My Mortgage Blog

I love this. Looking back at the history of how much Black Friday sales activity has told us about the strength of the economy in the immediate future, Mark Hulbert (who has studied economic newsletters for much of his life) sighed, “Take the initial news reports about Black Friday with a grain of salt. You either learn next to nothing from those reports about how the holiday season will shape up—or, to the extent you do learn something, it is likely to be wrong.”

Heads, we lose; tails, we lose.

But then, that’s the way the coins roll in the holiday season. If for no other reason than that investors take this time to adjust their holdings for tax reasons, it’s a time when the economic indicators can have little to do with what’s actually happening out in the world.

Add to that, though, the amazing distortion that European eco-politics create and it quickly becomes clear that just about everything needs to be taken with a grain of salt over the next month.

We are still limping from one moment of justifiable fright to another related to the European debt crisis—and from one fleeting apparent solution to the problems at hand to another as well. It seems to have taken many long months for the powers-that-be to acknowledge the depth and severity of the problems. At this point, they are speaking openly of the possibility that the euro will not survive and that the eurounion will fracture.

(And how bad of an eventuality would that be? For the U.S., the amount of trade lost if European markets go haywire for a time is surprisingly small. Europe makes up about 3% of our international trade. The proble becomes severe, though—and eerily unpredictable—when we talk of what could happen to international credit markets. What of the banks? And what of the loans supporting loans supporting loans? And what of the trillions of dollars out there in debt swaps? It could prove to be a huge implosion.)

There are two things closer to home that have my eye, though.

The first is that the new-home market seems to be strengthening after several years in the tank. We could see a market for newly-constructed real estate that will lead real estate out of the tail-end of the recession. Last month, the median price of a new home was 4% better than the median price in the same month a year ago. Things are looking good here.

But the second challenges any sustainable recovery. Paul Dales, an economist with Capital Economics, said it quite well recently: “It's one of the most striking developments of the housing downturn. The initial building blocks for a recovery are in place, but the legacy of the recession is really preventing households from taking advantage." The legacy of the recession—the foreclosures still the work out, the reticence on the part of buyers to obligate themselves for large mortgages, even if the rates are extremely low—these factors continue to keep a real recovery from cobbling itself together. And it’s very frustrating, to say the least.

The country’s overall economy would benefit mightily from a credible recovery that leads us all to take advantage of these prices, these loans, these sellers so anxious to sell.