This is The Wall Street Digest Hotline Update for Friday, February 20, 2009, at 6:00 p.m. EST.
Worries over a nationalized banking system pushed the Dow Industrial Average to an intraday low of 200. At the close, the Dow plunged 100 points, closing at 7,366, while the Nasdaq lost one point, closing at 1,441. The S&P 500 fell almost 9 points, closing at 770. Oil closed $0.54 lower at $38.94 per barrel, and gold closed $25.70 higher at $1,002.20 per ounce.
Wall Street has not reacted well to any measures presented by the Obama Administration to address the banking crisis, the credit crisis, and the deflationary slide of the housing sector.
Date News Event Dow Average
1/30 Fourth quarter GDP down 3.8 percent Fell 148 points
2/5 Obama/Geithner announce executive pay cap Fell 122 points
2/10 Geithner releases $2 trillion bank rescue plan Fell 382 points
2/13 House passes $787 billion stimulus bill Fell 82 points
2/17 Obama signs $787 billion stimulus bill Fell 298 points
2/19 Banks fear Nationalization Fell 89 points
2/20 Confusion after Bernanke speech (today) Fell 100 points
- 12 million home mortgages are under water.
- At least 344 banks have received TARP funds.
- Europe and the U.K. are sliding into a deep recession.
- GDP growth and profits growth will be negative in 2009.
- The Dow peaked at 14,164 on 10/9/07. Today the Dow is at 7,300 down 6,867 points or 48 percent.
Our Washington politicians will not be able to stop the next Great Depression from unfolding between 2010 and 2022, a period of 12 years. Pay off all debts. Sell all of your real estate, if possible.
During a deflationary depression the price or value of virtually everything will decline from current levels. Selling the personal residence is a very personal decision.
All of the bubbles including commodities, the stock market, and real estate will eventually burst and crash. Nothing can stop the 2010-2012 bear market and recession because all of the engines of economic growth have already turned negative.
The next Hotline Update will be on Tuesday, February 24, 2009, at 6:00 p.m. EST.
Friday, February 20, 2009
Price Drops to Continue
JANUARY 13, 2009, 9:07 P.M. ET
Home prices are likely to be lower in two years in more than one-quarter of the nation's housing markets, according to a new study by mortgage insurer PMI Group Inc.
The study "tells us ... that we are far from a rebound in prices," says PMI chief economist David Berson. The risk that home prices will be lower in the third quarter of 2010 increased in 97% of 381 metro areas, according to the PMI analysis, though in many markets that risk remains relatively low.
The markets with the greatest risk that home prices will be lower in two years include California's Inland Empire, the greater Miami area, Lake Havasu City-Kingman, Ariz., and Cape Coral-Fort Myers, Fla. Metro areas with the lowest chance of price declines include the Dallas-Fort Worth area, greater Houston and Pittsburgh.
In developing its risk index, PMI considers recent trends in home prices, housing affordability, unemployment rates and foreclosures, among other factors. The study included data through the third-quarter, but there was little sign of improvement since then, Mr. Berson says. Falling mortgage rates were a plus for the housing market, he says, "but offsetting that is the fact that unemployment rates are up everywhere, home prices fell further in the fourth quarter and the foreclosure rates probably increased in most places."
—Ruth Simon
Home prices are likely to be lower in two years in more than one-quarter of the nation's housing markets, according to a new study by mortgage insurer PMI Group Inc.
The study "tells us ... that we are far from a rebound in prices," says PMI chief economist David Berson. The risk that home prices will be lower in the third quarter of 2010 increased in 97% of 381 metro areas, according to the PMI analysis, though in many markets that risk remains relatively low.
The markets with the greatest risk that home prices will be lower in two years include California's Inland Empire, the greater Miami area, Lake Havasu City-Kingman, Ariz., and Cape Coral-Fort Myers, Fla. Metro areas with the lowest chance of price declines include the Dallas-Fort Worth area, greater Houston and Pittsburgh.
In developing its risk index, PMI considers recent trends in home prices, housing affordability, unemployment rates and foreclosures, among other factors. The study included data through the third-quarter, but there was little sign of improvement since then, Mr. Berson says. Falling mortgage rates were a plus for the housing market, he says, "but offsetting that is the fact that unemployment rates are up everywhere, home prices fell further in the fourth quarter and the foreclosure rates probably increased in most places."
—Ruth Simon
Wednesday, February 11, 2009
U.S. mortgage applications slump to 8-year low
Wed Feb 11, 2009 7:28am EST
By Lynn Adler
NEW YORK (Reuters) - Demand for U.S. mortgage applications tumbled nearly 25 percent last week, with requests for loans to buy homes sinking to an eight-year low, the Mortgage Bankers Association said on Wednesday, as potential buyers hold out for better terms and government help.
The Mortgage Bankers Association's seasonally adjusted home purchase applications index slid 9.8 percent in the week ended February 6 to 235.9, its lowest level since the end of 2000.
Average 30-year mortgage rates slipped to 5.19 percent from 5.28 percent a week earlier, the trade group said.
The rate has fallen more than a full percentage point in three months, but is up about 3/8 point from early this year and seen heading lower.
"In addition to waiting for the rate, you have home prices continuing to come down, so why would I pay $200,000 today when I can pay maybe $180,000 in a couple months or even $150,000," Daniel Penrod, industry analyst for the California Credit Union League in Rancho Cucamonga, California, said on Tuesday. The government is "really pushing against some very strong forces."
U.S. Treasury chief Timothy Geithner on Tuesday proposed pumping $2 trillion into the banking system to sop up bad assets, restore credit and revive lending at lower mortgage rates.
Expectations that government steps could yank 30-year home loan rates near 4 percent, a proposed $15,000 home-buying tax credit and the outlook for still lower house prices has raised the incentive to wait.
Home prices through November tumbled at least 25 percent from their mid-2006 peak, according to Standard & Poor's/Case-Shiller Home Price indexes. The descent should persist, with a record number of foreclosed properties dragging down market values, analysts have said.
The Mortgage Bankers Association's loan refinancing gauge tumbled 30.3 percent to 2,722.7 last week, its lowest level since the November 21 week and a far cry from the 7,414.1 reached in January when 30-year mortgage rates fell to 4.89 percent.
Intensified government actions will help, Penrod said, but the needed elixirs are more bank lending and a more stable employment picture.
"There's no urgency to jump in until prices settle," Penrod said. "Given the current state of unemployment and the projections there is still downward movement coming in the first half of the year for non-foreclosure sales and prices."
U.S. employers slashed nearly 600,000 jobs in January, the biggest monthly cuts in 34 years, while the unemployment rate set a 16-year peak.
The $15,000 home buyer tax credit that is part of the economic stimulus program adopted by the U.S. Senate would create nearly 500,000 home sales and add 255,000 jobs in the coming year, according to the National Association of Home Builders.
Analysts had also been predicting that at least a third of home owners applying to cut costs by refinancing would be turned down because of more rigid lending standards, job loss or because their home values have fallen below the size of existing mortgages.
Borrowers with mortgages that surpass their appraised home price are called "under water," or "upside down."
"Even with the proposed tax break and the rates dropping way down, it unfortunately doesn't change the water level for those drowning in their home debt," Penrod said.
(Editing by Leslie Adler)
By Lynn Adler
NEW YORK (Reuters) - Demand for U.S. mortgage applications tumbled nearly 25 percent last week, with requests for loans to buy homes sinking to an eight-year low, the Mortgage Bankers Association said on Wednesday, as potential buyers hold out for better terms and government help.
The Mortgage Bankers Association's seasonally adjusted home purchase applications index slid 9.8 percent in the week ended February 6 to 235.9, its lowest level since the end of 2000.
Average 30-year mortgage rates slipped to 5.19 percent from 5.28 percent a week earlier, the trade group said.
The rate has fallen more than a full percentage point in three months, but is up about 3/8 point from early this year and seen heading lower.
"In addition to waiting for the rate, you have home prices continuing to come down, so why would I pay $200,000 today when I can pay maybe $180,000 in a couple months or even $150,000," Daniel Penrod, industry analyst for the California Credit Union League in Rancho Cucamonga, California, said on Tuesday. The government is "really pushing against some very strong forces."
U.S. Treasury chief Timothy Geithner on Tuesday proposed pumping $2 trillion into the banking system to sop up bad assets, restore credit and revive lending at lower mortgage rates.
Expectations that government steps could yank 30-year home loan rates near 4 percent, a proposed $15,000 home-buying tax credit and the outlook for still lower house prices has raised the incentive to wait.
Home prices through November tumbled at least 25 percent from their mid-2006 peak, according to Standard & Poor's/Case-Shiller Home Price indexes. The descent should persist, with a record number of foreclosed properties dragging down market values, analysts have said.
The Mortgage Bankers Association's loan refinancing gauge tumbled 30.3 percent to 2,722.7 last week, its lowest level since the November 21 week and a far cry from the 7,414.1 reached in January when 30-year mortgage rates fell to 4.89 percent.
Intensified government actions will help, Penrod said, but the needed elixirs are more bank lending and a more stable employment picture.
"There's no urgency to jump in until prices settle," Penrod said. "Given the current state of unemployment and the projections there is still downward movement coming in the first half of the year for non-foreclosure sales and prices."
U.S. employers slashed nearly 600,000 jobs in January, the biggest monthly cuts in 34 years, while the unemployment rate set a 16-year peak.
The $15,000 home buyer tax credit that is part of the economic stimulus program adopted by the U.S. Senate would create nearly 500,000 home sales and add 255,000 jobs in the coming year, according to the National Association of Home Builders.
Analysts had also been predicting that at least a third of home owners applying to cut costs by refinancing would be turned down because of more rigid lending standards, job loss or because their home values have fallen below the size of existing mortgages.
Borrowers with mortgages that surpass their appraised home price are called "under water," or "upside down."
"Even with the proposed tax break and the rates dropping way down, it unfortunately doesn't change the water level for those drowning in their home debt," Penrod said.
(Editing by Leslie Adler)
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