Saturday, May 19, 2012

The Higher Education Bubble vs. Housing Bubble

The chart above shows the historical relationship between: a) college enrollment rates for high school graduates (blue line, left scale) which have gone from 30% to almost 50% between the early 1970s and 2009, b) college enrollment rates for all 18-24 year olds (data here), which have gone from 25% to over 40%, and c) an index for college tuition adjusted for inflation (red line, right scale, only available starting in 1978), which increased more than three times between 1978 and 2009. The positive historical relationship between college enrollment rates and inflation-adjusted college tuition is similar to the positive, historical relationship between: a) homeownership rates and b) inflation-adjusted home prices, see chart below:

In the case of both college degrees and homeownership, the government decided the private market wasn't providing "enough" of either, and then created various government financing schemes to lend money to borrowers, often with questionable credit, at below market rates, along with providing other taxpayer subsidies and incentives to induce more people to go to college and more renters to become homeowners. In both cases, government policies created unsustainable bubbles, one for higher education and one for homeownership.  We're just coming out of the disastrous effects of a housing bubble that crashed heavily starting in 2006, and we might be in the early stages of a higher education bubble that is just starting to show some early signs of deflating.  Is that a hissing sound?

Obama's Intrade Odds Trending Downward

Obama's re-election odds on Intrade have been trending downward since peaking about a month ago at 61.5%, and have now fallen below 57% for the first time since early February (see chart).   

Quote of the Day: Colleges Care More About Diversity of Freshman Classes than Senior Classes

From the WSJ's interview with Abigail Thernstrom:

The Voting Rights Act fits a familiar pattern. "This is the usual civil rights legislation story. It starts out being about opportunity and ends up being about results. We see that in any corner of the civil rights picture that you want to zero in on."

She adds: "I think there's a running assumption through all of the writing on the left about racial issues that, were it not for racism, you would have random distribution of racial and ethnic groups in education, employment, contracting, elections—whatever you're looking at. But the notion of random distribution of blacks, Latinos, Jews, Armenians or whomever is absurd. It's indifferent to the reality of society. That's just not how people distribute themselves."

In February, the Supreme Court agreed to hear arguments in a case about whether the University of Texas could use race as a factor in admissions, and Ms. Thernstrom couldn't be more thrilled. "It's a myth that in the elite schools you would have almost no black or Hispanic students" but for racial preferences, she says.

After the passage in 1996 of California's Proposition 209, which banned the use of race and ethnicity in public university admissions in that state, "the system as a whole did not lose blacks, and minority graduation rates went up. Nobody wants to talk about that. All that counts as far as these schools are concerned is what the freshman class looks like. They don't care what the senior class looks like."

MP: Nationally, only 43% of black students (36% for black males) graduated from college in 2006 compared to 63% for white students, meaning that the graduating senior college classes were much less racially diverse than the entering freshman classes.  At least part of the 20-point white-black racial gap in college graduation rates could be explained by "academic mismatch" - a consequence of affirmative action admission policies that admit minority students will lower academic qualifications than their white and Asian counterparts.  Result? The academic abilities of many minority students are not well matched with the academic abilities of non-minority students, and not well-matched with the academic rigor of the institution in general. 

Peter Thiel on 60 Minutes: $1 Trillion in Student Debt is $1 Trillion in Lies About Higher Education

(CBS News) -- "A billionaire's program to pay students with promising ideas to drop out of college and develop those concepts for the good of all is attracting students and critics. Internet business pioneer Peter Thiel thinks his program is a viable alternative to what he sees as a largely ineffective university system where costs far outweigh benefits.  Morley Safer takes a look at the controversial program and the increasingly expensive university system that helped spawn it on 60 Minutes, this Sunday May 20 at 7:00 p.m. ET (watch preview above)

"We have a bubble in education, like we had a bubble in housing...everybody believed you had to have a house, they'd pay whatever it took," says Thiel. "Today, everybody believes that we need to go to college, and people will pay-- whatever it takes." And that's way too much these days says Thiel, when people without a degree can make as much as those with an advanced one. 

"There are all sorts of vocational careers that pay extremely well today, so the average plumber makes as much as the average doctor," Thiel tells Safer. At a time when only half of recent college grads are employed full-time and tuition has quadrupled over the past 30 years, Thiel believes the system is broken and its promises are hollow. "I did not realize how screwed up the education system is. We now have $1 trillion in student debt in the U.S. Cynically, you can say it's paid for $1 trillion of lies about how good education is," Thiel says. 

Updates on America's Shameful War on Drugs, Which Has Spread to Mexico and Killed 55,000

1. George Will's latest Washington Post column highlights the shameful government overreach that is part of America's costly "War on Drugs Peaceful Americans Who Voluntarily Choose To Use Intoxicants Not Currently Approved of by the Government, Who Will Put Users in Cages if Caught."  It's titled "When the Looter is the Government," and profiles a case I featured on CD last October about a 68-year old Massachusetts businessman Russ Caswell who operates a budget hotel that has been in his family since 1955.  Unfortunately for him, he owns the $1.5 million property free-and-clear, and that's one reason the government is motivated to confiscate his property under the civil forfeiture statute of "equitable sharing," which George Will describes as "a process of government enrichment that often is indistinguishable from robbery."

Reason? In the last 20 years, 30 motel customers have been arrested on drug-dealing charges, which represents 1/20th of 1% of the 125,000 rooms that have been rented out during that time.  Mr. Caswell is fighting the seizure of his property and is being represented by the Institute for Justice.  But even if he prevails in court, it's shameful that the case has gotten this far, and even a legal victory for Mr. Caswell would still leave him as another victim of the War on Drugs for all of the personal costs of his ordeal.  

2. America's War on Drugs has exported our drug-related problems of crime, gangs, and violence to Mexico, where more than 8,000 corpses left across the country since 2006 have not even been identified, and where more than 5,000 people who have disappeared during the drug violence sweeping the country have never been tracked down, according to this Bloomberg report.  

"The sheer scale of the carnage makes it difficult for authorities to handle the murder cases. The latest violence has pushed the total number of drug-related deaths to around 55,000 since President Felipe Calderon assumed power in December 2006. Emergency teams have had to confront mass graves with more than 200 corpses, dozens of bodies thrown into mine shafts and massacres such as the 49 headless corpses found last week."

Note that the number of drug-related deaths in Mexico is about the same as the number of American casualties during The Vietnam War, so it makes the use of the term "war" very appropriate.  

3. To get a powerful visual understanding of the impact of the "War on Drugs 55,000 Mexicans Who Have Given Their Lives Because of Shameful, Senseless Government Policies in the U.S. and Mexico," check out this collection of 44 recent photographs from Mexico's drug war and the people so horribly affected by it, from The Atlantic (Mexico's Drug War: 50,000 Dead in Six Years), with this caution:

Warning: All images in this entry are shown in full. There are many dead bodies; the photographs are graphic and stark. This is the reality of the situation in Mexico right now.

The Unsustainable Higher Education Bubble; It's Showing Signs of Stress, Has the Deflation Started?

It's been widely reported now that the U.S. has a serious and unsustainable "higher education bubble," not unlike the unsustainable housing bubble in the U.S. that eventually crashed and resulted in a housing meltdown, mortgage tsunami, a wave of foreclosures, and a global financial crisis.  The chart above illustrates that the ever-inflating higher education bubble with ever-increasing costs for college tuition and education supplies is starting to make the housing bubble look almost inconsequential by comparison.

The CPI for college tuition has increased almost 12 times since 1978, compared to the 3.5 time increase in overall consumer prices, and the 4.4 time increase in home prices at their "bubble peak." What the two bubbles have in common is that they have both been fueled by political obsessions: one with homeownership and another with college education.  And with those political obsessions comes the government-sponsored coerced taxpayer funded assistance that creates the "politically-motivated air" to inflate the bubbles to unsustainable levels: government taxpayer- subsidized or government taxpayer-provided credit at below market rates to borrowers who wouldn't qualify for credit from private borrowers.

A Los Angeles Times article yesterday pointed out some of the grim facts that suggest that the higher education bubble is showing signs of real trouble:

1. Newly minted college graduates lucky enough to find a job after leaving school are in for a shock: They’ll likely be earning less money, adjusted for inflation, than they would have a decade ago.

2. Meanwhile, college debt is soaring. Last year, students took out $117 billion in new federal loans, pushing the total outstanding to above $1 trillion.

3. The average student graduating from college today has $25,250 in student loan debt.

4. Unlike other forms of debt, student loans are virtually impossible to discharge through bankruptcy. Uncle Sam frequently garnishes paychecks, tax refunds, even Social Security payments from people who haven't paid their government-backed loans.

A recent article in the Washington Examiner by James Harrigan and Antony Davies provides an excellent summary of the situation:

"The impending student loan crisis, like the recent housing crisis, is born of government meddling, and promises to have similar results. But with the students, the coming bankruptcies will be much worse. 

The anatomy of the housing crisis is simple. Years ago, the U.S. government decided that the path to prosperity was homeownership. When the free market did not provide what the government considered "enough" housing, the government used both carrots and sticks to force markets to lend more money for mortgages. 

When private banks shied away from high-risk borrowers, the government instructed its enterprises, Fannie Mae and Freddie Mac, to direct more than 40 percent of their lending toward low-income borrowers. These two government-sponsored enterprises took lending risk away from private banks and placed it on the backs of taxpayers instead. 

The government also offered tax incentives for people to take on more mortgage debt, and the Federal Reserve made mortgages cheaper by holding interest rates at historically low levels. Predictably, people rushed to secure cheap mortgages, fueling a boom in homebuying and causing home prices to soar over 400 percent from 1976 to 2010. When the rush tapered off, households realized they could not afford to pay their mortgages and declared bankruptcy in droves. 

The anatomy of the student loan crisis is similar. Having decided that the path to prosperity is a college education, and that the free market was not providing "enough" college education, the federal government created Sallie Mae to take lending risk away from banks and place it on the backs of taxpayers. The tax code provided modest tax incentives for students to take on more loans, and lately, the Federal Reserve has continued to make borrowing cheap by holding interest rates low. Sound familiar? 

As with housing, the price of college education has skyrocketed over the last 30 years (see chart above). Just as homebuyers borrowed to speculate on houses they could not afford, students now borrow to speculate on educations that many will not complete, and which others may find to be of little value (see LA Times article above). 

The impending burst of the education bubble will be far more damaging than the housing bubble. When homeowners got behind on their mortgages, they can declare bankruptcy to free themselves of crippling debt. Either they or their bank can offset some of what they owed by selling the collateral -- the house. Students cannot rely on either of these things. Bankruptcy does not wipe out student loans, and an education cannot serve as collateral. 

In both housing and higher education, government failed to seek out the reasons why there was not "enough" lending going on. Many people were in no position to afford the loans, and the banks couldn't afford the risk. With unbounded hubris and dogged myopia, politicians decided to "fix" the market by forcing people and banks to do what each had determined was imprudent. 

Just as the government sought to engineer an increase in homeownership, it now seeks to engineer an increase in higher education. This is the stuff of which bubbles are made. 

The solution is economic freedom: Let private banks determine lending without government interference. Allow people to decide for themselves whether one level of debt or another is prudent. This latest bubble will burst, as they all do. The government, unfortunately, will be there to create another." 

MP: It seems clear now that because of dual political obsessions, we have "oversold" both homeownership and college education to the American people, by artificially lowering the costs through government intervention and subsidies.  As economic theory tells us, if you subsidize something you get more of it, and that's what happened with both homeownerhip and college education - but we got too much of it, and that has led to twin bubbles.  Just like government policies turned "good renters into bad homeowners," it's now apparent that government policies have turned "good high school graduates, many of whom should have pursued tw0-year degrees or other forms of career training, into unemployable college graduates with excessive levels of student loan debt that can't be discharged."  Perhaps economics textbooks in the future can illustrate the concept of "government failure" with these two examples of government-induced, unsustainable bubbles?    

Another Grammar Rant, This Didn't Take Long

It's been only ten days since I ran my last "quarterly" grammar rant on "it's vs. its," but I've already collected six new examples, here they are:

1. The U.S. is one of the few countries that has not nationalized the oil industry and yet it gets hammered for it's "anti-energy" policies.

2. It is said that China manipulates it's currency to benefit itself.

3. Looks like Alaska is now down to about a 1/3 of it's peak.

4. How "big" is ND compared to how big Alaska was at it's PEAK?

5. Experts put max output at 1.0 - 1.2 mpd when it reaches it's peak.

6. Their market share continues it's decades-long slide.

Remember: It's = it is, and if you can't substitute "it is" for "it's" in a sentence, they you should use "its" and not "it's."  For example, it wouldn't make sense to say "China manipulates it is currency," so you can't use it's, it should be "its currency."  

Sorry for the hectoring, I guess I am just somehow perplexed and fascinated why such a simple grammar rule is apparently so difficult for so many intelligent people to follow, just like I have a fascination with why men wear shorts now year-round, and why cheap, flimsy "footwear" that is readily available at your local drug store is now the footwear of choice for so many people (flip-flops)?

Friday, May 18, 2012

Oil Prosperity Comes to McMullen County, Texas

McMullen County Texas is in the heart of the oil-rich Eagle Ford Shale formation in South Texas, where oil production is gushing and could reach 1 million barrels per day by 2016.  A recent study from the University of Texas-San Antonio projects the creation of approximately "shale-ready" 117,000 full-time jobs in the Eagle Ford region by 2021.  And that job growth is already starting to show up in McMullen County, where the the unemployment rate in April fell to a 14-year low of 2.4% (see chart above).  That's more than a 5 percent drop in the jobless rate in just 34 months from the recession-related peak of 7.5% in June of 2009.

Drill, drill, drill = jobs, jobs, jobs =a multi-decade low jobless rate of 2.4% in McMullen County. 

American Manufacturing Has Been at the Forefront of U.S. Economic Growth for the Last 15 Years

For the last year or so, I've made the case (along with others) that the U.S. manufacturing sector is at the forefront of the economic expansion based on all relevant measures of economic performance: profits, output, employment and unemployment.  For each of those variables, the U.S. manufacturing is leading the overall economy with greater growth in after-tax profits, greater growth in after-profits per employee, greater output growth, greater employment growth, and a lower unemployment rate.  

Using annual data from the BEA series "Real Value-added by Industry" (in constant 2005 dollars) through 2011 (and estimates for 2012), I'm now reporting that the U.S. manufacturing sector has actually been leading the overall U.S. economy for at least the last 15 years, based on annual growth rates in inflation-adjusted output growth. My estimates in growth rates for 2012 are 4% for real manufacturing value-added and 2.2% for real GDP. 

The top chart above shows that in each of the 13 non-recessionary years since 1997, the real growth rate in manufacturing output was greater than the growth rate of real GDP!  Only in the three recessionary years of  2001, 2008 and 2009 was manufacturing growth below real GDP growth.  Over this 16 year period, the average growth rate in real manufacturing output was 3% compared to the average growth of 2.3% for the overall economy.  

The bottom chart compares the level of inflation-adjusted output for the manufacturing sector to the level of real output for the overall economy (GDP) from 1997 to 2012 (estimated), when both series are set to equal an index value of 100 in 1997.  With an estimated growth rate of 4% this year for U.S. manufacturing, U.S. factory output in 2012 will be above the pre-recession 2007 level by about 3%, and it's highly likely that manufacturing output in the first four months of 2012 is already ahead of the 2007 peak.  On a cumulative basis since 1997, manufacturing output this year will be above the 1997 level by 47.5%, compared to a cumulative growth in real GDP of only 38.2%.   

Bottom Line:  The U.S. manufacturing sector isn't just at the forefront of the current economic expansion, it's been at the forefront of economic growth in the U.S. economy in every non-recession year for the last 15 years, and by a non-trivial difference of 0.7% higher growth per year on average. 

Update: Both manufacturing output and GDP are measured in constant, 2005 chained dollars using the BEA series "Real Value Added by Industry." 

Gas Prices Falling to $3.25 or Less in Some Areas

Ohio Senator Sherrod Brown claims that excessive oil speculation is partly to blame for high oil and gas prices and recently called for the Commodity Futures Trading Commission to intervene.

"We’re seeing gas prices rise long before the peak summer driving season — and excessive oil speculation is a key source of these cost spikes," Brown said in a news release. "In fact, one recent report showed that out-of-control speculation adds 56 cents to every gallon of gasoline siphoned from the pump — and that’s outrageous."

“We cannot afford to sit idly by while Wall Street and Big Oil get richer and Ohio’s families and small business owners foot the bill,” Brown added.

Now comes this news report today with the headline: Expect lower gas prices heading into Memorial Day: Pump prices should fall ahead of Memorial Day, $3.25 a gallon or less in some areas:

"If you're lucky enough to live in some parts of the United States, you may see gas pump prices fall to around $3.25 a gallon or less in the next week or two. Even West Coast drivers should get some relief from prices that are still above $4 a gallon."

Question for Sen. Brown: Does out-of-control, excessive oil speculation on Wall Street now get any of the credit for the dramatic drop in gas prices? 

Today is Endangered Species Day; Don Boudreaux on the Unintended Results of Gov't. Legislation

Today (May 18) is Endangered Species Day, and in the video above Professor Don Boudreaux explains how the Endangered Species Act of 1973 might have good intentions (preserve threatened animals), in reality it often has the effect of giving landowners strong reasons to kill any endangered species they find on their property. This phenomenon is known as "shoot, shovel, and shut up," and is one of the unintended consequences of government regulation. 

Friday Afternoon Links

1.  "Washington state's manufacturing sector added 14,600 jobs — most of that growth in the Seattle area — over the 12 months ending in March, leading all other sectors, according to data released Wednesday by the Employment Security Department. "It's been the highlight of the past 12 months," said Dave Wallace, the department's senior labor economist."

2. Baker-Hughes reported today that the share of rigs drilling for natural gas fell to 30.2% for the week ending May 18, the lowest share ever for natural gas since Baker-Hughes started tracking the oil/gas drilling split back in 1987. Market forces at work.

3. "In the Bakken, the latest slogan is, “Build, baby, build.” A Bakken Housing Summit hosted in Williston this week calls for 5,000 new homes to be built in 24 months. Organizer Jeff Zarling said that 5,000 may not be the magic number, but the theme was designed to convey the magnitude of the oil boom on western North Dakota’s housing needs to stakeholders around the country."

I see some shovel-ready (shale-ready?) construction jobs here from the economic stimulus program known as "Bakken shale oil."

4. "North Dakota airline boardings are setting records, due in large part to the influx of people into the booming western oil patch. Six of the state's eight commercial airports had record boardings in April, and statewide there was an increase over the year of nearly 24 percent.  In the western oil patch, the Williston airport saw a 36 percent increase in boardings over the year, the Minot airport a 69 percent rise and the Dickinson airport a 74 percent jump."

Another example of the "Bakken shale oil economic stimulus."

5. On the international front, a) Mexican economic growth accelerated to 4.6% in Q1, the fastest pace since Q3 2010, prompting several analysts to upgrade 2012 growth forecasts and b) Japan's economic growth accelerated to 4.1% in Q1.

6. Should insider trading be legal? Of course, here's the case.  Here's an alternative case for prosecuting traders using inside information with civil charges that generate pocket-book penalties instead of criminal ones that lead to prison sentences. Civil charges are more proportional to the wrongdoing, less expensive to prosecute, and still get the job done, according to criminal defense lawyer Harlan Protass.

 More double-digit home sales gains for April:

7.  "Huntsville AL home sales increased 31.8% from March. It's also a 19% rise over April's five-year sales average. It's the fifth-consecutive month that Huntsville area home sales have improved over the same month a year ago. The range of increases throughout Alabama is about 10 to 13 percent."

8. "The Northern Ohio Regional Multiple Listing Service is reporting a 12% climb in the number of sold listings in April, reaching 3,050 from 2,716 in April 2011. The number of listings sold also rose 7% in April from March. On a year-to-date basis through the end of April, sales are up 16% to 10,624 this year from 9,143 in the first four months of 2011."

Michigan Economy Shifts Into High Gear As America's Most Improved State Economy

The BLS released state unemployment rates today for April, and Michigan gets credit for the most improved state economy over the last year.  Michigan's jobless rate fell from 10.5% in April 2011 to 8.3% last month, and that 2.2% drop was the largest April 2011-April 2012 jobless rate decline in the country.

The chart above shows monthly jobless rates for Michigan and the U.S. back to 2000 and helps to illustrate how much the Michigan economy has improved in the last few years.  Michigan's April jobless rate of 8.3% is just 0.2% above the national rate of 8.1%, and that's the smallest Michigan-U.S. jobless rate gap since October 2000, more than a decade ago.  At the height of the recessionary effects on the labor market, the Michigan-U.S. gap was more than 4% in 2009 when Michigan's rate was above 14% compared to the 10% rate for the country.

Over the last year, the Michigan economy has added 59,300 new jobs, and about half (26,000) of those new jobs have been in manufacturing, reflecting a strong rebound in the automotive sector.  This dramatic improvement in the Michigan economy provides additional evidence that the manufacturing sector, especially the Midwest's heartland manufacturing, is at the forefront of the economic expansion.    

Future of American Manufacturing Looks Bright

Here are a few excerpts from my new article "Manufacturing in Our Favor: A Global Reallocation of Manufacturing" in the Spring issue of Business Horizons Quarterly, published by the National Chamber Foundation (U.S. Chamber of Commerce):  

There were three related and important manufacturing trends that emerged in 2011:

a) American manufacturing remained at the forefront of the United States’ economic expansion for the second year in a row and re-established itself as one of the economy’s strongest sectors;

b) An erosion of China’s manufacturing cost advantages, especially for wages, started to bring manufacturing production back to the United States from China and other low-wage countries, reversing a decade-long trend of outsourcing production overseas; and,

c) An abundance of domestic shale-based natural gas brought gas prices to record low levels and sparked a new boom in the United States for energy-intensive manufacturing.

As a result of these trends, American manufacturing in 2011 had its best year in at least a generation by all relevant measures of economic performance: profits, output growth, and employment gains. In fact, it’s possible that we will look back on 2011 as a watershed year that marked the beginning of a great manufacturing renaissance in America.

Putting it all together, the U.S. manufacturing sector had one of its best years ever in 2011, reflecting a new manufacturing rebound that is now underway and is expected to accelerate in the years ahead. Flush with record-level profits, the manufacturing sector has never been financially healthier than it is today, and the future of American manufacturing has never looked brighter. After years of negative reports about the decline of American manufacturing, it’s now time to recognize and celebrate a great turning point, as America’s industrial sector moves in a new direction that many are now calling a “manufacturing renaissance.”

Walter E. Williams: Greed is Good

In the video above, Professor Walter E. Williams explains why greed is noblest of all human motivations. 

Thursday, May 17, 2012

The Myth of "Idle Leases" for Oil on Federal Land

100 oil leases might produce 1 profitable discovery.
What sense would it make for profit-maximizing oil companies like Exxon Mobil to pay the federal government millions of dollars every year for offshore and onshore oil leases on federal land, and then leave those thousands or millions of acres idle? Especially today when oil prices are close to all-time historical inflation-adjusted highs? If you said "No sense at all," you can go the head of the class, as Professor Walter E. Williams would say. And yet that is exactly what Team Obama is saying:

WASHINGTON – "The White House pushed back against the oil and gas industry’s claims that the Obama administration is blocking domestic energy development, releasing a new analysis showing that 46 million acres of federal lands and waters leased for drilling are sitting idle.

“We continue to make millions of acres … available for safe and responsible domestic energy production on public lands and in federal waters,” said Interior Secretary Ken Salazar in a statement. “We also want companies to develop the tens of millions of acres they’ve already leased but have left sitting idle.”

According to the Department of Interior report, oil and gas companies are actively drilling or have launched development on less than a third of the 36 million acres they have leased offshore, and on just over half of their onshore leases. That includes leases where the companies have not yet filed exploration and development plans with the federal government, and ones where companies have received drilling permits but haven’t launched the work. According to the report, the government has issued about 7,000 permits for exploration not yet under way on federal and Indian lands."

Here's how API President and CEO Jack Gerard responded this week:

“If you look at their [the Administration's] characterization of idle leases, normally they include in that leases where we’re trying to get permits, we’re trying to get permission to develop this land. For example, there was a permit approved just last week in Utah, which Secretary Salazar took great credit for. We’ve been waiting for four and a half years for that approval. In the administration’s previous analysis they would have concluded that was an idle lease, while we’re waiting for Uncle Sam to give us permission to produce these resources, to identify resources on public lands. … The industry last year alone invested $200 billion in the United States, so we’re hardly sitting on anything.”

As Mark Green explains on the Energy Tomorrow blog:

"It’s important to remember that a lease isn’t a guarantee that an area will contain any oil or natural gas. Most of them don’t have enough oil or gas in quantities sufficient to produce or in formations that are accessible. The graphic above that puts the search for resources in context [MP: An oil company might pay for 100 leases, but that typically only leads to one actual profitable discovery].  

The administration has defined as “idle” leases that aren’t idle at all. They might not be producing for a number of reasons: because of ongoing seismic work, because government permits haven’t been issued, because the rigs and supporting resources are being put in place so drilling can begin – or because drilling is occurring. It’s just misleading to say a company is sitting on a lease when it is waiting for a government-issued permit to start drilling."

Thursday Energy Links

1. WSJ -- "Energy intensive industries in Europe and Asia are becoming increasingly envious of the huge competitive advantage their U.S. rivals have gained from a boom in natural gas production. The gap between U.S. and international gas prices has expanded to all time highs, giving American industries a competitive advantage that could be worth as much as $1 billion a day."

2.  "The development of the Eagle Ford shale continues to prompt dazzling assessments and predictions from experts, who said at an energy symposium Wednesday that in four years, the oil-rich formation could become the nation’s second-most productive shale play. Production in the Eagle Ford could reach 1 million barrels a day by 2016."

3. China Petrochemical Corp. will start pumping thenation’s first shale gas from a project in Sichuan province next month.  

4. "The shale energy boom in North America will lead to an industrial revival in the region while Europe could benefit from a conventional gas glut that will help decouple it from surging global oil prices, according to industry leaders and analysts.

A boom in North American shale gas production in the past five years has resulted in sharp falls in domestic power and gas prices there and could turn North America from a gas importer into a large exporter, and a similar development is seen as underway in the oil sector.

“It fundamentally modifies the geopolitical landscape, and this is bullish for the U.S. They will have the cheapest power, gas, and oil and that could lead to an industrial revival as its industry becomes globally competitive again because of cheap energy, said Daniel Jaeggi, co-founder and Head of Global Trading of Geneva-based commodities trading house Mercuria." 

More on the April Real Estate Blowout

1. "Pittsburgh's housing market continued strong with an 11 percent increase in sales in April. It's the seventh consecutive month that home sales are up. Total dollar volume was up 22 percent to $306.3 million; the average home sale price was up 11 percent to $159,613 in the five-county region."

2."Flocks of buyers pushed up home sales across the San Francisco Bay Area last month for the strongest April in six years. Sales of single family homes were up 12 percent from the previous April. There were double-digit increases in the number of homes sold in Santa Clara, San Mateo and Contra Costa counties.  A drop in the number of foreclosure sales, which fetch lower prices, helped push the median sales prices up, DataQuick said.

The median sales price of a Contra Costa County single family home was $296,750, up 12 percent from a year ago. In Santa Clara County, it was $595,000, a 13 percent gain; in San Mateo County, $635,000, a 2.4 percent increase and in Alameda County the median price was unchanged."

3. "Bidding wars are breaking out for luxury homes in such wealthy Los Angeles enclaves as Brentwood, Beverly Hills and Bel Air as an increasing number of buyers bet on rising home prices and investors return to the market. Even properties in need of extensive renovation are being fought over by shoppers who expect to resell them for more after a remodel or rebuild.

Sales of Beverly Hills homes priced at $2 million and higher climbed 11 percent in the first quarter from a year earlier to 39. In Brentwood, whose residents include actress and singer Julie Andrews, they increased 56 percent to 25, and in Malibu they gained 64 percent to 23."

Related: Mortgage rates fell again this week to fresh record lows, with the 30-year fixed rate dropping to 3.79% and the 15-year falling to 3.04%. 

Only People Pay Taxes, Not Solar Panels; Commerce Slaps 31% Tax on U.S. Consumers

On behalf of American consumers, a slightly edited version of this afternoon's NY Times article "U.S. Slaps High Tariffs on Chinese Solar Panels" Americans Who Purchase Solar Panels Made in China":

"The United States Commerce Department said Thursday that it has decided to impose tariffs (taxes) of more than 31 percent on Americans who purchase solar panels imported from China, after concluding that Chinese producers had generously “dumped” lowered the prices of solar panels on the American market for to less than it costs to manufacture and ship them, saving Americans millions of dollars. 

The tariffs, which are retroactive to 90 days before the decision, are in addition to anti-subsidy tariffs (taxes) of 2.9 percent to 4.73 percent that the department imposed on American consumers in March. Since Chinese panels make up a large portion of the American market, the combined anti-dumping and anti-subsidy tariffs are likely to mean a substantial increase in the price of solar panels here for American consumers

SolarWorld Industries America, which led the coalition special interest cartel of domestic solar manufacturers that filed the solar dumping case, welcomed the department’s ruling. The anti-consumer decision “is a very positive step in the process. It’s also in line with what we expected as a special interest group of domestic producers seeking protection from global competition,” said Ben Santarris, a company spokesman. “We consider this a bellwether case of the government protecting the self-interest of domestic producers seeking protection against foreign competitors. It underscores the importance of manufacturing special interest groups to the U.S. economy Congress seeking to increase political power, votes and support by catering to concentrated special interests."

Manufacturing: U.S. Will Own the Mid-21st Century and America Remains a Country Without Limits

From today's WSJ article "The Future is More Than Facebook" by Forbes publisher Rich Karlgaard:

"Manufacturing? America will own the mid-21st century. Geopolitical instability and rising oil prices will wreck the late 20th-century rationale for outsourcing. Chinese labor costs are rising 20% a year while robotic costs are dropping by 30% a year. Do the math. 

"Made in the USA" is set to have a major comeback. The showstopper will be 3-D printing, which makes physical objects from a digital file. It will turn our artists into artisanal manufacturers and reward American-style creativity (see related CD post here
on 3-D printing, featuring a 2011 Forbes article by Mr. Karlgaard).

Energy? America's natural-gas and shale oil boom will bridge us to 2030 or so when solar energy and algae-based fuels will be closer to market parity and begin to make a real contribution. As long as I'm on the topic of the natural-gas boom, what key technology made this happy surprise possible? High-tech horizontal drilling. Who knew? We were all too busy fiddling with our iPhone apps to see it coming.

Question: If America could have only one of the following—Facebook, Twitter or horizontal drilling—which would be the smarter choice?

Happily, we don't have to make that choice. America remains the world's innovator, a country without limits."

Dropbox, Google Drive, and the CPI

There's an ongoing debate (including in the CD comments section) about whether CPI inflation as measured by the BLS overstates or understates changes in consumer prices.  Mike Mandel makes the case here that the CPI may significantly overstate inflation because it doesn't capture many of the significant price decreases in online services, many of which are now free: Dropbox (which Mike Mandel uses 25-50 times per day) with 2.5 GB free storage, Google Drive ("Keep Everything, Share Anything, Access Everywhere") with 5 GB of free storage, and well, even free blogs like Mike's (Mandel on Innovation and Growth), and Marginal Revolution, Greg Mankiw's blog, Cafe Hayek, etc.

Consider that before the Internet, you'd have to buy books written by Tyler Cowen, Don Boudreaux or Greg Mankiw to access their expertise and knowledge, and you can now learn economics from them for free by reading their blogs.

Here's Mike:

"The omission of free online services from the CPI, once insignificant, has become increasingly important as we spend more and more of our time online. What has the bigger impact on Americans–an increase in the price of “lunchmeats” (2.3% over the past year) or a decline in the price of online storage (arguably down by as much as 50%, though it is probably less)?

That’s a real question, incidentally, not a rhetorical one. We may have reached the point where Internet companies are providing free services that have a higher value than some things we pay for. How do we change our economic statistics to reflect this new reality?"

MP: The reason this is an important economic issue is because if CPI inflation overstates true consumer price inflation due to mis-measurement of items like free online services, it would mean that the growth in real wages, real income, real output, etc. over time have been understated

HT: Mister Ed

In Praise of the Speculators, Who Smooth Out Production and Consumption, and Benefit Society

From the article "Why Speculators?" by Percy L. Greaves, which originally appeared in the November 1964 issue of The Freeman:

"Frequently, the speculator is the first to foresee a future scarcity. When he does, he buys while prices are still low. His buying bids up prices, and consumption is thus more quickly adjusted to future conditions than if no one had foreseen the approaching scarcity. A larger quantity is then stored for future use and serves to reduce the hardships when the shortage becomes evident to all.

Since a price rise tends to encourage increased production, the sooner prices rise, the sooner new and additional production will be started and become available. So a successful speculator reduces both the time and the intensity of shortages as well as the hardships which always accompany shortages.

Likewise, speculators are often the first to foresee an increase in future supplies. When they do, they hasten to sell contracts for future delivery. This in turn drives down future prices earlier than would otherwise be the case. This tends to discourage new production that could only be sold at a loss. It also gives manufacturers a better idea of what future prices will actually be. So, here again the speculator tends to smooth out production and consumption to the benefit of all concerned.

A good example of how speculators serve society was provided in the coffee market a few years ago. A small newspaper item reported a sudden unexpected frost blight in Brazil. Speculators immediately realized that such a frost must have killed large numbers of coffee bushes. This meant much smaller future supplies for the United States. So the speculators promptly bought all the coffee they could below the price they thought would prevail when consumers became fully aware of the approaching shortage. This tended to raise coffee prices immediately.

The effect of this was to reduce consumption and stretch some of the existing supply into the shortage period. It likewise alerted coffee growers in other areas to be more careful in their picking and handling of coffee so that there was less waste. Higher prices encouraged them to get to market every last bean, which at lower prices would not have been worth the trouble. Higher prices also speeded up the planting of new bushes. Since it takes five years for a new coffee bush to bear berries, the sooner new planting was undertaken the shorter the period of shortage.

The speculators who first acted on this development served every coffee consumer. If these speculators had not driven up prices immediately, consumers would have continued drinking coffee at cheap prices for a time. Then, suddenly, they would have faced a still-greater shortage and still-higher prices than those that actually prevailed.

By buying when coffee supplies were still relatively plentiful and selling later when the shortage was known to all, speculators helped to level out the available supply and reduce the extreme height to which prices would otherwise have risen. Speculators make money only when they serve society by better distributing a limited supply over a period of time in such a manner that it gives greater satisfaction to consumers. They thus permit other businessmen and consumers to proceed with greater safety and less speculation in their own actions."
MP: In the example above, you could easily substitute "oil" for "coffee" and have a pretty good understanding of oil markets and oil prices over the last few months, and perhaps gain an appreciation of the role of oil speculators in helping to determine spot and futures prices for oil and gasoline, in response to changing market forces globally. And you could also understand how the media in the 1960s might have charged/blamed/accused coffee speculators for "high coffee prices," even though they were betting on market forces (falling future supply), not against market forces.  

Food Truck Fiesta at Farragut Square in DC

The food trucks were out in force today at DC's Farragut Square (see photos above), probably almost 20 in total, including my personal favorite DC food truck, Sauca,which featured everything on its menu today for only $5 (gotta love competition), including my personal favorite Sauca item Mumbai Butter Chicken.

Related, via New York Magazine: "Late last year, when Occupy Wall Street was kicked out of Zuccotti Park, protestors marched north and tried to occupy another public-private space, Duarte Square. They didn't last long in the space, thanks to aggressive policing and a less-than-hospitable landlord.

Duarte Square happens to be across the street from New York's offices (pictured below). Normally, it's a barren, gravel-filled space filled with seldom-used green chairs. This morning, there were four artisanal food trucks parked inside the park. There will eventually be six parked there three times a week."

MP: That sure seems like a major upgrade to me.  

Let's Just Declare the End of Peak Oil/Asininity

Tim Worstall in The Telegraph:

"Even if we accept the geological conventional wisdom [of Peak Oil], then there's still no cause for panic. Prices will rise, yes, so people will go off and do other things. Either use something else instead of oil (that ever cheaper shale gas for example) or simply doing things that require less energy. That's what a price system is for, after all, providing the signals that a certain resource is in scarce supply.

Peak oil wouldn't be a problem if it did happen and it's not going to happen anyway. So can we please just declare the end of peak oil and get on with worrying about something important instead?"

Wednesday, May 16, 2012

Chevron VP: Peak Oil is Peak Nitwitery

Well, he didn't say that exactly but......

From today's Fuel Fix:

"Technology advancements in the energy sector can boost oil and gas production, improve safety and curb fears that fossil fuels are rapidly running out, a Chevron official said today. During the opening session of a Houston energy conference this morning, Jay Pryor, Chevron’s vice president for business development, touted a number of technology advancements that have improved the efficiency and safety of fossil fuel production, including enhanced oil recovery, 3D seismic imaging, horizontal wells, and hydraulic fracturing.

“Because of technology, we are producing in places once just dreamed of,” Pryor said, at the 10th annual KPMG Global Energy Conference. “In lifting those reserves, we’ve raised doubts about the eminence of peak oil.”

Technology has allowed the industry to cut the cost of production, increase the volume of fossil fuels captured, reduce environmental impacts and reach previously inaccessible deposits of oil and natural gas. Global reserves of oil and natural gas have grown 130 percent since 1980 and more than 30 percent since 2000, Pryor said.New methods for extracting more oil and natural gas from the ground have been particularly important to growing production volumes, Pryor said.

The natural flow of oil from wells only accounts for 15 percent to 20 percent of the total volume produced today, he said. Easing the flow of fossil fuels using water, carbon dioxide and other methods can enhance production by as much as 25 percent.

“And now the combined application of horizontal drilling and fracking can add another 10 percent,” he said. “Each of these technology advances unlocks more resource and reserves.”
Deep-ocean drilling holds among the greatest promises for expanding oil and natural gas production, Pryor said. He noted that in the 1950s, the industry was limited to drilling in water depths less than 100 feet. Today, wells are being completed 10,000 feet below the ocean’s surface."

Milton Friedman Video on The Great Depression, Bank Runs and the Federal Reserve

In the video above, Milton Friedman discusses the Great Depression, banker's fear of a bank run and the appropriate Federal Reserve response to provide assistance.

Quote of the Day: Give Me Greed and Profits

From a 2004 column by economist Walter E. Williams:

"People in the education and political establishments pretend they're not motivated by such "callous" motives as greed and profits. These people "care" about us, but from which areas of our lives do we derive the greatest pleasures and have the fewest complaints, and from which areas do we have the greatest headaches and complaints? We tend to have a high satisfaction level with goods and services like computers, cell phones, movies, clothing and supermarkets. These are areas where the motivations are greed and profits. Our greatest dissatisfaction is in areas of caring and no profit motive such as public education, postal services and politics. Give me greed and profits, and you can keep the caring."

Featured in today's The Gartman Letter. 

The College Degree Gap for Blacks is Huge: 2:1

In 2009, there were more than two college degrees awarded to black women for one every degree earned by a black man.

The table above is based on data from the Department of Education on college degrees by sex and race/ethnicity, and compares black college graduates by gender for the Classes of 1977 and 2009 (most recent year available). The chart displays the number of degrees earned by black females for every 100 degrees earned by black males. There is huge gender "degree gap" for the general population but that gap is much, much wider for black college graduates compared to the degree gap for all racial/ethnic groups.

For example, there were more than 250 master's degrees awarded in 2009 to black females for every 100 degrees earned by black men, and that degree gap is the widest, followed by the degree gap for Associate's degrees (217.5 black females per 100 males) and Doctor's (Ph.D. and Ed.D.) degrees (198.5 black women per 100).  

Consider also that in 1976-1977, black men outnumbered black women for doctor's degrees and professional degrees (MDs and JDs) and there were 100 doctor's degrees earned by black men for every 63.6 degrees awarded to black females, and 100 professional degrees for black men for every 44.1 degrees earned by black women (more than a 2:1 ratio in favor of black men). By 2009, the gender imbalance had completely reversed and black women outnumbered black men by almost 2-to-1 for doctor's degrees and by 1.63-to-1 for professional degrees. 

In 2009, President Obama signed an executive order to create the White House Council on Women and Girls.  When it comes to successfully completing college degrees, it's clear that it's black men who have fallen way behind black women to become the "second sex" in higher education.  Despite requests to create a similar White House Council on Boys to Men to address the challenges facing boys and men, including the reality that they have become the "second sex" in higher education, Obama seems determined to only address challenges faced by one sex - women, and has shown no interest in addressing the challenges faced by boys and men.  The huge and growing gender imbalance in the black community for attaining college degrees is a serious challenge that you would think would attract some attention, but it has gone largely ignored. 

When there were gender imbalances in college sports it was addressed with federal legislation - Title IX legislation.  Where's the concern today about the growing academic gender disparities in higher education, especially for African-American men?

Chart of the Day: April U.S. Motor Vehicle Assemblies Return to 2007 Pre-Recession Levels

The chart above shows Total U.S. Motor Vehicle Assemblies on a monthly basis back to 1986, data are from the Federal Reserve and were updated today through April as part of the report on U.S. Industrial Production.  At 10.668 million units, vehicle assemblies are now back above pre-recession levels, and were the highest in April since August of 2007, almost five years ago. 

If the current pace of monthly increases continues, motor vehicle assemblies will be back to the 12 million unit level that prevailed between 1995-2005 within the next six months. Based on vehicle assemblies, the U.S. auto industry has made a complete recovery from the recession, and is one part of the reason that U.S. manufacturing, especially Midwest manufacturing, is at the forefront of the economy.    

Industrial Production Rebounds in April; Vehicle Assemblies Were Highest in Almost Five Years

The Federal Reserve released its report today on Industrial Production in April, here are some highlights:

1. Overall industrial output increased by 1.1% in April on a monthly basis, which was the largest monthly gain since a slightly higher 1.13% increase in December 2010.  It was also the 11th monthly gain in the last 12 months.  

2. On an annual basis, industrial production increased by 5.2%, which was the largest annual gain in more than a year.  Annual increases were especially strong for business equipment (12%), motor vehicle and parts (27.1%) and manufacturing (5.8%), especially for durable manufactured goods (10.1%) and oil and gas well drilling (11.9%).

3. The Federal Reserve reported motor vehicle assemblies of 10.67 million units in April (seasonally adjusted, annual rate), which was an increase of 35% over last year, and the highest monthly number of vehicles assembled since August 2007, almost five years ago.  Look for strong gains in vehicle sales to continue through the summer, and an ongoing rebound in Midwest manufacturing. 

Overall, a very positive report for output at America's factories during the month of April, and more evidence that the U.S. manufacturing sector is at the forefront of the economic recovery. 

Update: As Jon Murphy points out, the 1.1% monthly gain in factory output from March to April this year was the highest March-April gain since 1964. 

CORRECTION: Hold the Champagne, Alaska is Still No. 2 for Oil

There have been a lot of celebratory news reports in the last few days about North Dakota's March oil production passing Alaska's output to make North Dakota the No. 2 oil-producing state.  See examples in the WSJ, Washington Post, and Bloomberg.

However, the celebration might be a little premature.  According to the State of Alaska's Division of Oil and Gas, Alaska produced 19.22 million barrels of oil in March, at a rate of 620,000 barrels per day.  That compares to 17.8 million barrels of oil in North Dakota for March, or 575,490 barrels per day.  As I reported several days ago, it's more likely that North Dakota will surpass Alaska in oil production in June or July. 

I'm not sure exactly what's going on here, but the news reports cite North Dakota's Assistant State Mineral Resources Director Bruce Hicks as their source for Alaska's March oil production, and he's reporting 17.5 million barrels for Alaska, not the 19.22 million barrels the state of Alaska is now reporting.

Correction/Update: On this State of Alaska website (Department of Natural Resources, Division of Oil and Gas), it reports March 2012 oil production at 19.22 million barrels.  On this State of Alaska website (Alaska Department of Administration, Oil and Gas Conservation Commission), it reports March 2012 oil production at 17.6 million barrels.  I wasn't aware of the second source of Alaska oil production, which was the source the media were using to report that North Dakota oil production passed Alaska's in March.  Therefore, I stand corrected if Alaska's Oil and Gas Conservation Commission's production number (17.6 million barrels) is more accurate than Alaska's Division of Oil and Gas's estimate (19.22 million barrels).  

However, even based on the Oil and Gas Conservation Commission numbers, the year-to-date total for Alaska (52.84 million barrels) is higher than North Dakota's 50.94 million January-March production.  

Tuesday, May 15, 2012

April Real Estate Blowout: Recovery Is Underway

Houston is now the 31st metro or state real estate market reporting double-digit sales gains in April (see full list here):

"April marked the eleventh straight month of growth in Houston home sales. Total sales and sales of single-family units registered increases of nearly 10% each over April of 2011. The average price of a single-family home rose by 11% year-over-year to $223,000. Rising demand pushed down the inventory of single-family homes by 27% compared to a year earlier. The Houston Association of Realtors expects tighter inventory will continue to push prices upward and spur new home construction in the coming months."

And add Tuscaloosa as No. 32:

"April home sales in Tuscaloosa experienced a 25.2% increase when compared to April 2011. The last time Tuscaloosa's real estate market experienced positive sales growth in April when compared to the previous year was in 2010 and that was primarily due the home buying tax credit. April marks represents the eleventh consecutive month that Tuscaloosa home sales have improved when compared to the same month from the prior year."

And add Orange County as No. 33:

"Orange County had the fastest April home-selling pace since 2006. Overall, house shoppers bought 2,920 residences last month, up 17.5% in a year."

Map of the Day: 87% of U.S. Federal Offshore Acreage is Off Limits to Oil and Gas Development

The map above is from the American Petroleum Institute's "2012 Energy in Charts: Energy Industry Statistics," with the following commentary: 

"Additional access to offshore areas currently off limits remains a key missing component of U.S. energy policy, and would provide substantial additional gains to the nation in terms of energy security, employment and government revenue."

The Housing Market Recovery Has Officially Begun

That's how Time Magazine is describing the conclusions from a new report issued today by the Conference Board and Nielsen through their jointly-owned Demand Institute. Here are some excerpts form the report titled "The Shifting Nature of U.S. Housing Demand":

"The worst is over for the U.S. housing market. After six years of declining sales and falling prices that wiped $7 trillion from the value of housing assets, a turning point has been reached. The Demand Institute sees average prices rising by up to 1 percent in the second half of 2012 (in seasonally adjusted terms), marking the start of a housing recovery.

As the market revives, so will consumer spending: the business of building, buying, and selling homes generates enormous expenditure in a wide range of industries, including those associated with the transaction, those that produce goods and services for the home itself, and those that provide goods and services in the neighborhood around the home.

This housing recovery will be different in nature from previous recoveriesbecause it will be shaped by new market conditions and expectations. This report explains those differences and the various ways in which they impact consumer demand."

From the Time Magazine article:

"The report argues that the recovery will come in two stages. The first will be driven by rental demand. Over the past several years plummeting home prices have been coupled with rising rents, and this dynamic has made landlording very profitable. This is evidenced by the recent rebound of the apartment-building business. According to the report, “The only segment of the home building sector now showing clear signs of recovery is multifamily housing,” noting that housing starts for multi-family units have increased 54 percent in 2011 over the previous year.

The Demand Institute also believes the dynamics buoying the multifamily market — rising rents, low interest rates, and cheap real estate — are starting to boost the single-family housing sector as well: “Investors attracted by high yields are buying up single-family properties that can generate rental income.”

The second stage of the recovery will occur after this investor intervention causes prices to stabilize. Price stabilization is crucial for banks to loosen their stingy lending standards. When home prices are falling, it’s bad business to issue mortgages to all but the most credit-worthy borrowers. But in an environment of even slowly appreciating real estate, banks can afford to offer more generous terms."

Here are the report's predictions for home values:

Phase 1: We predict that seasonally adjusted average house prices will grow by just under 1% in the second half of 2012. In 2013, growth will increase to about 1.5% over the year, rising to 2.5% a year in 2014.

Phase 2: We expect house prices to increase by an annual 3% to 3.5% between 2015 and 2017. Improved economic conditions, and in particular lower unemployment, will encourage more people to buy again. So will historically low home-ownership costs, even though house prices and interest rates are likely to rise during the period. Importantly, by the start of 2015, there will no longer be an oversupply of existing properties.

From the report's conclusion:

"The double-digit increases in U.S. housing prices over the first half of the past decade proved unsustainable. But the freefall is over. The point has been reached where housing prices will start to climb, albeit at single-digit rates in most markets over the next five years.

That is good news for Americans who want to invest in building a home for themselves and their families. While short-term profits will be rare, the evidence suggests that housing remains a sound long–term investment. 

Nevertheless, consumers are adapting to new economic circumstances that will change how and where they choose to live. And where there is shifting demand, there are opportunities for new business. It is a shift with which consumer-facing companies should familiarize themselves."

More Positive Real Estate News

Here's some more positive news coming out today about the recovering U.S. real estate market, which might have reached a major turning point in the month of April. 

1. California Spring Home Buying Season Off to Strong Start, Home Sales and Price Post Impressive April Results  --  "California home sales and median price both jumped in April, with sales shooting up to their highest level in more than two years, and the median price rising above $300,000 for the first time in 16 months.  

"A brighter economic picture, coupled with record-high housing affordability, pushed the spring home buying season off to a strong start," said California Association of Realtor President LeFrancis Arnold. "With a continuing improving economy and interest rates declining to new record lows in recent weeks, we should see a steady improvement in the housing market throughout the end of the year." 

Sales in April were 10% higher than March's pace and 11% higher than in April 2011.  The statewide median price of an existing, single-family detached home climbed 5.7% in April to $308,050, up from March's revised $291,330 median price and 4.7% from a revised $294,140 recorded in April 2011. The median price rose above the $300,000 mark for the first time since December 2010."

Note: This marks the 26th metro or state market that is reporting double-digit gains in April for either home sales or median prices, or both, see full list here.

2.  Bloomberg -- "Confidence among U.S. homebuilders jumped more than forecast in May, reaching a five-year high that signals an improving outlook for construction. The National Association of Home Builders/Wells Fargo index of builder confidence rose to 29, the highest since May 2007, a report from the Washington-based group showed today. The gauge exceeded the highest projection in a Bloomberg News survey in which the median estimate was 26." 

3. The SPDR S&P Homebuilders Index has been trading at close to four-year highs in recent days, and has risen by 30% over the last six months, compared to a 10% gain over the same period for the S&P 500 Index.