How Bloomberg Fabricates U.S. Housing Numbers

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Includes: C, IYR, MS
by: Jeff Nielson

Being one of the most vigilant observers of the U.S. housing market – as well as one of the most vociferous critics of fraudulent “statistics”, there was little chance that Bloomberg's attempt to “rewrite history” would slip past me.

Here is what Bloomberg wrote on February 3rd of this year:

A record 19 million U.S. homes stood empty at the end of 2008...

Here is the new version of “history” which Bloomberg spewed out Thursday:

    About 18.8 million homes stood empty in the U.S. during the third quarter...The record-high was in the first quarter [of 2009] when 18.95 million homes were vacant.

Unless the U.S. propaganda-machine has also re-written the rules of arithmetic, then the 19 million empty homes which Bloomberg reported for last year (in February) is a larger number than the 18.95 million which Bloomberg claimed was a record this year.

Admittedly, as far as statistical lies go, this particular example is hardly earth-shattering. However, what is important is it clearly established the fact that U.S. propagandists are simply inventing numbers when they report “statistics”.

The really important departure from reality is how Bloomberg (and the rest of the U.S. propaganda-machine) have simply ignored the millions of already-foreclosed properties which U.S. banks are hiding from the market.

As I demonstrated in “Fantasy Housing Numbers a Prelude for NEXT U.S. Housing Crash”, U.S. banks are on track to record close to 5 million foreclosures and repossessions – just in the current year. However, they are only on pace to sell about 1.5 “distressed properties” (which also include “short sales”). This simple arithmetic means that U.S. banks are adding at least 3.5 million empty homes to the millions of foreclosed properties they were already holding off the market prior to this year.

Obviously, if there were 19 million empty homes at the end of 2008, and at least 3.5 million more empty homes this year (just counting only those being held by U.S. banks), then the real total of U.S. empty homes today would be at least 22 million. Clearly, Bloomberg's claim of 18.8 million empty homes in the U.S. in the 3rd quarter of this year has absolutely no connection to the “real world”.

Presumably a major news organization like Bloomberg is able to keep track of its own prior published articles, which strongly suggests the deliberate attempt to deceive. Interestingly, Bloomberg's previous report on U.S. empty homes provides some data which strongly supports my assertion that U.S. banks have been accumulating vast quantities of foreclosed properties.

Bloomberg noted in February that at the end of the 3rd quarter of 2008 U.S. banks were holding $11.5 billion worth of foreclosed properties (in nominal value) – more than double what they held a year earlier. This doubling of the banks' inventories of foreclosed properties occurred during a year when there were 'only' 2.2 million foreclosures.

This year, U.S. banks are on pace to nearly double the total number of foreclosures from 2008 – yet all the reports from U.S. propaganda outlets indicate declining inventories of unsold homes, month after month.

This farce also extends to the new home market – except the fabrications are even more extreme. U.S. home-builders have been building roughly 50% more homes than they are selling, for every month for the last two years. This is why the U.S. propagandists never report “new home sales” and “new home starts” in the same article. Despite this horrendous discrepancy, and a long-term trend which can only end with mass-bankruptcies among home-builders, “inventories” of new homes have been reported as declining every month.

This sham just hit a new level of absurdity this week. When “new home sales” were reported this week, there was a “surprising” decline in the latest reading – and the previous month's number was revised lower. Yet in the same piece of propaganda it was reported that the inventory of new homes still supposedly declined in the last month.

Putting aside the huge, existing gap between new home starts and sales, one would think that the compulsive liars of the U.S. propaganda-machine would not have the audacity to report increasing “starts” of new homes, decreasing sales – and still claim that inventories were falling. Clearly this is nothing less than a "slap in the face" for market sheep - who are presumed to be so brain-dead that the propagandists can write 100% contradictory "facts" in the same article, and expect no one to notice.

Returning to the millions of foreclosed properties which U.S. banks are holding off the market, obviously part of the reason for this was to try to halt the collapse in housing prices. If U.S. banks had dumped an additional 5+ million homes onto the market (equal to a full year of demand by itself) then instead of the collapse in U.S. housing prices easing, it would still be accelerating.

However, as I pointed out in “Who OWNS Foreclosed U.S. Properties, Part II: the role of MERS”, there is a second reason for U.S. banks to hide all these millions of foreclosed properties: credit default swaps. This $50+ trillion market represents the phony “insurance” on the entire Wall Street Ponzi-scheme – which was the key to (so-called) “regulators” allowing the U.S. financial crime syndicate to leverage the entire financial sector by an utterly insane average of 30:1.

Now, with the U.S. housing market collapsing, these credit default swaps are being triggered. Selling these foreclosed properties locks-in the banks' losses – causing these massive obligations to come due. As I illustrated in “Bankster Sues Bankster – AGAIN”, in one example of a credit default swap, Citigroup (NYSE:C) is suing Morgan Stanley (NYSE:MS) to collect on this contract.

Even after the “collateral” which “backed” this insurance was liquidated, Morgan Stanley is still facing a pay-out of more than 300:1 based on the premiums it received for this insurance. While not every CDS will require 300:1 pay-outs, there is no reason that some of these payments could not exceed 300:1 – given the gross negligence of regulators in not requiring adequate collateral for this $50+ trillion “insurance market”.

If you take the billions in losses which U.S. banks are racking-up on foreclosed U.S. properties, and then start making 300:1 pay-outs on those losses, it doesn't take long for the entire U.S. financial system to appear hopelessly insolvent – even with the new, fraudulent accounting rules enacted in the U.S. in April.

For the benefit of new readers, I will repeat my warning: it is perilous to accept any U.S. government-reported statistics at “face value”. The absurd reading on 3rd-quarter GDP is a prime example.

The U.S. economy is supposedly now growing at a robust 3.5% annual rate. Wall Street is reporting “record profits” (and paying record bonuses). Yet the state of New York is desperately trying to close a $3 BILLION budget-gap – which has materialized over the same quarter where both Wall Street and the broader U.S. economy are supposedly thriving. Apparently Wall Street's fantasy "profits" are producing only fantasy tax revenues for the state of New York.

This entire Ponzi-scheme economy continues plunging toward collapse – and formal default on its massive, unpayable debts. Total public and private debt in the U.S. is now approximately $60 trillion, and this completely excludes the roughly $70 trillion in additional “unfunded liabilities” (for the federal government, alone). However, don't expect to hear the truth about this from the U.S. propaganda-machine.

Disclosure: I hold no position in Citigroup or Morgan Stanley