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On the Home Front, the Numbers Look Good


JACKSON HOLE, Wyo. -- Three recent housing notes:


Housing starts

fell 2.5% in September. Yet single-unit starts, which account for 79.1% of total starts, fell only 0.6%. Meanwhile, starts fell 3.6% in the Northeast and plunged 8.6% in the South but rose 3.2% in the Midwest and surged 5.6% in the West. This doesn't spell d-e-a-t-h. It spells w-e-a-t-h-e-r. Starts rose 4.1% during the third quarter against a 0.9% decrease during the second. And building permits -- the best gauge of starts in future -- soared 15.4% during the quarter just ended.

(2) The

National Association of Home Builders'

Housing Market Index hit an all-time high in October. The percentage of builders labeling new-home sales conditions as "good" jumped to 68 from 57 while the percentage labeling them "poor" remained at six. The gap between "good" and "poor" -- a decent indication of near-term sales -- now stands at its highest level of the cycle.

(3) The

Mortgage Bankers Association


this morning that loan applications are rising at a 121.4% (!) year-on-year rate and that applications for refinancings are rising at a 256.6% (!) rate.

Bottom line: You will now hear that housing is dead. But to quote someone who said that very thing on television this morning: Wrong! Building permits, builder sentiment and loan application volume all suggest that those who have banked on an end to huge house-sales numbers are likely to be disappointed. This bodes well for the consumption of housing-related items.

And for spending in general. The huge volume of mortgage refinancings that has persisted throughout the year -- and especially over the last eight weeks -- spells s-t-i-m-u-l-u-s.

Keep in mind that hordes of creditworthy consumers are still rushing to refinance; banks are very happy to turn over these loans where the mortgage guys won't. To quote the chief economist of

Freddie Mac

, "from the standpoint of buying houses, there's not a credit crunch."

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Fed Holes

Atlanta Fed


Jack Guynn

on Oct. 20:

It is my sense that while bankers have tightened lending a bit in terms of conditions, I don't have a sense yet that banks have made any radical changes about the availability of credit.

More Guynn:

It is sobering to reflect how quickly the economic worm has turned.


Vice Chair

Alice Rivlin

on Oct. 20:

The crisis that started in Asia has spread to Russia and to the emerging markets and to our economy ... the mood of pessimism and risk aversion has affected consumer confidence ... The economy has been growing pretty well, but expect a slowdown in this quarter.

St. Louis Fed


William Poole

on Oct. 20:

Chairman Greenspan has a tremendous feel for the economy and how to run monetary policy, the intermeeting ease was his judgment, and I respect him so much as a leader and as a skillful observer and, obviously, major participant in the markets that I have no problem whatsoever with that decision.

More Poole:

My gut feeling is that credit spreads have probably peaked out ... I do not anticipate that market conditions will remain as uncertain as they are ... It's only if the stock market were to remain low for a long period of time that you'd expect to see the wealth effect show up in a declining rate of consumer spending.

Chicago Fed


Michael Moskow

on Oct. 19:

There are growing concerns that credit-worthy borrowers may find it difficult to obtain credit for productive investment opportunities in the coming months. Some companies have cut back on their borrowing in the capital markets. And Federal Reserve surveys and other sources indicate that banks are less willing to lend to some borrowers. Although the jury is still out on these questions, the risks to the U.S. economy seem to have swung towards slower growth in aggregate demand ... The risk, and it's only a risk at this point, is that this slowing will be too quick.

Side Dish

Treasury Secretary Bob Rubin

last night:

Our dollar policy is absolutely unchanged.

Kindly make sure you aren't writing from a bunk email address when you send a question to be answered. Very frustrating to take the time to Reply to Author only to have the message bounce back four days later.