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Case Shiller report shows a deceleration in the annual growth rates in 17 of the 20 MSAs. Housing generally leads the economy out of a recession. This time its not, housing is simply suffering. Not only is money tight but job creation is still a big hurt. In some cities, the decline over the last year was quite sharp.

David M. Blitze,chairman of S.&P.’s index committee tells the NY Times that a double-dip could be confirmed before spring. He goes on to say the series is now only 4.8% and 3.3% above their April 2009 lows. Certainly nine cities set new lows, and with the only positive news concentrated in southern California and Washington DC, the data point to weakness in home prices.

S&P sounds dismal, indeed. David Wyss, S&Ps chief economist tells martketwatch that The recovery in home prices has not only stopped, it's going in reverse, that it's going to get worse before it gets better

Some Balance Is Needed

Artificial Stimulus
The tax credit
First, the index to a positive spike due to the tax credit, an artificial inducement to buy. Well it worked, and we saw buyers flood the market. But comparing new data to a spike that doesnt represent normal market behavior, but a artificial spike in home sales due to the tax credit can skew the true picture.

Seasonality
This is the slowest part of the year for home sales and must have something to do with the steep decline

Weather
Could the weather have been worse for the mid west and east coast? Winter is traditionally a poor indicator of market health.

Certainly, this market needs no excuses and Im not second guessing S&P, but lets not lose perspective - winter data is hardly a leading indicator for housing markets and there is more to the story than the data is expressing.

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NAR Existing Home Sales

Existing home sales which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November, but are 27.9% below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time buyer tax credit. Median existing single-family home prices rose year-over-year in 77 of 155 metropolitan areas and fell in 76 metro areas.

NAR Pending Sales

A forward-looking indicator, rose 10.4% based on contracts signed in October from in September. The index remains 20.5% below a surge to a cyclical peak in October 2009, which was the highest level since May 2006.

Rent Vs Buy

The argument for affordability has a few key components. Price, cost of money and a comparison to a similar property rental.

Price
Home prices are running about 22% less than five years ago. Its hard to know when price has reached a point where willing buyers step up, but pending sales clearly point to a slowing trend. The Commerce Dept. report showed that new home sales rose 5.5 percent to an annual rate of 290,000 in November from the revised October rate of 275,000.

Price will continue to decline and increase affordability. There are some that think a double dip is in progress and we will see continuede price declines through 2011 or 2012.

Cost of Money
Lower tax rates just extended for another two years may boost growth. Mortgage rates responded by increasing to a six month high with rates up more than half a point in just the past month. NAR President Vicki Golder, points out: A decade ago, mortgage rates were almost double what they are today, and they’re about 1.5% lower than the peak of the housing boom....So still historically low.

Rates remain low and are still well below where they began the year. Low mortgage rates are an important factor affordability, which in October was the highest on record

Rent Comps
Rents increased for the second quarter in a row. Asking and effective rents increased by 0.5% and 0.6% respectively in the third quarter and vacancy rates dropped from 7.8% to 7.1% nationally.To summarize, price is dropping but cost of money is rising and so are rents. Most areas havent reached a balance between the cost of renting and the cost of buyi ng, probably the main arguement for home prices continuing to descend to meet a willing buyer.

Rule of thumb: Homes are probably fairly valued at about 15 times a year's rent. So, for example, if you're paying $15,000 a year to rent a place, think twice about buying a home that costs more than $225,000. Fifteen times is the historic average.

Your home is not a growth stock. You should look to justify multiples higher than 15 to 20 by considering personal needs, proximity to schools and transportation, your own cash flow situation and job security.

It would also be advisable to get a sense of what the property would likely rent for and see how far that rent would go towards paying the mortgage should you have to move. Home sales are slowing and if you find yourself a reluctant landlord, be sure you can carry the mortgage.

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The threat of hyperinflation is more real as Russia and China announce that they are renouncing the U.S. Dollar for and will use domestic currency in bilateral trade.

So, what does that mean to you, average American.

Well, first you need to understand that the only reason the US Dollar was chosen to be the World reserve currency is because, no other currency in the World was as stable as the US Dollar.

Now, that has all changed. With the Fed doing these “Quantatative Easements” which is essentially monetizing the debt, the world is wising up and moving out of the dollar.

It just dosen’t make any monetary sense for these countries to hold onto US Dollars because they are loosing money due to the fact the Fed is monetizing the debt. To make this a bit more real for you to understand, imagine for a second, you and I are countries. So, let’s say…..I want to sell you something, anything but, you can’t pay for it right now, you need to pay for it in six months, when we ultimately settle. Now, here is the problem. If your currency that you pay me in isn’t stable and it’s value drops 10% over that 6 months well, I just lost 10% on my deal.

Now, translate that to how America is purchasing money from China in the form of loans. China isn’t going to continue to loan because even if they charge us higher interest rates, we are devaluing our money so quickly, they still end up loosing millions, billions and possibly trillions of dollars before the bill is even due!

So, what does China do? They start selling off their dollars by renouncing the dollar and moving all their trade deals to their own domestic currency. In other words, they will flood global markets with so many dollars that instead of seeing dollar values drop 10% over 6 months, we can see it drop 10% in hours.

In other words, domestic US prices of goods and services will skyrocket equal to the amount of loss and because this will create panic with in the US financial system, you will see a run on banks which we all know, they don’t have the cash to pay out because of the real estate bubble bursting.

I am normally not a doomsday type of person however, when countries start announcing that they are no longer trading their goods and services in US Dollars but, instead they start selling those dollars to try and recoup whatever they can, I am afraid we may have slept through the wak up call.

The point is, the more Quantatative Easement we do, the more we end up screwing foreign countries and the less powerful our dollar becomes against other currencies. The biggest fear is that ultimately our country could end up moving towards a more socialist society in response to this mistake the Feds are making.

The IBT reports:

“We agreed to expand the possibilities for application of national currencies during trade and economic contacts,” said Russian Prime Minister Vladimir Putin after holding talks with the Chinese premier Wen Jiabao.

However, the move is not aimed at challenging the dollar but to protect their economies, as the countries started exploring other options in the wake of the global financial crisis.

With Russian ruble already trading on the Chinese exchange, yuan trade in Moscow is expected to begin in early December.

The bilateral trade between the two countries is estimated to reach above $50 billion by the end of 2010, according to the Russian government. A major chunk of the trade is transacted in US dollars currently.

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