Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Little Hope for the U.S. Housing Market

Housing-Market / US Housing Aug 31, 2010 - 05:23 AM GMT

By: Money_Morning

Housing-Market

Best Financial Markets Analysis ArticleJon D. Markman writes: Just when you thought the housing market couldn't get worse, it did.

New single-family home sales slumped 12.4% in July to a record-low annual rate of 276,000 units, as homebuyers shunned their realtors in the absence of government support. The consensus expectation was for a slight up-tick to a 333,000 unit annual rate, so I suppose it's time to throw out the models. Sales over the prior three months were also revised lower by 9,000 units.


No section of the country was spared, though the West led the parade with a 25.4% plunge. On a year-over-year basis, sales were down 32.4%, the fastest decline since April 2009.

New home inventories held steady at 210,000 units, the lowest level in 42 years, according to Ned Davis Research analysts. Low-to-medium-priced homes were in the most demand. Only properties in the $150,000 - $300,000 price range rose as a share of total sales. So median prices fell to the lowest level since 2003.

Put the existing and new home figures together and the final picture is that total home sales have fallen off a cliff - not just absolutely but also compared to previous housing market recoveries, according to NDR. And furthermore, the trend has reversed to negative for the first time in a year - a fact that will weigh on economic growth through the end of the year at least.

It's gotten so bad that we need a new word to describe the buyers' strike that's going on in the market for new and existing homes - some combination of fiasco, conflagration, and abyss.

What is dispiriting about this is that mortgages are at record lows, making homes more affordable now than in the past 30 years to the average household. This buyers' strike is a vote of no-confidence in the nation's economic prospects that comes through louder than any poll. The only meager bright stat recently came from the Mortgage Bankers Association (MBA) Refinance Index, which showed that low rates have encouraged a 5.7% up-tick in home refinancing, its highest level since May 2009.

From the point of view of homebuilders' stocks, the market had a gleam in its eye when industry powerhouse Toll Brothers Inc. (NYSE: TOL) reported earnings. The company's second-quarter results were a lot less terrible than expected, mostly because of some balance sheet tricks, so TOL last Wednesday jumped 5.8%. I love it when the valuation gods show their sense of humor.

While it would be great to think results, expectations and prices may have bottomed amid such bad news, it's probably not the case.

Check out the price of Hovnanian Enterprises Inc. (NYSE: HOV), which is a great homebuilder that's been through the wars. It took HOV and the other homebuilders about a decade to recover from the late 1980s' housing bubble, and the one that occurred in the mid-2000s was even bigger. Expect another very long slog in these stocks as investors continue to re-price their risk. They'll come back one day, no doubt, just not tomorrow or next year; maybe mark your calendar to buy HOV and TOL in 2016.

Frequent Delinquents
Financial television newsreaders were delighted to report that mortgage delinquency and foreclosure rates appear to be past their peak, according to new data reported by the MBA. But what they didn't tell you was that they are both still incredibly high by historical standards.

As many as 4 million households are in imminent danger of losing their homes. This augurs poorly for consumer spending, bank profits and the housing market.

Relying on a report by analysts at Capital Economics, here are the key elements to understand about the MBA report:

The Good News: The mortgage delinquency rate (share of households that have missed at least one payment) fell from the first quarter's record high of 10.1% to 9.9% in the second quarter. The foreclosure inventory rate slipped from 4.6% to 4.4%. And the seriously delinquent rate, which includes those more than 90 days in arrears and those already in foreclosure, declined from 9.5% to 9.1%. All these rates are now below their peaks.

The Bad News: Delinquency and foreclosure rates remain very high by historical standards. The seriously delinquent rate of 9.1% compares with the average of 1.7% seen in the 25 years before 2007. Moreover, the absolute number of households in trouble is sobering: 5.3 million are in some form delinquent on their mortgage. Add in the 2.5 million already in foreclosure, and up to 7.8 million households are in danger of losing their home.

Not all these households will lose their homes, obviously. But CapEcon analysts estimate that the fading of the economic recovery and chronically high unemployment will mean that up to 4 million homes may still be foreclosed. That's enough to double the amount of homes currently up for sale. The inevitable result of high supply and weak demand (as shown by the recent surge in home sales) will be lower house prices and more trouble for profits of consumer-oriented banks like Bank of America Corp. (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC) and U.S. Bancorp (NYSE: USB).

CapEcon analysts point out that the recent divergence between the seriously delinquent rate and the new foreclosure rate suggests that banks are in no rush to realize the losses from the zombie loans on their books. This is one more reason to believe that it will be years before the housing market, banks and the broad economy return to good health.

Source : http://moneymorning.com/2010/08/31/housing-market-16/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014