com

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