Tuesday, December 22, 2009

GDP Revised Down But Everybody Buys a House

Third-quarter GDP was revised lower again to a 2.2% annual pace from a previously reported 2.8% gain, which had already been revised lower from an initially reported 3.5% pace. It seems the more the folks at the Commerce Department looked at it, the worse it got. But no worries, the third-quarter of 2009 is so yesterday and all the bullish analysts are now focused on predicting that GDP growth is going to be 4% in the fourth quarter and then at least 10% in 2010. Comically, Bloomberg has a quote from a senior economist in the article about the GDP revision saying "We are really starting to see the mechanisms for a sustained recovery coming into place." It's as if Bloomberg had already written the article with the quote intact before the actual statistic was released when everyone was still expecting the number to be 2.8%, and then just stuck in the part about the downward revision. Unless they just screwed up and meant to put it in the article about existing home sales.

In better news, existing home sales in November were up 7.4% to a 6.54 million annual rate from a revised 6.09 million pace the prior month. The median price declined 4.3% from the same month a year earlier. This was the highest rate of home sales we've had since Feb 2007, right before all the subprime lenders imploded. So congrats to the government for re-inflating the housing market back to its subprime, no down-payment, no doc, no income, no problem glory. We'll see how everything goes when the tax credits expire in April (if they ever do) and the Fed stops purchasing agencies and MBS.

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