Tuesday - August 24, 2010

Dark Tuesday

UPDATE: And the housing news is pretty grim. And unexpected of course.

Sales of U.S. previously owned homes plunged 27 percent in July, twice as much as forecast, evidence foreclosures and limited job growth are depressing the market.

“This is a devastating reading on the U.S. housing market,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto. “There’s such an inventory overhang, it shows there will be pressure on prices” in the months ahead.

Sales last month fell in all four U.S. regions, today’s report showed. Foreclosures accounted for 22 percent of total purchases in July, while short sales made up another 10 percent, the NAR said.

So nearly A FULL THIRD of the transactions are bank driven (ie distressed properties). In other words, actual people are only buying 2/3 as many homes as the numbers indicate ... doesn’t this imply that the actual sales decrease is more like 40%?

Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.

“People shouldn’t look at a home as a way to make money because it won’t,” Mr. Baker said.

If the long term is grim, the short term is grimmer. Housing experts are bracing themselves for Tuesday, when the sales figures for July will be released. The data is expected to show a drop of as much as 20 percent from last year.

So I guess a decrease of 27 percent is thus grimmest? And how is the market reacting?

In early morning trading, the Dow Jones industrial average fell 101.72, or 1 percent, to 10,072.69. The Standard & Poor’s 500 index fell 12.50, or 1.2 percent, to 1,054.86, while Nasdaq composite index fell 29.65, or 1.4 percent, to 1,782.68

That was the drop attached to the Nikkei index news. Currently hovering around 10,090, expect the housing news to have a late afternoon impact. Summer of Recovery? Gone. Never happened. And every last part of it was completely unexpected by the liars in DC and their ass sucking minions in the MSM. The very same assclowns who created the housing crisis in the first place, and are still in power.

With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.

Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit. That credit brought buyers out in droves, as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34% below April’s tax incentive-induced peak.

“Home sales were eye-wateringly weak in July,” said economist Paul Dales of Capital Economics. “It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, thing could get a lot worse.”

But look on the bright side. If you live in some urban ghetto or otherwise strongly Democratic area, Obama done be payin yo mortgage fo ya! Peggy Joseph was right after all!

To help bring stability to the market, the Obama administration will offer $1 billion in zero-interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas.

The Department of Housing and Urban Development plans to make loans of as much as $50,000 for borrowers “in hard hit local areas” to make mortgage, tax and insurance payments for as long as two years, according to an Aug. 11 statement

Go find a list of those areas, then see how few of them are Red States. Betcha the number is just about zero.

Japan’s Nikkei index led world markets lower Tuesday as the yen’s rise to a fresh 15-year high against the dollar and a nine-year best against the euro hit the share prices of the country’s high-value exporters.

The retreat in Europe came after many of Asia’s markets closed lower. Japan’s Nikkei index led the declines, closing down 121.55 points, or 1.3 percent, at 8,995.14 — slipping under the 9,000 level for the first time since May 2009.

The worry is that the rising yen will make Japanese exports less competitive in the international marketplace and limit already paltry economic growth. Figures last week showed that Japan grew by a tepid 0.1 percent quarterly rate in the second quarter, allowing China to overtake the country in terms of economic output for the first time ever.

With Japan’s economy under pressure and the U.S. recovery losing momentum, investors are getting increasingly worried that the global economic recovery has run its course — the yen is widely considered one of the safest assets to hold and therefore advances when investor appetite for risk declines.

With little economic news around the world and trading activity still light — the average daily volumes in August on the Standard & Poor’s 500 index in the U.S. is the lowest since 1999 — stock markets could well remain choppy.

The key focus later Tuesday will be U.S. existing home sales data for July and investors will be interested to see if the headline figure falls again following the big drop recorded in June.

We follow the real estate market closely, and have seen housing prices continue their free fall even though mortgages rates are very low. Those rates don’t really matter if a) the banks aren’t giving mortgages regardless, or b) nobody is applying for them. There is a very nice condo around the corner that has been rotting on the market for a long time now. It came on the market at $215,000, and has dropped bit by bit over the months and is now going for $150,000. The only units here that have closed are in the $120-140 bracket, which is nearly 20% less than they sold for last year. So I am expecting that the July housing figures to be just as ugly as the June ones, and IIRC they were at an 18 year low. Ouch.

The main point of interest this week will be Friday’s latest speech on the state of the U.S. economic recovery from Federal Reserve Chairman Ben Bernanke. His speech will come in the aftermath of the latest estimate for second quarter U.S. economic growth — a number of economists think that the 2.4 percent annualized growth previously estimated will be reduced, possibly to as little as 1.5 percent.

Uncertainty about the U.S. economy in particular also weighed on oil prices. Benchmark crude for October delivery was down 79 cents at $72.31 a barrel in electronic trading on the New York Mercantile Exchange.

Our local retail gas prices are down 5¢ / gallon this week, and those were down 3¢ from the week before that.

This week the MSM seems to have finally noticed that when those evil Bush Tax Cuts For Only The Rich expire at the end of the year, we’re ALL going to get hammered. Again.

How’s that hope & change working out for you, 52ers?

Worries about the U.S. economy are set to dominate when Wall Street opens later — Dow futures were down 73 points, or 0.7 percent, at 10,084 while the broader S&P 500 futures fell 9.5 points, or 0.9 percent, to 1,056.10.

So it’s a sure thing guarantee that the DJI will drop below 10,000 today. The only question is, how far? 9800? 9500? 9000? Hang onto your assets, today is going to be a bumpy ride.

Posted by Drew458     on 08/24/2010 at 06:28 AM   
Filed Under: • Economics •  
• Comments (1) • Trackbacks(0)  Permalink •  

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