By JEFF BATER
December 31, 2007 10:21 a.m.
WASHINGTON -- Existing-home sales managed a small climb during November, the first increase in nine months, but that didn't change the overall bleak picture for the ailing housing industry.
Home resales rose to a 5.00 million annual rate, a 0.4% increase from October's revised 4.98 million annual pace, the National Association of Realtors said Monday. October's rate was originally estimated at 4.97 million.
The median price of a previously owned home was $210,200 in November, down 3.3% from $217,300 in November 2006. The median price in October this year was $206,900.
The NAR said disruptions in mortgage availability and pricing peaked in August, which caused sales to slow in subsequent months. The November resales increase was the first since February 2007; the sales level of 5.00 million was in line with Wall Street expectations.
"Near term, existing-home sales should continue to hover in a narrow range, just as they have since September, and that's good news because it'll be a further sign that the housing market is stabilizing," NAR chief economist Lawrence Yun said.
The housing slump has been a drag on the economy for nearly two years. In the third quarter, the economy roared despite the burden. But in the fourth quarter, which ends with the year, the economy is seen much weaker, restrained by the dead weight of housing. New-home sales retreated to a 12-year low in November, the government reported last week; that is, sales of single-family homes decreased by 9.0% to a seasonally adjusted annual rate of 647,000, the lowest since 621,000 in April 1995.
Also receding are prices for new homes. Falling prices can chill consumer spending, which makes up 70% of U.S. economic activity as measured by GDP. When consumers watch the value of their homes shrink, they tend to feel less wealthy, a mood that can act as a damper on spending plans and, in turn, slow economic growth.
But on a bright note, data from Freddie Mac show the average 30-year mortgage rate was 6.21% in November, down from 6.38% in October.
"Mortgage interest rates are near historic lows and the most current data shows decelerating price declines, along with a modest reduction in the number of homes on the market," Mr. Yun said.
Inventories of homes fell 3.6% at the end of November to 4.27 million available for sale, which represented a 10.3-month supply at the current sales pace. There was a 10.7-month supply at the end of October, revised from a previously estimated 10.8 months.
Regionally, existing-home sales were mixed in November. Sales rose 10.3% in the West and were unchanged in the Midwest. Demand fell 2% in the South and 3.3% in the Northeast.
Write to Jeff Bater at jeff.bater@dowjones.com
Monday, December 31, 2007
Sunday, December 30, 2007
The Housing Market May Not Be Great in 2008
Friday, December 28, 2007
SUZANNE PRATT: More bad news on the housing front today. Fresh data from the Commerce Department show sales of new homes plunged 9 percent last month to their lowest level in more than 12 years. The larger-than-expected drop in sales is the latest sign of deepening trouble for the housing market, the bleakest sector of the economy this year. As Erika Miller reports, most experts see no sign of a turnaround anytime soon.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you think housing was weak this year, brace yourself for next year. Many industry experts think we're only half way through the housing downturn. They say the problem is a classic case of too much supply, too little demand. S&P economist Beth Ann Bovino says the solution is for home prices to come down another 5 percent or so.
BETH ANN BOVINO, SR. ECONOMIST, STANDARD & POOR'S: Within the housing sector, we will need to see housing prices fall. This will actually help go through in a sense that inventory of unsold homes. When the prices start to drop a little bit, then you're going to see buyers become more interested.
MILLER: Experts say some previously sizzling markets like Florida could suffer double digit drops next year. On the other hand, prices are expected to barely dip in the northeast where inventories are leaner. Economists expect foreclosures to increase as much as 33 percent nationwide, adding to the housing supply. Lenders have also tightened mortgage requirements in response to the sub-prime crisis. That means a smaller pool of qualified home buyers. The most optimistic projections call for housing to stabilize in the second half of the year. Economists say much depends on whether the U.S. economy slips into recession.
BOVINO: We're at the brink, I guess you could say, of much more severe issues happening. We do see -- we have a 40 percent likelihood that there could be a recession in 2008. That would certainly extend the housing crisis even further out into 2009.
MILLER: All of this is of course good news for home buyers. Brokers say prices on new homes are the lowest they've been in years. But the outlook is bleak for the millions of families hoping to sell their homes. Economist Lakshman Achuthan recommends taking a good look at your asking price.
LAKSHMAN ACHUTHAN, MANAGING DIRECTOR, ECONOMIC CYCLE RESEARCH: People are living in fantasy land, actually, where they think that their home price is going to just remain flat or maybe even go up in the next 12 months. It's just not going to happen.
MILLER: Economists are waiting to see a reduction in inventories before calling a turnaround. They also want to see an improving job market, which would help stimulate housing demand. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
SUZANNE PRATT: More bad news on the housing front today. Fresh data from the Commerce Department show sales of new homes plunged 9 percent last month to their lowest level in more than 12 years. The larger-than-expected drop in sales is the latest sign of deepening trouble for the housing market, the bleakest sector of the economy this year. As Erika Miller reports, most experts see no sign of a turnaround anytime soon.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you think housing was weak this year, brace yourself for next year. Many industry experts think we're only half way through the housing downturn. They say the problem is a classic case of too much supply, too little demand. S&P economist Beth Ann Bovino says the solution is for home prices to come down another 5 percent or so.
BETH ANN BOVINO, SR. ECONOMIST, STANDARD & POOR'S: Within the housing sector, we will need to see housing prices fall. This will actually help go through in a sense that inventory of unsold homes. When the prices start to drop a little bit, then you're going to see buyers become more interested.
MILLER: Experts say some previously sizzling markets like Florida could suffer double digit drops next year. On the other hand, prices are expected to barely dip in the northeast where inventories are leaner. Economists expect foreclosures to increase as much as 33 percent nationwide, adding to the housing supply. Lenders have also tightened mortgage requirements in response to the sub-prime crisis. That means a smaller pool of qualified home buyers. The most optimistic projections call for housing to stabilize in the second half of the year. Economists say much depends on whether the U.S. economy slips into recession.
BOVINO: We're at the brink, I guess you could say, of much more severe issues happening. We do see -- we have a 40 percent likelihood that there could be a recession in 2008. That would certainly extend the housing crisis even further out into 2009.
MILLER: All of this is of course good news for home buyers. Brokers say prices on new homes are the lowest they've been in years. But the outlook is bleak for the millions of families hoping to sell their homes. Economist Lakshman Achuthan recommends taking a good look at your asking price.
LAKSHMAN ACHUTHAN, MANAGING DIRECTOR, ECONOMIC CYCLE RESEARCH: People are living in fantasy land, actually, where they think that their home price is going to just remain flat or maybe even go up in the next 12 months. It's just not going to happen.
MILLER: Economists are waiting to see a reduction in inventories before calling a turnaround. They also want to see an improving job market, which would help stimulate housing demand. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Growth Slows In Some States
By Conor Dougherty
From The Wall Street Journal Online
Population growth in several of the fastest-growing states is slowing -- in Arizona, Florida and Nevada, in particular -- in a trend both reflecting and fueling the housing-market malaise in those areas.
"This is our first chance to see what has been the migration impact of the housing-market slowdown, and it's showing up in these highflying states," says William Frey, a demographer at the Brookings Institution, a Washington think tank.
The Census Bureau's annual estimate of state population changes covers the 12 months that ended July 1. It shows that people continue to flee the Midwest -- especially Michigan, one of two states to lose people -- and that the Mountain states in the West continue to post large population gains as people arrive from California and elsewhere.
Arizona, Florida and Nevada are still among the fastest-growing states in the country, by percentage. Nevada saw an increase of 2.9%, or 72,955 people, tallying births, deaths and migration from inside and outside the U.S.
That was less than the previous year's 3.5% increase and lower than the 3%-plus growth rate for the six previous years. Arizona, the second-fastest-growing state, saw its population increase 2.8% in the most recent period, compared with a 3.6% rise in the previous year.
Florida, which has suffered heavily in the housing bust, saw the sharpest falloff in population growth. Florida grew 1.07%, slightly faster than the U.S. growth rate of 0.96%. During the year, 35,301 people moved to Florida from another state, 134,798 fewer than in the previous year. That is the slowest rate of domestic migration into Florida since at least 1990, the year the Census Bureau began publishing annual estimates of migration between states.
Pain in the manufacturing sector, especially auto manufacturing, continued to purge residents from the Midwest. Michigan lost 30,500 residents, a 0.3% decline. Ohio was essentially flat, gaining 3,404. Besides Michigan, the only state to lose population was Rhode Island.
Broadly, people in the Northeast and Midwest continue to leave for the West and South. Utah and Idaho were the third- and fourth-fastest-growing states, respectively. Colorado and Wyoming were eighth and ninth, respectively. Both states saw their rate of growth increase.
Residents of California, on the other hand, continue to leave: In the most recent period, 263,035 people left California for another state. The state's 0.8% population growth was mostly because of births.
In the South, states including Georgia and North Carolina have taken the fast-growing mantle away from Florida, while Texas continues to suck up new residents. Georgia and North Carolina grew 2.17% and 2.16%, respectively. Texas grew 2.12%. Those states also are among the biggest gainers in absolute terms. Texas gained 496,751 residents, more than any other state. Georgia had the third-largest increase, with 202,670, and North Carolina was fifth, with 191,590.
Following the exodus of residents after Hurricane Katrina, Louisiana added about 50,000 people in the year to July 1. There is still a ways to go, though: From July 2005 to July 2006, the state lost about 220,000 residents.
U.S. Census, 2007 VS. 2006
See a sortable chart of states' shifting populations.
Email your comments to rjeditor@dowjones.com.
-- December 28, 2007
Looking for an End To the Housing Slump
By Amy Hoak
From MarketWatch
CHICAGO -- After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
But if there's any improvement in 2008, it may be relatively modest.
It's difficult to get a consensus on exactly when housing will turn the corner. Local markets will certainly vary, but at the least it's likely that some of the same problems that plagued 2007 will carry over into next year.
At best, market conditions could start to stabilize, with home sales regaining strength. If more buyers get back into the market, some of the huge inventories of new and existing homes for sale can begin to be worked off.
"The only reason why demand is finding a bottom is because sellers are cutting their prices," said Mark Zandi, chief economist of Moody's Economy.com. "There was a sense that the market would cool -- I don't think there was a sense it would crash. And it crashed."
The National Association of Realtors predicts a slight increase in existing-home sales next year but a decline in new-home sales. Others aren't as optimistic, including the Mortgage Bankers Association, which is predicting that sales won't pick up until 2009.
After the median price for existing homes dropped 1.9% in 2007 to a projected $217,600, NAR forecasts that the median price will rise 0.3% to $218,300 in 2008.
But the MBA is expecting prices of existing homes to decrease 2.93% in 2007 and 2.04% in 2008; new-home prices should decrease 2.72% in 2007 and 1.96% in 2008.
A recent Economy.com report, "Aftershock: Housing in the Wake of the Mortgage Meltdown," predicts home sales will hit bottom in early 2008, with housing starts hitting bottom mid-2008. But prices will continue to drop, and by early 2009 home prices will have fallen about 13% nationally from their peaks, according to the report. Prices will have fallen more than 15% if nonprice discounts to buyers are taken into account.
Housing's ills
Housing's most fundamental problem, according to the Economy.com report, is the excess of unsold inventory lingering in many of the country's local markets. The supply of homes for sale hit its highest level in 22 years in October, according to NAR.
Overbuilding is a culprit in many markets, and investors who are unloading units bought during the boom are adding to the massive supply, the National Association of Home Builders pointed out in a recent forecast. In December, the group reported that single-family housing starts were down by about 50% from a record high at the beginning of 2006.
"Once we hit bottom ... we're going to stay there for awhile," at least in terms of new construction, predicted Richard F. Moody, chief economist of Mission Residential.
Adding to the already elevated inventories are foreclosures hitting the market. According to the MBA, 1.69% of first-lien mortgages were in the foreclosure process in the third quarter. The percentage was the highest in the survey's history, and the group expects high numbers of foreclosures to continue into next year.
Areas where overall economic conditions were weak, including Michigan and Ohio, drove up the national foreclosure numbers, as did areas where there was much investor speculation, including California, Nevada and Florida. Defaults on adjustable-rate loans -- especially subprime loans made to borrowers with weaker credit histories -- caused a lot of the strain; when the mortgage's teaser period was up, homeowners couldn't keep up with payments.
The mortgage meltdown this summer made it tougher for some borrowers to get a loan, another stumbling block in this housing market. In particular, nonconforming loans, which can't be bought by government-sponsored mortgage agencies Freddie Mac or Fannie Mae, were harder or more expensive to come by.
Many borrowers with good credit and a decent down payment were fine, but subprime loans, intended for borrowers with poor credit histories, became a thing of the past. Alt-A loans, which required little or no documentation, became a rarity. And rates on jumbo loans went through the roof, making it tougher for home buyers in expensive markets.
Some borrowers who could qualify for a Federal Housing Administration insured loan turned to those, and proposed FHA modernization may help some borrowers even more. But in the second half of the year, the credit disruptions slowed down an already sluggish market.
Waiting for the rebound
Rick Loughlin thought the Boston market appeared to be "really coming alive" this summer.
"Then we had the mortgage crisis," said Loughlin, chairman of the Greater Boston Real Estate Board and president of Coldwell Banker Residential Brokerage New England. The borrowing ability of many individuals took a hit, reducing the number of buyers able to enter the market and stranding homeowners looking to trade up.
The lending landscape isn't likely to change much in the near term, with no-documentation and low-down payment loans remaining harder to come by, Moody said.
Perhaps the only bright spot in the mortgage arena this year was low interest rates on conforming loans. The average rate on the 30-year fixed-rate mortgage fell below 6% at one point in December; NAR expects the 30-year to rise to about 6.4% by the end of 2008.
The low rates "should have provided a lift to home sales, but it has not," said Lawrence Yun, NAR's chief economist. That indicates to him that the elevated cost of jumbo loans is still taking a toll. If conforming loan limits were raised to accommodate expensive markets, it could have a greater impact on housing than the current low conforming rates have, he said.
Sitting on the sidelines
The home price drops encouraged a number of people to put home buying decisions on hold. In some of the most sluggish markets, sellers who don't absolutely need to sell aren't attempting to do so; those who do are offering price cuts and concessions to make the deal.
"A lot of buyers and investors are sitting on the sidelines. They feel unsure what is happening in the marketplace," said Devin Reiss, president of the Greater Las Vegas Association of Realtors. Some mistakenly think that it's impossible for anyone to get a mortgage nowadays, even with good credit, he said. Often, however, fears revolve around the undesirable scenario of buying a home only to watch it decrease in value a short time later.
His advice for bargain hunters: Don't wait too long.
"If we start to see demand go up and supply go down, prices will go (up) with it," he said.
But probably the best advice is to know your market before making any kind of move.
"A hallmark of the downturn is how broad it is across the country," said Economy.com's Zandi. But even in poor-performing markets there could be good neighborhoods, he said, adding that housing conditions vary "block to block."
NAR reported that 93 out of 150 metropolitan areas showed increases in median existing single-family home prices during the third quarter of 2007, compared with 2006, even though price drops in other areas brought down the national median price.
Still, Bob McNamera, a real-estate agent with Pasquesi Realty in Chicago, said that some people are staying out of the market based on what they hear about general trends.
"They hear it's a bad market, and don't do any more homework," he said. First-time buyers, however, with a down payment and decent credit, could find bargains, he added.
Even in Stockton, Calif., an area hard-hit by foreclosures, Renee Becker, a Realtor and vice president of Beck Realtors, has hope for next year. The deals in the foreclosure inventory might bring back more investors and help fuel a slow and gradual recovery, she said.
Email your comments to rjeditor@dowjones.com.
-- December 25, 2007
From MarketWatch
CHICAGO -- After a year of falling house prices in numerous parts of the country and a meltdown in the mortgage market that affected borrowers regardless of their ZIP code, many hope that housing markets will finally start to get better next year.
But if there's any improvement in 2008, it may be relatively modest.
It's difficult to get a consensus on exactly when housing will turn the corner. Local markets will certainly vary, but at the least it's likely that some of the same problems that plagued 2007 will carry over into next year.
At best, market conditions could start to stabilize, with home sales regaining strength. If more buyers get back into the market, some of the huge inventories of new and existing homes for sale can begin to be worked off.
"The only reason why demand is finding a bottom is because sellers are cutting their prices," said Mark Zandi, chief economist of Moody's Economy.com. "There was a sense that the market would cool -- I don't think there was a sense it would crash. And it crashed."
The National Association of Realtors predicts a slight increase in existing-home sales next year but a decline in new-home sales. Others aren't as optimistic, including the Mortgage Bankers Association, which is predicting that sales won't pick up until 2009.
After the median price for existing homes dropped 1.9% in 2007 to a projected $217,600, NAR forecasts that the median price will rise 0.3% to $218,300 in 2008.
But the MBA is expecting prices of existing homes to decrease 2.93% in 2007 and 2.04% in 2008; new-home prices should decrease 2.72% in 2007 and 1.96% in 2008.
A recent Economy.com report, "Aftershock: Housing in the Wake of the Mortgage Meltdown," predicts home sales will hit bottom in early 2008, with housing starts hitting bottom mid-2008. But prices will continue to drop, and by early 2009 home prices will have fallen about 13% nationally from their peaks, according to the report. Prices will have fallen more than 15% if nonprice discounts to buyers are taken into account.
Housing's ills
Housing's most fundamental problem, according to the Economy.com report, is the excess of unsold inventory lingering in many of the country's local markets. The supply of homes for sale hit its highest level in 22 years in October, according to NAR.
Overbuilding is a culprit in many markets, and investors who are unloading units bought during the boom are adding to the massive supply, the National Association of Home Builders pointed out in a recent forecast. In December, the group reported that single-family housing starts were down by about 50% from a record high at the beginning of 2006.
"Once we hit bottom ... we're going to stay there for awhile," at least in terms of new construction, predicted Richard F. Moody, chief economist of Mission Residential.
Adding to the already elevated inventories are foreclosures hitting the market. According to the MBA, 1.69% of first-lien mortgages were in the foreclosure process in the third quarter. The percentage was the highest in the survey's history, and the group expects high numbers of foreclosures to continue into next year.
Areas where overall economic conditions were weak, including Michigan and Ohio, drove up the national foreclosure numbers, as did areas where there was much investor speculation, including California, Nevada and Florida. Defaults on adjustable-rate loans -- especially subprime loans made to borrowers with weaker credit histories -- caused a lot of the strain; when the mortgage's teaser period was up, homeowners couldn't keep up with payments.
The mortgage meltdown this summer made it tougher for some borrowers to get a loan, another stumbling block in this housing market. In particular, nonconforming loans, which can't be bought by government-sponsored mortgage agencies Freddie Mac or Fannie Mae, were harder or more expensive to come by.
Many borrowers with good credit and a decent down payment were fine, but subprime loans, intended for borrowers with poor credit histories, became a thing of the past. Alt-A loans, which required little or no documentation, became a rarity. And rates on jumbo loans went through the roof, making it tougher for home buyers in expensive markets.
Some borrowers who could qualify for a Federal Housing Administration insured loan turned to those, and proposed FHA modernization may help some borrowers even more. But in the second half of the year, the credit disruptions slowed down an already sluggish market.
Waiting for the rebound
Rick Loughlin thought the Boston market appeared to be "really coming alive" this summer.
"Then we had the mortgage crisis," said Loughlin, chairman of the Greater Boston Real Estate Board and president of Coldwell Banker Residential Brokerage New England. The borrowing ability of many individuals took a hit, reducing the number of buyers able to enter the market and stranding homeowners looking to trade up.
The lending landscape isn't likely to change much in the near term, with no-documentation and low-down payment loans remaining harder to come by, Moody said.
Perhaps the only bright spot in the mortgage arena this year was low interest rates on conforming loans. The average rate on the 30-year fixed-rate mortgage fell below 6% at one point in December; NAR expects the 30-year to rise to about 6.4% by the end of 2008.
The low rates "should have provided a lift to home sales, but it has not," said Lawrence Yun, NAR's chief economist. That indicates to him that the elevated cost of jumbo loans is still taking a toll. If conforming loan limits were raised to accommodate expensive markets, it could have a greater impact on housing than the current low conforming rates have, he said.
Sitting on the sidelines
The home price drops encouraged a number of people to put home buying decisions on hold. In some of the most sluggish markets, sellers who don't absolutely need to sell aren't attempting to do so; those who do are offering price cuts and concessions to make the deal.
"A lot of buyers and investors are sitting on the sidelines. They feel unsure what is happening in the marketplace," said Devin Reiss, president of the Greater Las Vegas Association of Realtors. Some mistakenly think that it's impossible for anyone to get a mortgage nowadays, even with good credit, he said. Often, however, fears revolve around the undesirable scenario of buying a home only to watch it decrease in value a short time later.
His advice for bargain hunters: Don't wait too long.
"If we start to see demand go up and supply go down, prices will go (up) with it," he said.
But probably the best advice is to know your market before making any kind of move.
"A hallmark of the downturn is how broad it is across the country," said Economy.com's Zandi. But even in poor-performing markets there could be good neighborhoods, he said, adding that housing conditions vary "block to block."
NAR reported that 93 out of 150 metropolitan areas showed increases in median existing single-family home prices during the third quarter of 2007, compared with 2006, even though price drops in other areas brought down the national median price.
Still, Bob McNamera, a real-estate agent with Pasquesi Realty in Chicago, said that some people are staying out of the market based on what they hear about general trends.
"They hear it's a bad market, and don't do any more homework," he said. First-time buyers, however, with a down payment and decent credit, could find bargains, he added.
Even in Stockton, Calif., an area hard-hit by foreclosures, Renee Becker, a Realtor and vice president of Beck Realtors, has hope for next year. The deals in the foreclosure inventory might bring back more investors and help fuel a slow and gradual recovery, she said.
Email your comments to rjeditor@dowjones.com.
-- December 25, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, December 28, 2007, at 6:00 p.m. EST.
Plunging November new home sales pushed the dollar down sharply today. At the close, the Dow gained 6 points, closing at 13,365, while the Nasdaq lost just over 2 points, closing at 2,674. Oil closed down $0.45 at $96.17 per barrel, and gold closed up $11.40 at $843.20 an ounce.
Citigroup, Merrill Lynch and JPMorgan Chase will write-off $18.7 billion, $11.5 billion, and $3.4 billion respectively in the fourth quarter, for a total of $33.6 billion in collateralized debt obligations.
New home sales fell 9 percent in November. In the past year, new home sales are down 34.4 percent nationwide. The Midwest has the worst decline, down 38.7 percent in the past year.
Stay fully invested. In the U.S., I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much in collateralized debt obligations (CDOs) these companies still own, nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The offices of The Wall Street Digest will be closed on Monday, December 31, and Tuesday, January 1, in observance of New Year's Day. The next Hotline Update will be on Wednesday, January 2, 2008, at 6:00 p.m. EST. Have a safe and joyous holiday weekend!
Plunging November new home sales pushed the dollar down sharply today. At the close, the Dow gained 6 points, closing at 13,365, while the Nasdaq lost just over 2 points, closing at 2,674. Oil closed down $0.45 at $96.17 per barrel, and gold closed up $11.40 at $843.20 an ounce.
Citigroup, Merrill Lynch and JPMorgan Chase will write-off $18.7 billion, $11.5 billion, and $3.4 billion respectively in the fourth quarter, for a total of $33.6 billion in collateralized debt obligations.
New home sales fell 9 percent in November. In the past year, new home sales are down 34.4 percent nationwide. The Midwest has the worst decline, down 38.7 percent in the past year.
Stay fully invested. In the U.S., I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much in collateralized debt obligations (CDOs) these companies still own, nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The offices of The Wall Street Digest will be closed on Monday, December 31, and Tuesday, January 1, in observance of New Year's Day. The next Hotline Update will be on Wednesday, January 2, 2008, at 6:00 p.m. EST. Have a safe and joyous holiday weekend!
U.S. Real Estate Snapshot Update
Chart Notes:
U.S. real estate did go lower from last update of October 14, we our now on an Elliott Wave 3 on the Daily Chart, Elliott Wave 3 is always the longest wave, EW 4 never materialized. We are below the 200 Moving Average for the first time ever, the blue line, going back to 1999 data on chart anyway. On the Monthly chart, the above chart, we are at the 50 FIB RET, which means we could recover from here. But if it breaks the 50, watch out! But it does look like an EW 4 Wave is complete, which means now could be a great time to buy real estate. But we need more confirmation to see which way it is going to go.
iShares Dow Jones U.S. Real Estate Index Fund (the Fund) seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Real Estate Index (the Index). The Index measures the performance of the real estate sector of the United States equity market. The Index includes companies in sub sectors, such as real estate holding and development, and real estate investment trusts (REITs). The Fund uses a representative sampling strategy in seeking to track the Index that collectively has an investment profile similar to the Index.
Tuesday, December 18, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, December 18, 2007, at 6:00 p.m. EST.
The Bank of England and the European Central Bank added $500 billion to liquefy the banking system between now and year-end. At the close, the Dow gained almost 65 points, closing at 13,232, while the Nasdaq added almost 22 points, closing at 2,596. Oil closed $0.14 lower at $90.49 per barrel, and gold closed $8.10 higher at $807.40 an ounce.
Global liquidity is still at record levels, but the mortgage mess and tight credit conditions in the U.S. are creating a volatile stock market. The Fed is working with alternative methods to liquefy both the mortgage market and the banking system. The banking system may be temporarily broken, but huge sums of capital are available to fix it. The fear of the unknown is worse than the problem. The Bernanke Fed would like to fix the problem without creating more inflation. That will take more time than using the Greenspan fix, which amounted to shoving $200 billion into the banking system and worrying about inflation next year.
Stay fully invested. In the U.S., I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own; nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, December 21, 2007, at 6:00 p.m. EST.
The Bank of England and the European Central Bank added $500 billion to liquefy the banking system between now and year-end. At the close, the Dow gained almost 65 points, closing at 13,232, while the Nasdaq added almost 22 points, closing at 2,596. Oil closed $0.14 lower at $90.49 per barrel, and gold closed $8.10 higher at $807.40 an ounce.
Global liquidity is still at record levels, but the mortgage mess and tight credit conditions in the U.S. are creating a volatile stock market. The Fed is working with alternative methods to liquefy both the mortgage market and the banking system. The banking system may be temporarily broken, but huge sums of capital are available to fix it. The fear of the unknown is worse than the problem. The Bernanke Fed would like to fix the problem without creating more inflation. That will take more time than using the Greenspan fix, which amounted to shoving $200 billion into the banking system and worrying about inflation next year.
Stay fully invested. In the U.S., I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own; nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, December 21, 2007, at 6:00 p.m. EST.
Sunday, December 16, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, December 14, 2007, at 6:00 p.m. EST.
Rising inflationary pressures surprised stock traders this morning. Stock prices fell on fading hopes of future rate cuts by the Fed. At the close, the Dow plunged 178 points, closing at 13,339, while the Nasdaq dropped almost 33 points, closing at 2,635. Oil closed $0.90 lower at $91.31 per barrel, and gold closed $4.50 lower at $799.50 an ounce.
The November Consumer Price Index (CPI) was released this morning at 8:30. November prices soared by 0.8 percent, while the core inflation rate (minus food and energy) was up 0.3 percent. Both figures were higher than expected. By now, I’m sure the Fed would like to take back the December 11th 25-basis point cut in the Fed Funds rate. Bond prices fell sharply immediately after the announcement, followed by plunging stock prices from the opening bell at 9:30. However, hopes of further rate cuts were dashed at the same time. Rising inflation and a slowing economy is not an easy problem for the Fed. More volatility in the U.S. stock market will unfold going forward, which could push both foreign and U.S. investors offshore for better profits.
While slowing growth in the U.S. is becoming more obvious, there is no talk, not even a whisper, of slowing growth in China, India or Asia. China’s inflation rate is at the highest levels in 15 years, with the money supply growing at 18.5 percent. China’s retail sales were up almost 18 percent in November. As a result, the China ETF, iShares FTSE/Xingua China 25 Index (FXI), is forming what could eventually be a double top. Rising inflation is creating labor unrest, but police are not arriving on the scene to restore order. Almost a year ago, Fed Chairman Bernanke warned Chinese leaders that monetary inflation would produce increasing labor unrest. We are watching the China charts for a technical sell signal, which could come next week.
In the U.S., I would continue to avoid the following sectors: financial, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own; nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, December 18, 2007, at 6:00 p.m. EST.
Rising inflationary pressures surprised stock traders this morning. Stock prices fell on fading hopes of future rate cuts by the Fed. At the close, the Dow plunged 178 points, closing at 13,339, while the Nasdaq dropped almost 33 points, closing at 2,635. Oil closed $0.90 lower at $91.31 per barrel, and gold closed $4.50 lower at $799.50 an ounce.
The November Consumer Price Index (CPI) was released this morning at 8:30. November prices soared by 0.8 percent, while the core inflation rate (minus food and energy) was up 0.3 percent. Both figures were higher than expected. By now, I’m sure the Fed would like to take back the December 11th 25-basis point cut in the Fed Funds rate. Bond prices fell sharply immediately after the announcement, followed by plunging stock prices from the opening bell at 9:30. However, hopes of further rate cuts were dashed at the same time. Rising inflation and a slowing economy is not an easy problem for the Fed. More volatility in the U.S. stock market will unfold going forward, which could push both foreign and U.S. investors offshore for better profits.
While slowing growth in the U.S. is becoming more obvious, there is no talk, not even a whisper, of slowing growth in China, India or Asia. China’s inflation rate is at the highest levels in 15 years, with the money supply growing at 18.5 percent. China’s retail sales were up almost 18 percent in November. As a result, the China ETF, iShares FTSE/Xingua China 25 Index (FXI), is forming what could eventually be a double top. Rising inflation is creating labor unrest, but police are not arriving on the scene to restore order. Almost a year ago, Fed Chairman Bernanke warned Chinese leaders that monetary inflation would produce increasing labor unrest. We are watching the China charts for a technical sell signal, which could come next week.
In the U.S., I would continue to avoid the following sectors: financial, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own; nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in India, Asia and the emerging markets will outperform the U.S. stock market. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, December 18, 2007, at 6:00 p.m. EST.
Tuesday, December 11, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, December 11, 2007, at 6:00 p.m. EST.
Wall Street was disappointed with the Fed's 25-basis point cut in the discount rate. Stock prices plunged after the mid-day announcement. At the close, the Dow sank 294 points, closing at 13,432, while the Nasdaq lost 66 points, closing at 2,652. Oil closed $1.28 higher at $89.14 per barrel, and gold closed $11.70 lower at $801.80 an ounce.
Wall Street was expecting a 25-basis point cut in the Fed Funds rate and a 50-basis point cut in the discount rate. The Fed did cut the Fed Funds rate by 25-basis points, but Wall Street was extremely disappointed with the 25-basis cut in the discount rate. Wall Street wanted a deeper discount-rate cut to assist the process of liquefying the credit markets. The Fed governors meet every two weeks, which will allow further rate cuts, as needed.
The dollar fell immediately after the Fed's rate cut. The Fed Funds rate is still more than 100-basis points above the 2-year Note. Consequently, I expect further rate cuts totaling 75- to 100-basis points during 2008.
I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own, nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as local currencies rise against the falling dollar. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, December 14, 2007, at 6:00 p.m. EST.
Wall Street was disappointed with the Fed's 25-basis point cut in the discount rate. Stock prices plunged after the mid-day announcement. At the close, the Dow sank 294 points, closing at 13,432, while the Nasdaq lost 66 points, closing at 2,652. Oil closed $1.28 higher at $89.14 per barrel, and gold closed $11.70 lower at $801.80 an ounce.
Wall Street was expecting a 25-basis point cut in the Fed Funds rate and a 50-basis point cut in the discount rate. The Fed did cut the Fed Funds rate by 25-basis points, but Wall Street was extremely disappointed with the 25-basis cut in the discount rate. Wall Street wanted a deeper discount-rate cut to assist the process of liquefying the credit markets. The Fed governors meet every two weeks, which will allow further rate cuts, as needed.
The dollar fell immediately after the Fed's rate cut. The Fed Funds rate is still more than 100-basis points above the 2-year Note. Consequently, I expect further rate cuts totaling 75- to 100-basis points during 2008.
I would continue to avoid the following sectors: financials, brokerages, banks, and the insurance companies. No one knows how much collateralized debt obligations (CDOs) these companies still own, nor do they know what the CDOs are worth. I would also avoid the housing sector. I would not purchase a home or a condo, nor would I bottom-fish the housing stocks. The housing market will not bottom during 2008 in most markets.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as local currencies rise against the falling dollar. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, December 14, 2007, at 6:00 p.m. EST.
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