A Mistake in Action or in Reason?

Someone explain this one to me. We all know that bond prices and yields are inverted. That means that investors buy bonds, usually on economic weakness, yields lower. Similarly when the economy is doing well, investors sell bonds, thus raising rates.

Bloomberg reports “Treasuries fell, pushing yields on benchmark 10-year notes to the highest level since January, on a sign of housing strength… after a government report showed the biggest rise in new-home sales in 14 years.”

But this news is bad! After stagnant home-sales over the past few months its about time we get some action. But this means that some buyers, impatient and reluctant to wait for lower prices, have thrown in the towel and decided to buy anyway. Now although they may not be categorized as investors, they are nonetheless not that stupid. Look at the numbers: Marketwatch reports Median sales price off 10.9% in past year, Biggest drop since 1970! (emphasis our but should be theirs). Existing Homes sold for a 2% discount. Now wonder there are suddenly so many buyers.

[As to why the Existing Homes are lagging New Homes, Adrian Ash from Bullion vault explains that Builders are smarter than Buyers. “The only way U.S. Builders can shift unsold homes is to discount. Existing homes, in contrast, won’t sell – because the discounting has yet to begin…”]

So now tell me. This economic report is supposed to be good news? A reason to sell bonds and buy what? Houses? Maybe Bloomberg has it wrong. It could be these bond investors are off to cash in on something altogether different (and I sure as hell hope it doesn’t require a mortgage to buy or contains the words “Private” and “Equity” in the same sentence).

Oh, and I just got word that the reality show “Flip This House” was a setup.

I repeat over the words of Bill Hampel, chief economist for the Credit Union National Association. “The bottom of the housing sector is not upon us.”


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