Today's archidose #103

sacred heart, originally uploaded by stoneroberts.

Church of the Sacred Heart in Prague, Czech Republic by Josef Plecnik, 1933

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Home Prices Rise: a Surprise?

In no surprise to anyone (for a change) the GDP was revised lower to 0.6% in first quarter.

The U.S. economy slowed to a crawl in the first quarter, held back by falling investments in homes, shrinking inventories and a large trade gap, the Commerce Department reported Thursday.

The economy grew at a 0.6% annualized pace in the quarter, revised down from the initial estimate of 1.3%, the government said in its second estimate of quarterly gross domestic product. It was the slowest growth since late 2002.

The economy has grown just 1.9% in the past four quarters, well below the 3% growth most economists say is the long-run potential. It's the weakest year-over-year growth in four years.

"The details of the report suggest some reasons for even more optimism for the second quarter," wrote Drew Matus, an economist for Lehman Bros. The faster businesses cut their inventories, the sooner they'll be ready to ramp up production again.

Considering the large upward revision to consumer spending, the report "will widely be viewed as a positive when the details are scoured," wrote Tony Crescenzi, chief bond market strategist for Miller Tabak & Co. Although the drags from inventories and home building will lessen in coming quarters, consumer spending is weakening, he said.

"The composition of GDP will turn unfavorable in the second quarter, putting into question the sustainability of a rebound in GDP," Crescenzi said. Data on consumer spending will be the main variable to watch.

Select Details of GDP

• Real consumer spending increased 4.4% annualized, the fastest in a year, compared with the 3.8% initial estimate. Spending on durable goods increased 8.8%, spending on nondurable goods rose 3.5% and spending on services increased 4%.
• Consumer spending contributed 3 percentage points to growth.
• Business fixed investments increased at a 2.9% annual pace, revised up from 2% earlier. Investments in equipment and software rose 2%, while investments in structures increased 5.1%. Business investments contributed 0.3 percentage points to growth.
• Inventories shrank by $4.5 billion. The change in inventory investment cut 1 percentage point from growth.
• Exports fell 0.6%, the biggest decline in four years. Meanwhile, imports rose 5.7%. The trade deficit cut 1 percentage point from growth.
• Government spending rose 1% in the first quarter. Federal spending fell 3.9%, including a 7.3% drop in national defense spending. State and local government spending rose 3.9%.
• Government spending contributed 0.2 percentage points to growth.

Note that the 4th quarter 2006 GDP was also revised dramatically lower (see US GDP Flunks Smell Test). Now we are starting see the same thing happen with 1st quarter 2007 estimates. Is there a pattern here?

If one believes as I do, that the first 2% of GDP is hedonics, imputations and other fictional activity (e.g. the estimated value of things like free checking accounts - yes I am serious - added into the GDP numbers), then we are already in a recession starting now.

What is most interesting is the notion that this is some sort of optimistic report. It is not. Rather than looking at inventories that have to be replenished, the correct way to look at things is that GDP was up a mere .6% in spite of very robust consumer spending. If +.6% GDP is all we can muster with strong consumer spending, it should be obvious what will happen when consumers toss in the towel.

Home Prices Rise

In unrelated news I see that Home prices rise at slowest pace in 10 years.

U.S. home prices increased 0.5% in the first quarter, the slowest quarter-to-quarter price gain in 10 years, the Office of Federal Housing Enterprise Oversight reported Thursday.

The OFHEO price index shows home prices are up 4.3% compared with a year earlier, the smallest gains in 10 years. Price appreciation has slowed sharply from a 13.7% year-over-year gain in 2005.

"Prices are rising slowly in most areas," said Patrick Lawler, chief economist for the federal agency, which regulates mortgage giants Fannie Mae and Freddie Mac. The price index is derived from mortgage data from the two companies.

In the OFHEO index, prices fell in seven states from the fourth quarter to the first, including California, Nevada and Florida, three states that saw the largest price gains in 2004 through 2006.

Prices were dropping at a 3.4% annual rate in California and at a 2% annual pace in Nevada and Massachusetts.

Prices were down quarter-to-quarter in 96 of 285 cities, including 13 of 18 Florida cities and 22 of 26 cities in California. Among 22 major cities around the nation, prices were falling in eight.

On a year-over-year basis, prices fell in two states: Michigan and Massachusetts.

It borders on ridiculous to suggest with a straight face and no explanation that "Home prices are rising slowly in most areas". Home prices are not rising and have not been rising for at least a year. Want proof? Just ask the CEO of any homebuilder if home prices including incentives are rising. I suspect they would all laugh in your face.

Yesterday in Housing prices: Comparing Shiller and HPI I was wondering whether or not the numbers will tell us what we already know: home prices are falling. The numbers are in. Surprise Surprise Surprise. We now have to wait at least another quarter for a government agency to tell us what we all knew many months ago.

This post originally appeared in Minyanville.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Monthly Recap: May 2007

May was a bit slower compared to last month in terms of posting. There are two main reasons (excuses) for this slowness

1. I was at eMetrics
2. I was not feeling well for 3 days in this month.

I noticed that when I don�t write anything for few days the number of people who subscribe to the feed of this blog goes up. Does anybody have an idea why this is happening? I have my own theory (Well I am a web analyst) but would like to hear from others.

Here is the list of articles that I psoted.

Web Analytics

• <Web Analytics Job Market is Hot - Update on the web analytics job market. Last month was the highest ever month in terms of open jobs since January 1st. Open Jobs in web analytics were up 68% from January 1st. Omniture was the most sought after tool experience followed by webtrends. My next update is coming tomorrow.


• Are you doing Web Reporting or Web Analytics? � A lot of marketers confuse web reporting with web analytics. I explain the difference between web reporting and web analytics in this post.


• Live from eMetrics - My quick update from eMetrics in San Francisco.
  eMetrics Conference in San Francisco � My second update from eMetrics in San Francisco.


• What does Website Optimization mean? � The word �Optimization� and �Website Optimization� means different things to different people. This article is my attempt to clarify the definition of �Website Optimization�.


• Hot off the press: Actionable Web Analytics � Jason Burby and Shane Atchison of ZAAZ released their first book on Web Analytics.


• Do you really need a home page? - This article was in response to Seth Godin, article "Do you really need a home page? Does the web respect it?". I reiterated what I had said on the similar topic last year.

Web Analyst Interviews

• Web Analyst Interview: Rohan Kapoor


• Web Analyst Interview: Ravi Pathak


• Web Analyst Interview: Daniel Shields

Behavioral Targeting

• Future of small Behavioral Targeting Networks is grim - I think with Google, Yahoo and Microsoft all trying to build their own Behavioral Targeting Networks with recent acquisitions of DoubleClick, RighMedia and aQuantive receptively it probably does not make sense to have stand alone Behavioral Targeting networks.


• Behavioral Targeting: Audience of One � My views and follow-up on the Washington past article titled �Web Ads with An Audience of One� discussing the growing use of Behavioral Targeting.


• Google, Yahoo, Microsoft and Cookies � This article talks about how the recent acquisitions by three giants acquisition are not about ad serving technology but about user data and reach.

2 New Books + 1 Online Magazine

Here's a couple of new books and a new online magazine that may be of interest.

Design Studio Pedagogy:
Horizons for the Future
Edited by Ashraf M. Salama & Nicholas Wilkinson
The Urban International Press, 2007

This groundbreaking book is a new comprehensive round of debate developed in response to the lack of research on design pedagogy. It provides thoughts, ideas, and experiments of design educators of different generations, different academic backgrounds, who are teaching and conducting research in different cultural contexts. It probes future universal visions within which the needs of future shapers of the built environment can be conceptualized and the design pedagogy that satisfies those needs can be debated.

Spaces Speak, Are You Listening?
Experiencing Aural Architecture
By Barry Blesser and Linda-Ruth Salter
MIT Press, 2007

We experience spaces not only by seeing but also by listening. We can navigate a room in the dark, and "hear" the emptiness of a house without furniture. Our experience of music in a concert hall depends on whether we sit in the front row or under the balcony. The unique acoustics of religious spaces acquire symbolic meaning. Social relationships are strongly influenced by the way that space changes sound. In Spaces Speak, Are You Listening?, Barry Blesser and Linda-Ruth Salter examine auditory spatial awareness: experiencing space by attentive listening. Every environment has an aural architecture.

�ltimasmag
Recent work by Fernando Guerra

To provide a publication designed for the internet with the body and graphic concept of a magazine or a book is the complement to 3 years of images in ultimareportagens, with special dossiers, audio slide-shows and a small collection of FG + SG books of photography on contemporary Portuguese architecture. �ltimasmag is yet another form we use to transmit architecture and hence our work. And to coincide with �ltimas� third anniversary, this first number has a special flavour. Each bilingual edition will focus on an architectural work of special and topical relevance, analysed in a complete dossier including everything from sketches to critical texts, building blueprints and, of course, photographs. It will be regularly available and completely free for online reading or to download in order to collect or print. The choice is yours.

Housing prices: Comparing Shiller and HPI

Eyes are focused on the upcoming Office of Federal Housing Enterprise Oversight (OFHEO) housing price report due out on Thursday to hopefully tell us what we already know: home prices are falling.

For reference purposes the fourth quarter 2006 headline from OFHEO was U.S. House Price Appreciation Rate Steadies. Yes, the word appreciation was still in the headline. Here is a snip:

The rate of home price appreciation in the U.S. remained steady in the fourth quarter of 2006, extending a general trend of deceleration begun earlier in the year. Home prices, based on repeat sales and refinancings, were 1.1 percent higher in the fourth quarter than they were in the third quarter of 2006. This is slightly above the revised growth estimate of 1.0 percent from the second to the third quarter.

Prices in the fourth quarter of 2006 were 5.9 percent higher than they were in the same quarter in 2005. Price appreciation in 2006 was substantially smaller than the tremendous price gains of recent years, which ranged from 7.4 percent in 2002 to 13.2 percent in 2005. The figures were released today by OFHEO Director James B. Lockhart, as part of the House Price Index (HPI), a quarterly report analyzing housing price appreciation trends.

�These data show that, on the whole, prices are still rising, albeit at a much slower
pace,� said Lockhart. �This suggests that house price appreciation is, for now, more in line with historical norms.�

Does anyone possibly believe that housing prices in general were still rising at the end of 2006? I don't. I doubt even David Lereah believes that.

Shiller Reports First Price Drop Since 1991

According to the Shiller Index U.S. home prices fell for first time since 1991.

U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday.

A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters.

The Case-Shiller indexes cover three geographical areas. The national index is released quarterly, while the 10-city and 20-city indexes are released each month.
The 10-city Case-Shiller price index fell 1.9% year-on-year through March, while the 20-city index dropped 1.4%. The 10-city index has fallen nine months in a row, while the 20-city index has fallen for eight straight months.

Thirteen of 20 cities in the Case-Shiller index have seen falling prices in the past year, led by Detroit (down 8.4%) and San Diego (down 6%). Home prices rose 10% in Seattle, 7.4% in Charlotte, N.C., and 7% in Portland, Ore. Prices in Phoenix and Las Vegas, Nev., have fallen the furthest from their peak. After growing at a 49.3% pace in September 2005, home prices in Phoenix are now down 3% year-on-year. In Las Vegas, price gains went from 53.2% in September 2004 to negative 1.6% in March 2007.

Among other major cities tracked by the index, home prices are down 4.9% in Boston, down 4.8% in Washington, down 3% in Tampa, Fla., down 2.4% in Cleveland, and down 2.3% in San Francisco. Prices fell 2% in Denver, 1.9% in Minneapolis, 1.4% in Los Angeles and 1.1% in New York. In addition to the price gains in Seattle, Charlotte and Portland, prices rose 2% in Atlanta, 1.6% in Dallas, 1.3% in Chicago and 1% in Miami.

The Case-Shiller index is considered a superior gauge of home prices compared to the median sales-price data released by the Commerce Department or National Association of Realtors, because it tracks multiple sales on the same property and is therefore not influenced by a different mix of homes sold in a period.

Unlike the price index produced by the Office of Federal Housing Enterprise Oversight, the Case-Shiller index does not include refinancings. And, also unlike the OFHEO index, it includes homes with mortgages larger than the conforming limit of $417,000.

The OFHEO index for the first quarter will be released on Thursday. Through the fourth quarter, home price gains had slowed to 5.9% year-on-year from 13.3% a year earlier. The OFHEO purchase-only index (which excludes refinancings) had risen 4.1% year-over-year.

HPI Methodology

Here are a few of snips about the HPI (Housing Price Index) as computed by the OFHEO.

Each quarter, Fannie Mae and Freddie Mac provide OFHEO with information on their most recent mortgage transactions. These data are combined with the data of the previous 32 years to establish price differentials on properties where more than one mortgage transaction has occurred. The data are merged, creating an updated historical database that is then used to estimate the HPI.

The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties.

The HPI is based on repeat transactions. That is, the estimates of appreciation are based on repeated valuations of the same property over time. Therefore, each time a property "repeats" in the form of a sale or refinance, average appreciation since the prior sale/refinance period is influenced.

Shiller Methodology

Eligibility Criteria
To be eligible for inclusion in the indices, a house must be a single-family dwelling. Condominiums and co-ops are specifically excluded. Houses included in the indices must also have two or more recorded arms-length sale transactions. As a result, new construction is excluded.

High Turnover Frequency
Data related to homes that sell more than once within six months are excluded from the calculation of any indices. Historical and statistical data indicate that sales made within a short interval often indicate that one of the transactions 1) is not arms-length, 2) precedes or follows the redevelopment of a property, or 3) is a fraudulent transaction.

Time Interval Adjustments
Sales pairs are also weighted based on the time interval between the first and second sales. If a sales pair interval is longer, then it is more likely that a house may have experienced physical changes. Sales pairs with longer intervals are, therefore, given less weight than sales pairs with shorter intervals.

Shiller attempts to adjust for time factors by giving more weighting to repeat sales (as long as they are at least 6 months apart) as the following chart shows.



Shiller goes on to make a lengthy mathematical presentation of his model but there is theory and there is practice.

His model shows that prices in Tampa are down 3%, Phoenix down 3%, and prices rose 1% in Miami. That is what the data shows (in theory). In practice I do not buy it. There is simply no way home prices rose in Miami in 2006 nor is there any way prices in Tampa or Phoenix are down as little as reported.

What Went Wrong?

Supposedly the index's main advantage is that it only looks at repeat sales. Perhaps that is fine in a steady market with frequent repeat sales, where the rate of appreciation is uniform, but how often do those conditions exist? How long does a blowoff top spike keep influencing the data? And what happens at major turning points or when repeat sales take longer and longer?

Based on the above weightings chart, a home that resells with an interval of 10 years has a weighting of .8 while one that sells in six months (but not sooner) has a weighting of 1. Let's consider a house that sold in 2002 for $200,000. It sells in 2007 for $250,000. Is that a gain? How much? What if that house would have sold for $400,000 in 2005 and $300,000 in 2006 based on comparables? There is no way to account for this in his model because it looks at only the seen. Also unseen are potential upgrades such as new kitchen, incentives, etc. that were done to make the home "more sellable". Extensive upgrades should be factored in but they are not.

Both indices exclude new home sales even when the homebuilder is still building the same model year after year (at now dramatically reduced prices). With homebuilders discounting new homes by hundreds of thousands of dollars and 20% or more (not counting incentives) it is absurd to believe (or even report) that Miami home prices are rising by 1% or Tampa prices are falling by a mere 3%.

But I am not just talking Florida. Homebuilders nationwide have been reducing prices dramatically in nearly every market, even more so when one includes incentives. Try telling the guy trying to bail on his condo in any city anywhere that prices are down a mere 1.4% last year. See what kind of reaction you get. Ooops, condo prices are not included in Shiller's index either.

Also note that neither model looks at incentives and incentive have been massive lately (but nonexistent at the blowoff peak in 2005).

The differences between Shiller and the HPI seem to be that Shiller does not look at refinancings but the HPI does, and the HPI has a price cutoff based on Fannie Mae conforming loans at $417,000 but Shiller does not. Otherwise they both seem to have a fatal flaw in assuming that there was an increase in price over a 5 year period (on a house that last sold in 2002) when in fact there may have been huge unrealized gains 3 years and a huge unrealized loss in year 5.

By attempting to eliminate distortions caused by optimistic appraisals and evaluation of comparables, other serious flaws in the computations were introduced. While it's true that the faster the housing turnover the less the bias (barring fraud), does a difference in weightings of 1.0 vs. .8 over a 6 month period vs. a 10 year period properly account for that bias?

More importantly, for long timespans it is not what happened but how it happened that is important. A model that looks at a sales price (and a sales price only) from 10 years ago vs. today cannot properly account for year to year variations in price. Prices may have gone up 5 years were flat 3 years and fell for two years but if the price appreciated over 10 years the model is going to be biased towards a year over year gain when in fact there may have been a loss two consecutive years.

It will be interesting to see if the OFHEO tells us what everyone already knows: home prices are falling. But what the index will not show is by how much. The methodology of looking only at previous sales is simply too flawed. Shiller's model is an improvement over the HPI but for practical purposes and year over year comparisons, both models seem fatally flawed.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Postopolis! Videos

Storefront for Art and Architecture is posting video of this week's Postopolis! event at YouTube, great for those of you interested in this event but not in New York. I'll use this post to collect them, updating them as often as I can, with the latest on the top. Another outlet is this Postopolis! pool on Flickr, and of course there's the pages of the big four.

Eric Rodenbeck (Stamen):


Keller Easterling:


Lawrence Weschler:


Laura Kurgan:


Kevin Slavin:


David Benjamin & Soo-in Yang:


James Sanders:


Julia Solis:


Andrew Blum:


Jake Barton:


Lebbeus Woods:


Joel Sanders:


Robert Neuwirth:


Wes Janz:


Monica Hernandez (Lifeform):


Scott Marble (Marble Fairbanks):


Mitchell Joachim (Terreform):


Paul Seletsky:


Ada Tolla & Giuseppe Lignano (LOT-EK):


Matthew Clark (Ove Arup):


Benjamin Aranda & Chris Lasch (terraswarm):


Panel on Sustainability:


Michael Kubo (Actar):


Inhabitat's Pecha Kucha:


Subtopia's Pecha Kucha:


Pecha Kucha presentation by Dan Hill:


Geoff Manaugh's Pecha Kucha:


Stanley Greenberg's presentation:


POSTOPOLIS! preparations:

Property Tax Dilemma

Kevin Depew in Tuesday's Five Things wrote about the Property Tax Dilemma.

The Florida legislature plans to convene a special session in mid-June that could result in more than $30 billion in property-tax relief over the next five years, the Wall Street Journal reported.

• Thanks to the housing boom, the average annual property-tax bill in the U.S. was $1,132 per person in 2005, up 13% from 2000 in inflation-adjusted terms, according to data from the Commerce Department.
• The boom was so strong that in many areas housing prices rose too fast for local tax assessors to keep up, the WSJ said.
• Now, tax assessments are catching up just as market prices are declining, a double whammy for homeowners facing increasing mortgage payments due to resets, or homeowners now trapped in residents with property tax bills edging them out of their comfort zone.
• But that's the homeowners problem.
• Here is the dilemma for states: Reducing property-tax revenues threatens budgets of cities and counties. However, a property-tax cut could stimulate the economy by leaving homeowners with a bit more money in their pockets.
• Florida doesn't have a personal income tax, and its cities and counties depend heavily on property taxes to pay for services such as police and firefighters, the Journal noted.

That post got me to thinking about dilemmas in general.
So Let's Recap General Dilemmas ....

• So property taxes are up even as home prices are sinking.
• So gasoline prices are up because of demand from China.
• So food prices are up because of bad policies on ethanol.
• So health care prices are up because of bad policies everywhere.
• So wages are not keeping up with inflation.
• So insurance cost are rising dramatically especially in the hurricane zones.
• So foreclosures and bankruptcies are rising dramatically.
• So the economy is slowing.
  
• So the little guy is being squeezed.
• So property tax relief is on the way.
• So states are facing declining revenue.

Dilemma?
Do you see any dilemmas here?
The stock market sure doesn't.
For now anyway.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Garage in the Sky

This might be old news to some, but I just heard that "a luxury tower planned for 11th Avenue features an elevator that lifts cars to the apartment owner's floor, where they can be parked near the entry door," this according to the Washington Post. The article describes that this is one among many frills developers are using to snag the wealthy, cash-paying minority, at a time when "the collapse of subprime lenders spurs a housing crisis," and "a record [percentage] of U.S. home loans were entering foreclosure."

200 Eleventh Avenue (website includes a video of how the sky garage system works) is a 56,000 sf luxury condominium tower in Chelsea by Selldorf Architects. Even though, according to the architects, "the base of the building is clad with glazed terra cotta panels, and the tower has a custom-fabricated curvilinear stainless steel 'rain screen' system," it's the relatively invisible sky garages that steal the show.


Renderings by Hayes Davidson

The sky garages recall Chicago's former Jewelers' Building (now going by the distinguished 35 Wacker Drive). Chicago Architecture.info explains:

[The Jewelers' Building] was created for the city�s diamond merchants and had an unusual security procedure � to reduce the chances that its tenants would be mugged walking between their cars and their offices, the building featured a central auto elevator. People would drive into this elevator and it would take them to the floor where their office was. Jewelers loaded down with precious stones and metals wouldn�t have to be exposed to a potentially hostile exterior environment. Though innovative, it was an arrangement that didn�t last very long. By the Second World War the auto elevators were abandoned and decked over to make more office space.

This description might actually fit 200 Eleventh Avenue, where owners of $16 million condos won't have to worry about being mugged or be exposed to the potentially hostile exterior environment of Chelsea and the rest of Manhattan!

Thanks to Joy for the head's up on the article and the Jewelers' Building!

Street Views

Google is taking one more step towards helping people never leave their homes, launching Street View on Google Maps. At first sight it looks, well, awesome. After the 103-second demo you'll know enough to completely waste the rest of the day. There's only a limited number of cities and views, but knowing Google it won't be long before they have the whole world covered.

In commemoration of Postopolis! which started yesterday and runs until Saturday -- and to give you an idea of the views -- here's a street view of Kenmare Avenue and the Storefront for Art and Architecture.



(via Bird to the North)

Record Short Sales & Liquidity Bubbles

Bloomberg is reporting Short Sales Break Record on NYSE; Market Bulls Get More Bullish.

Short sellers are betting against U.S. stocks like never before as the Standard & Poor's 500 Index approaches an all-time high. That's making some of the biggest bulls even more optimistic.

"What the short seller appears to be doing is doubling down," said Kenneth Fisher, who oversees about $40 billion as chairman of Fisher Investments in Woodside, California. "You love to see it, because if you believe there is a basic driver to the bull market, they're going to get run over."

The amount of shorting -- where traders sell borrowed stocks expecting to buy them back after prices fall -- jumped to 3.1 percent of the total shares listed on the New York Stock Exchange this month. That's the highest since at least 1931, according to Bespoke Investment Group LLC, a research firm in Mamaroneck, New York.

The wagers represent billions of dollars that could be invested in equities if short sellers close their positions. The bears also reassure fund managers who get skittish when few traders anticipate the possibility of a stock market decline.

"Ultimately you have to cover the short positions and that tends to create more of a buying frenzy," said Andy Engel, co- manager of the Leuthold Core Investment Fund, which has outperformed 99 percent of similar funds over the past five years.

Losses are mounting for traders speculating on a drop in stocks. So-called short interest on the NYSE rose to a record 11.8 billion shares as of May 15, 7 percent more than a month earlier, according to the world's biggest exchange.

"Anyone that did the theory, sell in May and go away, they're going to wish they never read that," Chicago-based Froehlich said. He expects the Dow average to climb 11 percent and reach 15,000 by Christmas.

Dow 15,000 on a short squeeze huh? I am hearing other targets like 1800 on the S&P. And there is talk of bears piling it on when bulls are pressing their bets based on merger mania in leveraged buyouts (LBOs) and banking on short squeezes.

The liquidity that is driving these LBOs can dry up at any time. I suspect it will be lights out at some point just as it was with Florida condos. Remember how people went from camping out overnight to get in on hot new condo developments to no bid almost overnight. We were all told that it would take much higher interest rates to kill housing. It didn't. The housing bubble popped on pure exhaustion.

I suspect the liquidity bubble fueling these stock buybacks and LBOs will die of exhaustion as well. Overnight (at a date unknown) there will be an attitude change and financing these deals will go from super easy to super hard just as we saw previously with subprime lending for housing.

As for short sales and the meaning thereof, the bulls are simply wrong. We talked about this at length last week on Buzz&Banter. In case you missed it, here is a repeat of Hussman's article called Spot the Pigeon.

A similar claim is that �there are a lot of shorts out there, and they're going to be forced to cover.�

Again, this is not supported by the data. Recent years have seen a proliferation of hedge funds, market neutral strategies, and merger arbitrage vehicles. All of these are based on matched long and short positions. These are not �speculative� or �naked� shorts, and in many cases are not even bets that the stocks sold short will decline (instead, the objective is to earn a difference in performance between the longs and the shorts, regardless of whether they both rise or fall in absolute terms). It is wrong to quote the current short interest as a bullish argument, as if the shorts are somehow compelled to cover here.

In today's Buzz, Jason Goepfert at SentimentTrader responded to this Mini-Minyan Mailbag:

"Regarding the record-breaking levels of short sales: My question stems from the fact, and from the remembrance of something (Prof. Succo) touched on awhile back, that the short sale figures can't really be relied upon due to traders who may be short, but vs. derivatives of some kind (in most cases being calls on a delta ratio)...

That being said my question is how much of the short sales out there do you believe to be part of a larger vol play and how much do you think is due to a plain vanilla short."

Minyan Michael

Reply from Jason Goepfert at SentimentTrader

Michael, this is a difficult question on which to even hazard a guess, since we don't know how many traders are using the options as a hedge versus speculation, and for those who do hedge, on what kind of ratio they're doing so.

But, that doesn't mean we can't take a guess, right? So here's my shot. From mid-April through mid-May, the NYSE reported 11.7 billion shares short, which was a change of +772 million from the previous month.

Over approximately the same period, there were 18 million call options bought to open on all the U.S. exchanges by large traders. By "large traders," I mean those that did transactions of 50 or more contracts at a time.

Assuming that every trader hedged those call options they bought, and they wanted to remain delta-neutral, and the average delta of the calls was 0.50, then they would need to short about 902 million shares.

There are a whole host of wild assumptions in that previous paragraph, but it resulted in these hedgers shorting 117% of the change in the NYSE short interest! That's obviously not possible, which means that some of our assumptions are off base.

If we assume that only half the traders were fully hedging those calls, then last month's activity would have explained about 60% of the change in short interest. Or, assuming that the traders did not remain exactly delta-neutral, or the average delta was lower, would also reduce the number of shares they had to short.

So without knowing a lot more detail, this is basically an impossible question to answer, but given the information we do have, it seems like derivative activity could possibly explain a big chunk of the monthly changes in short interest.

So there you have it. Thus there are three solid reasons why short interest is not what it seems: derivatives hedging, long/short funds, and arbs on convertible bonds. Once again mainstream media presents a distorted view of what is really happening and draws the wrong conclusions.

Stocks are not cheap and there is likely no short squeeze (in the broader sense). Instead we are in the midst of liquidity madness where it is more important to get deals done than it is for any deal to make sense.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Today's archidose #102

Musuem "Reina Sofia", Madrid, originally uploaded by sinor favela.

The Museo Nacional Reina Sof�a in Madrid, Spain by Jean Nouvel, 2005.

To contribute your Flickr images for consideration, just:

:: Join and add photos to the archidose pool, and/or
:: Tag your photos archidose

Canon Powershot SD1000

Canon looked to the original ELPH when they designed the retro-styled Powershot SD1000, and the result is one of the smallest and sleekest digitals on the market. The body of this camera is remarkably thin; in fact, the SD1000 is smaller than a deck of playing cards, making it ideal for travelers or style-conscious consumers looking for an unobtrusive camera companion. 7.1 megapixels, 3x optical zoom, and DIGIC III with Face Detection and Noise Reduction ensure the great results we've come to expect from Canon. Fast operation, improved image quality, and long battery life make the SD1000 ideal for almost any user.

Canon SD1000 Specifications

* 7.1 megapixels
* 3x optical zoom / 4x digital zoom
* Auto focus and exposure
* JPEG file format
* Movie mode with sound
* ISO 80-1600
* 2.5-inch LCD
* Secure Digital memory (32MB included)
* Lithium-ion battery

Monday, Monday

My weekly page update:

Sachsenhausen Memorial in Oranienburg, Germany, by HG Merz Architekten Museumsgestalter.

The updated book feature is Judging Architectural Value, edited by William S. Saunders.

Some unrelated links for your enjoyment:

architectural videos*
A blog dedicated to architectural videos. (added to sidebar under architectural links::audio/video; via architechnophilia)

Smart City Radio
"A weekly, hour-long public radio talk show that takes an in-depth look at urban life, the people, places, ideas and trends shaping cities." (added to sidebar under architectural links::audio/video)

Architorture
"A documentary that captures five diverse students in a single studio at one university throughout the entirety of their thesis project...Check back with us often to watch our concept evolve." (via too many pages to list)

Waning Patience

Stephen Roach is talking about China�s Pace, America�s Angst.
Following are a few select snips:

Round II of the Strategic Economic Dialog has come and gone. In just eight months time, this carefully orchestrated consultation between senior officials from the US and China has established a robust framework of engagement between the world�s first and fourth largest economies. The good news is there is progress to report. The bad news is that the progress was predictably incremental � insufficient to defuse the political angst now bubbling over in the US Congress.

In an era of accelerating globalization, the Chinese strain of open development offers the world considerably greater opportunity than the closed approach long advocated by Japan.

The US Congress could care less. The economic pressures bearing down on Washington come straight from the American middle class. And with understandable reason: According to the US Bureau of Labor Statistics, the median real wage � inflation-adjusted wages for the worker in the middle of the pay distribution � has risen a cumulative total of just 0.9% over the seven years ending in the first quarter of 2007.

Over the past 30 years, China has been exceedingly careful to balance the pace of reforms against the risks of instability. At no point did it follow the shock-therapy approach embraced by states of the former Soviet Union. �Determined incrementalism� is the best way I would describe the character of three decades of Chinese reforms � no backtracking but steady and unrelenting progress toward private ownership and markets. This approach is very much at odds with the search for the �magic potion� that always seems to dominate the short-term problem-solving mentality of Washington politicians. The radical currency-fix option that is now on the table in Washington is very much at odds with the gradualism that has served China so well over the past 30 years.

The easy answer is to blame someone else � in this case, scapegoating China because it accounts for the largest bilateral piece of America�s record multilateral trade deficit. The tougher answer is to get to the bottom of the real wage stagnation problem � and put policies in place that could rectify this situation.

I stand by my view that there is about 60% chance that a veto-proof majority of the US Congress will pass a WTO-compliant bill by the end of 2007 that will impose broad-based trade sanctions on Chinese products sold in America.

If Roach has it correct that there is a 60% chance of massive protectionist legislation out of Congress, then I will suggest that it will be the equivalent of another Smoot Hawley Tariff Act if it passes.

Roach writes "Congress could care less". I believe he means "Congress could NOT care less". Congress seldom cares about anything but votes. If horrendous policies will get Congress reelected then horrendous policies we will get.

Right now there is a vested interest in protectionism all under the nonsense of "fair trade" as opposed to "free trade". Fair of course means fair to those with a vested interest in keeping their wages high regardless of the consequences to anyone else. No one in Congress ever bothers to look at the seen and the unseen. There is simply too much political hay to be made by only concentrating on the seen. I recently talked about this in Protectionist Crackdown - Seen vs. Unseen.

Another interesting factoid is that inflation-adjusted wages for the worker in the middle of the pay distribution � has risen a cumulative total of just 0.9% over the seven years ending in the first quarter of 2007.

That is of course if one believes the CPI. I don't. If the CPI is understated by as little as 1% then real wages are negative over the last seven years.

Business Employment Dynamics

But not only do I disbelieve the CPI, I disbelieve job stats as well and have written about it many times. Please consider Birth Death Model Fatally Flawed.

Supporting evidence is starting to roll in. The New York Times is writing Wait a Few Months Before You Believe the Numbers.

Sometimes the statistics that take the longest to arrive can provide the most important information, particularly when they point to inflection points in the economy.

So it may be with jobs data that the Bureau of Labor Statistics released this month for the third quarter of 2006. The new data calls into question the previous conclusion that employment grew at a strong rate in late 2006.

And it indicates that many small businesses, which had been leading the way in job creation, are now suffering. As is shown in the accompanying graphic, companies with fewer than 50 employees lost workers in the quarter, while larger ones kept hiring, albeit at a reduced pace.

It also appears that 8,000 more businesses closed than opened in that quarter, making it the worst quarter by that measure since the third quarter of 2001, when an economy already in recession was jolted by the Sept. 11 attacks.

The data is included in a quarterly report, titled �Business Employment Dynamics,� that comes from reviewing employment at every company in the United States that is subject to state unemployment compensation laws. By that measure, private-sector employment rose by just 19,000 jobs in the quarter.

The widely reported data from the bureau�s monthly survey of employers concluded that the quarter had a net gain in private-sector jobs of 498,000. That led economists to conclude that employment growth was holding up well even though the overall economy had slowed, growing at just a 2 percent annual rate.

A big difference was in construction employment, which the quarterly study found contracted by 77,000 jobs in the quarter, in contrast to the increase of 34,000 jobs shown by the monthly surveys.

�The data show we had two consecutive quarters of job losses in construction,� said David Talan, an economist at the bureau, noting the small decrease shown in the second quarter of last year.

One has to be nuts in the midst of this housing slump to think that we are adding construction jobs at the pace estimated by the BLS, but nonetheless, the BLS seems to be sticking to their model (without ever explaining it I might add). It is one gigantic optimistic black box that will not turn negative until it is obvious to everyone on the planet that the US is in recession.

Men's earnings shrink

Are women to blame for shrinking mens wages?

Those in their 30s make less than dads did, a report says. Outsourcing and the advancement of women are cited.

American men in their 30s earn less than their fathers' generation did at the same age, potentially reversing longtime assumptions that each successive generation will be better off than their predecessors, according to a study released Friday.

Family incomes of thirtysomething men have continued to rise in recent decades, but mostly because more of their wives are working, the study's authors said. Yet even with the addition of women's paychecks, the rate of family income growth has slowed.

Taken together with data showing more workers are earning less in comparison with the stratospheric incomes of top earners, the report suggests that a growing number of Americans "believe that the rules of the game are no longer fair," said John E. Morton, director of the Economic Mobility Project at the Pew Charitable Trusts and one of the study's lead authors.

In 2004, the median income for a man in his 30s was $35,010, 12% less than that of men in their 30s in 1974, adjusted for inflation, according to the study, which was based on Census Bureau data. By contrast, thirtysomething men in 1994 earned 5% more than their older counterparts.

The generational income gap highlights troubling questions, Morton said, including what happens if an increasing percentage of Americans believe the American dream "is off limits to them."

Die-hard careerist baby boomers may partly explain the inability of thirtysomething men to move up the income ladder as quickly as their fathers. From the moment Generation Xers first set foot in the workplace, the boomers have been the "ceiling" blocking their way up the income ladder, said Peter Rose, a partner with marketing research firm Yankelovich Inc. in Los Angeles.

"The boomers stand out in defining themselves in terms of their work and have shown a disinclination to get out of the way," he said.

Freelancer Hayslett thinks there's another factor at play: "Honestly, it seems that women are more together," he said.

They're more stable and focused, he said, as compared with "a lot of guys who feel so frustrated that they tend to move around and leave."

Let me be the first to say that any study that blames women for shrinking men's wages is simply way off base as to cause and effect. Excuses are now running rampant.

Although China is willing to proceed on a pace that can be described as Determined Incrementalism, in typical US fashion we want action now even it it means compounding the problem by 800%. Heaven help us if Congress gets insanely protectionist.

But if unemployment was as low and jobs as plentiful as the BLS, the treasury and this administration says, then Congress should not be threatening the actions against China that are now under serious discussion. Which is it? Jobs can't be plentiful and the economy humming along if one is looking for protectionism as the cure. You can't have it both ways.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Today's archidose #101

Australia_2006_0425, originally uploaded by marco 2000.

The Shrine of Remembrance Visitor Centre in Melbourne, Australia by Ashton Raggatt McDougall.

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Prouv� SOLD!

No, not that Prouv� (not 'til June 5), but some of these.

In the process of doing research for a final paper on Paris I came across this Phillips de Pury & Company design auction held a few days ago (May 24) in New York. With Prouv� still on my mind after the last post, I looked around and saw a number of items of his (alone and occasionally with Charlotte Perriand) on the block, as they say.


Bookshelf, 1958 by Charlotte Perriand and Jean Prouv�

So what were the results? (PDF link) 7 of 11 lots sold for a grand total of $107,160, or an average of $15,309 per sold item. Not bad. The highest bids went to a set of six "Standard" chairs (ca. 1950) and a large "Compass" desk (1948), each for $28,800. My favorite sold piece (not surprisingly) is the bookshelf above he designed with Perriand. I'll admit I like it, but not $24,000 like it.

Healthcare costs soar-What are we getting for it?

The Seattle Times is reporting Blue Shield is hiking rates 19 percent on 137,000 plans.

Regence BlueShield on Tuesday began notifying 137,000 individual-plan customers that their premiums are rising an average of 19 percent in July in the steepest increase for individual plans this year by a Washington health insurer.

And for 16,000 of those enrollees, the rate increase will total 40 percent because they also happen to be moving into an older, more expensive age group.

The rate jump is a sharp change from last year, when Regence proposed � then rescinded � raising premiums by 5 percent. Regence has gained 30,000 new customers, bringing its total individual members to 137,000.

The rate boost does not apply to people who buy their coverage through employer plans or small-group plans. But both Regence's rate reversal last year and the size of this latest premium increase have outraged Washington Insurance Commissioner Mike Kreidler, who accuses the insurer of a bait-and-switch.

"I have serious concerns that consumers may have been whipsawed in an effort by Regence to increase market share," Kreidler wrote in a letter sent Tuesday to state legislative leaders.

Cute. Hold off rate hikes, get 30,000 more customers then jack up costs 19-40%. Inquiring minds might be asking if this is just a Washington state thing. So let's take a look.

The Boston Globe is reporting Healthcare costs soar out of control.

A common refrain this spring in local town and city halls is that despite increased revenues, jobs or programs will have to be cut. The culprit, according to municipal officials, is an increase in fixed costs, which are rising faster than tax receipts.

The major factor is health insurance. But per-employee annual costs for healthcare to municipalities covered by City Weekly have almost doubled since 2000, according to officials in Boston, Brookline, Cambridge, and Somerville.

According to a Boston Municipal Research Bureau report of November 2006, the city cut 1,176 employees between 2002 and 2006. But in that time it also spent an additional $187.5 million on employees, two-thirds of which was to cover benefits, such as healthcare.

In the state of Michigan Inmate health care costs soar.

The cost of sending Michigan's 51,000 inmates to hospitals and medical specialists outside prison walls has skyrocketed this year, with state officials predicting spending will run 61 percent over budget.

Corrections officials expect the bill for specialty care and hospitalization to grow from $58.8 million to nearly $95 million by Sept., 30, the end of the fiscal year.

"It's huge," said Barry Wickman, the Michigan Department of Corrections chief financial officer.

In all, taxpayers will spend $281 million this year to cover physical and mental health treatment and prescriptions for prisoners, even as the state considers cuts to schools and local governments to deal with a deficit that's pegged at $686 million.

Driving the increase are more inmate referrals to specialists outside prison and more hospital stays. In 2004, inmates spent 9,612 days in hospitals, jumping to 13,039 in 2006. Similarly, the number of referrals to care outside prison rose from 18,777 in 2004 to 23,294 in 2006.

Corrections officials say they have little choice but to pay the bills. A 1976 U.S. Supreme Court decision mandated health care to prisoners as an entitlement, including dental, vision, pharmaceutical and mental heath treatment.

The payment for outside care had been running $5 million per month, but jumped to $8.15 million during each of the first four months of the fiscal year starting in October, according to Corrections. Lawmakers appropriated $11.7 million for extra costs last fiscal year and $12.6 million this fiscal year. A request for an additional $23.3 million this year is pending.

"The increase in (health care) costs within the prison system far outstrips what we're seeing in the rest of society,'' Kahn said. "This is much, much, much worse."

U.S. is Dead Last

A study of Comparative Performance of American Health Care shows that you can find much better care, but you can't pay more.

Despite having the most costly health system in the world, the United States consistently underperforms on most dimensions of performance, relative to other countries. Compared with five other nations�Australia, Canada, Germany, New Zealand, the United Kingdom�the U.S. health care system ranks last or next-to-last on five dimensions of a high performance health system: quality, access, efficiency, equity, and healthy lives. The U.S. is the only country in the study without universal health insurance coverage, partly accounting for its poor performance on access, equity, and health outcomes. The inclusion of physician survey data also shows the U.S. lagging in adoption of information technology and use of nurses to improve care coordination for the chronically ill.

The most notable way the U.S. differs from other countries is the absence of universal health insurance coverage. Other nations ensure the accessibility of care through universal health insurance systems and through better ties between patients and the physician practices that serve as their long-term "medical home."

With the inclusion of physician survey data in the analysis, it is also apparent that the U.S. is lagging in adoption of information technology and national policies that promote quality improvement.

Health Care Stats

• The much touted Canadian system comes in second to last and is the second most expensive but has a cost about half that of the US.
• The UK reportedly has the best healthcare system at well under half the cost of the US.
• New Zealand is the low cost provider at just about a third of what one pays in the US.

Most seem to think we should do something about this. But what?

Competing Plans

1. President Bush announced his plan for Affordable, Accessible, and Flexible Health Coverage in the State of the Union message.
2. California Governor Arnold Schwarzenegger has his health care plan.
3. Democratic Senator Ron Wyden has a health care plan.
4. Families USA the self proclaimed Voice for Health Care Consumers pans Bush's Health Savings Account approach while offering its own plan.
   

Hospice Care Anecdotes

There were a couple of interesting posts recently on the The Market Traders about personal experiences with Hospice care. The first is by WilsonsJulie on Odyssey Hospice.

My dad has alzheimer's. He qualified for Hospice care several years ago and has been under the care of odyssey hospice since 2004. Hospice is a service aimed at comfort, mainly for the last 6 months. My dad is a tough, sweet guy, so he's chosen to keep hanging on ;-) There are clients who have had this care for 5-6 years, in some cases, where the health decline is steady but serious.

Odyssey was sued in a whistle blowing case a couple of years ago for giving services to people who didn't qualify and they had to pay the government millions of dollars. See the Hospice Blog article Is Odyssey Hospice the tip of the iceberg?

I just recently got notice that my dad no longer qualifies for hospice. It is ironic because the guy is very much bedridden now and he is literally wasting away as the disease progresses. However they consider his condition "stable". They have a new feature to call and contest it. I did, and the person was very sympathetic, but my dad was denied services. I then got a three page letter about the denial of services.

I contacted another hospice provider who hasn't been sued by the government for fraud and they did an initial evaluation of my father and will return in a month to chart any changes. I fully expect my dad to requalify for hospice. I just wanted to give the heads up in case anyone else is involved with Hospice or will be considering Hospice. I think the government might just be shifting the burden of end of life care back onto the families, despite past promises. ~julie

In response to Julie's post PeterTribo responded with his story on hospice care.

Part of my skeptical attitude toward all things "official" and "bureacratic" comes from my caring for my mother for three years while she was in a nursing home. This occurred in Massachusetts 1993-96 and I was a naive layman with no experience dealing with either the Healthcare or the Legal System. I did a lot of research on both at that time and what I found horrified me.

One of the first books I read at a Probate and Family Court Law Library run by the MA government was a tome titled THE LAWYER'S GUIDE TO MEDICARE. I had read a few "civilian" books about MEDICARE by that time but this book was a real shocker. I can only describe it as a "nudge, nudge, wink, wink" guide to scammming MEDICARE. It described in detail methods to hide assets and get MEDICARE to pay fraudulent legal bills. This book really sat me up in my chair as to the state of affairs in the US since it was written by a Law Professor!

One of the techniques used by the nursing home to raise additional revenue was quite a shocker. My mother had to be hospitalized two times outside of the nursing home. When that happens, the nursing home gave me the choice: do you want to reserve your mother's place if she returns from the hospital? If not, we do not guarantee that she can return to the facility. So, for each day that you pay, you may or may not be paying for a place that might have been empty anyway. Only the nursing home knows their occupancy rate. This is classic double billing.

Another shocker was that the nursing home dealt with only one drug supplier. At one point, they changed the supplier and the cost of a drug my mother was taking was tripled!

Another time I received a call from someone who said they were my mother's "audiologist". My mother had never had any trouble with her hearing. I did some research on this and found out that a private company was allowed into the facility to examine patients and sell their wares. I was never consulted on this. It sure looked like a revenue raiser for both the hearing aid company and the nursing home via fees paid to them.

On four occasions, ambulances were used and I thought the fees for these rides were exorbitant.

I can only imagine a room full of Healthcare Beancounters examining every nook and cranny of Operations and devising schemes and methods to maximize profits. In short, I am rather amazed that more Americans working in this vast system are not whistle blowing. Like many institutions in American society, one must ask if the corruption and venality are not beyond critical mass.

One might simply substitute the Mortgage Industry with its crooked appraisers, mortgage brokers willing to falsify paperwork, Wall Street ready to slice, dice, bury the paper and regulators turning a blind eye to all. It would seem that much of the American Economy is predatory.

Plans are floating everywhere but little attention is focused on fraud, waste, paperwork, the right to die, liability costs, or health care rationing. Is it any wonder costs are soaring?

Fraud

At every step of the way there is every incentive to milk the system for as much as possible, and conditions for fraud run rampant. The Insurance Journal is reporting
Three California Doctors Arrested in Outpatient Surgery Center Scam.

The California Department of Insurance and the Orange County District Attorney's Office have arrested three doctors for medical fraud. The doctors are the latest charged defendants in what's being dubbed the Unity Outpatient Surgery Center scheme, and are accused of performing unnecessary surgical procedures and fraudulently billing more than $30 million to medical insurance companies.

According to the DOI, the doctors participated in a $96 million billing scheme that recruited 2,000 healthy people from all over the country to receive unnecessary surgeries in exchange for money or low cost cosmetic surgery. The recruitment of patients, or "capping," is illegal in California. Insurance companies paid Unity more than $17 million during a 10-month period.

The Unity cappers, or recruiters, targeted employees from businesses in more than 32 states and covered by PPO insurance plans, as pre-approval from the insurance company would not be a requirement for surgery. More than 1,600 employers were affected by employees who were involved in this scheme. The cappers arranged transportation for the patients, scheduled the surgeries, and coached the healthy patients on what to say. In exchange for undergoing surgery, the "patients" would receive a cash payment, usually between $300 and $1,000 per surgery, or credit toward a free or discounted cosmetic surgery.

Chan is accused of performing procedures on 208 patients which resulted in more than $9.5 million in insurance billing with more than $1.8 million collected for the unnecessary and fraudulent work.

Rosenberg, on staff at Cedars-Sinai Medical Center and affiliated with Herbalife, primarily performed colonoscopies and esophagogastroduodenoscopy (EGDs). Rosenberg is accused of performing 646 procedures on 554 patients, which resulted in the fraudulent billing to insurance companies of more than $9 million, for which Unity was paid more than $2.3 million.

Hampton is accused of performing 180 procedures on 178 patients. He primarily performed thoracic sympathectomies, also known as sweaty palms surgeries, which is a highly unusual and dangerous medical procedure.

Arguing about competing healthcare plans and health savings plans or even mandating insurance as Massachusetts was dumb enough to do (see Massachusetts Marks Health-Care Milestone Insurance Required Of All Residents) is a waste of time unless those plans deal with fraud prevention, paperwork reduction, the right to die, liability costs, and some reasonable discussion about health care rationing. In other words the whole system probably ought to be scrapped not patched.

Instead of figuring out what the real problem is (and what we can really afford), in typical bureaucratic procedure we have states and the federal government mandating solutions and most of those solutions just waste more money. I would recommend that we take a look at New Zealand and start all over from there. Reducing expenses by two thirds and improving care dramatically at the same time has to be a good start.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Today's archidose #100

g�rgolas, originally uploaded by TwOsE.

La casa La Ricarda n Barcelona, Spain by Antonio Bonet Castellana, 1959.

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Prouv� Parfait

Yesterday afternoon I took a break from the four projects that will soon bring my year of graduate school to a conclusion, in order to take in the Maison Tropicale by Jean Prouv�, currently sitting next to the Queensborough Bridge in Long Island City. The prefabricated house was designed for mass production in Niger, Africa, but only three were built. This one will be auctioned on June 5 and is expected to nab $6 million, $2 million more than the nearby, landmarked Steinway Mansion. Go figure.



The house sits on the future site of Silvercup West, a large-scale, mixed-use development designed by Richard Rogers.



Designed for a completely different context -- a completely different continent -- the house's location is a bit disconcerting at first, but after spending a few minutes with the house, it seems to be "at home" in its location, for some reason.



Perhaps the bridge is accommodating. Perhaps the house requires something bigger than itself. Whatever the reason, it's impossible to take in the house without acknowledging the bridge...



...or the skyline, something the new owner won't get for $6 million.



The house is an amazing thing. It is a great example of vernacular design executed with modern materials, in this case wood and lots and lots of metal.



The single, large space is surrounded by a walkway that provides shade, though when the sun hits the sliding panels the circles' soft blue glow makes for a great interior space. Operable circles above and below the blue grid allow for air movement across this interior space when the doors are closed, as do the louvered railings and the sun shades.



The way each material and surface is subservient to its intended context makes the sale of the house a bit suspect, like it will become a part of some art collection, rather than a functional piece of architecture, as intended. Regardless, it offers lessons for architects striving to increase comfort while reducing energy consumption.

Home Prices Take Record Dive

In the shadow of the headline Monthly new-home sales hit a 14-year high is the more important subtitle "prices taking record dive".

The beleaguered housing industry is sending mixed signals, with sales of new homes surging in April by the biggest amount in 14 years while prices endured a record plunge. Analysts said the price drop could provide evidence of builders' desperation. They are looking to reduce a glut of unsold homes in the face of the worst slump in sales in more than a decade.

The Commerce Department reported Thursday that sales of new single-family homes jumped by 16.2 percent in April to a seasonally adjusted annual rate of 981,000 units. That was the biggest one-month sales gain since a 16.4 percent surge in April 1993. Even with the increase, however, sales are 10.6 percent below the level of a year ago.

The median price of a new home -- the midway point between the costliest and cheapest -- fell to $229,100, a record 11.1 percent below the March level. The price was 10.9 percent below the level of a year ago, the biggest year-over-year price decline since 1970.

Analysts said the drop in home prices probably reflected efforts by builders to cut prices more aggressively to sell homes. The inventory of unsold new homes fell slightly to 532,000 in April. It still would take six months to deplete this inventory at the April sales rate.

Good News

• The Census Bureau Report shows new home sales are up 16.2% from March
• The Census Bureau report shows that housing inventory plunged from 6.7 months supply to 5.8 months supply.
  

The Bad News

• Median new home prices made a record plunge
• Those prices do not include incentives that are running rampant
• The new home sales figures will likely be revised lower
• March sales were revised lower from 858,000 to 844,000
• New home sales do not include cancellations
• The margin of error on new home sales is +- 13%
• Median home prices are now reportedly back to July 2005 prices and there were few if any pricing incentives in summer of 2005
• Home for sale dropped 540,000 to 532,000 units.

Summary

In spite of a record decline in median sales price and a 14 year high in new home sales, actual inventory of homes dropped a mere 8,000 units from 540,000 to 532,000 units.

Having trouble paying the mortgage?

No Problem. Just Charge-It.

American Express is breaking new ground, allowing its card members to pay their monthly mortgage bills on the card. I know what you're thinking, but hold on... Amex is requiring that these be prime loans only, so you can forget that whole subprime mortgage implosion issue. And of course, they'll be charging you $395 to enroll in the program.

"Obviously you have to be approved for the loan and depending on your credit line, it's all governed by the same standards," Christine Elliott of American Express tells me.

The loans, for now, also have to come from American Home Mortgage Corp the first lender to offer this Express Rewards Mortgage program, and oh to think of the rewards!!

How anyone can think this is a good idea is simply beyond me. I guess everyone thinks prime is safe. Then again all the lenders acted as if subprime was safe. And of course we all know how well "contained" this problem is, don't we?

Reality TV

Check out the Flip This House reality show on A&E. The entire event was staged right down to "rented landscape" buried in pots that was removed after the filming. It is quite amazing what passes as reality.

Half Price Houses

There is a great video on YouTube about half price houses in zipcode 95832 (Sacramento California).



Less than 2 years ago the above house sold for $526,000. At the recent courthouse foreclosure auction no one wanted it even at half price. That's reality.

This post originally appeared in Minyanville.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Canon Powershot TX1

The Canon Powershot TX1 is the camera everyone's been waiting for, combining a high-quality digital still camera with the large zoom and versatility of a camcorder. With the TX1, you can take large, 7-megapixel images or high definition (720p) videos, with a deep, image stabilized 10x zoom, all in a tiny, compact body that measures only 1-inch thick. The TX1 is going to make a lot of waves in both the digital camera and camcorder markets, so expect to see a big move in the direction of these hybrid models. Everything records directly to your Secure Digital memory card. Early price estimates indicate the TX1 will move for about $499, an absolute bargain for such an exciting, feature-rich new model.

Specifications

* 7.1 megapixels
* 10x optical zoom / 4x digital zoom
* Canon DIGIC III image processing
* Auto focus
* ISO 80-1600
* Auto and manual (camera) exposure
* 720p High Definition video (16:9 widescreen, 30 frames per second. Movie size capped at 4GB/13min.)
* 1.8-inch swivel LCD display
* Secure Digital storage media
* Image Stabilization (Lens-Shift)
* Lithium-ion battery