Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
China Stocks - This Is What a Bubble Looks Like - 30th June 15
Stocks Plunge on Greece Euro-Zone Financial Armageddon Blackmail - 30th June 15
Greece Crisis Shows Importance of Gold as Europeans Buy Coins and Bars - 30th June 15
Stock Investors Express Route to Profits in the Healthcare Sector - 30th June 15
Beyond the Greek Impasse - 30th June 15
Gold GDXJ : Impulse Move Pending - 30th June 15
Fed Interest Rate Increase Could Be Best Thing to Happen to Gold - 30th June 15
Marc Faber - Greece is Basically Bankrupt - 30th June 15
Greece - Shoot the Dog and Sell the Farm - 29th June 15
Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy - 29th June 15
The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting - 29th June 15
Gold and Silver Greece and Short Positions - 29th June 15
Volatility and Sleep-Walking Markets - 29th June 15
Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - 29th June 15
Stock Market More Decline Ahead? - 29th June 15
China Stock Market Crackup - The Final Trap Looms... - 29th June 15
Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - 28th June 15
Investor Stock Play for Two Growing Missile Threats - 28th June 15
Stock Market Uptrend/downtrend Inflection Point - 27th June 15
Greece Crisis OXI - 27th June 15
Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - 27th June 15
It’s Time to Change the Way You Look at Disney Forever - 27th June 15
Flatline Investing and Dead End Debt Schemes - 27th June 15
Stock Market Investors Avoid the "Herd" Like the Plague - 26th June 15
Extreme Gold/Silver Shorting - 26th June 15
USD Daily, Weekly, Monthly & Conclusions - 26th June 15
Gold Price Target of USD 2,300 - 26th June 15
Gold and Silver - Another Successful Option Expiration For the Insiders - 26th June 15
Why Buffett Bet A Billion On Solar Energy - 26th June 15
Fed Taper Talk, And The $10 Bill - 25th June 15
When a Bond Is Not a Bond - 25th June 15
Nature Rebounds - Trends in America Portend a Global Restoration of Nature - 25th June 15
Stocks That Profit... Even When You're Dead Wrong - 25th June 15
When Will US Debt Hit the Wall? - 25th June 15
Ron Paul Warns “They Can’t Print Money Forever” - 25th June 15
In Gold We Trust 2015: Gold Remains In A Secular Bull Market - 25th June 15
European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - 25th June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

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

© 2005-2015 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

Biggest Debt Bomb in History