Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Moribund U.S. Housing Market Threatens to Kill Economic Recovery

Housing-Market / US Housing Aug 26, 2010 - 07:41 AM GMT

By: Money_Morning

Housing-Market

Best Financial Markets Analysis ArticleDon Miller writes: The weak housing market, which has traditionally led the U.S. economy out of recent recessions, this time may put an end to the economic recovery.

Existing home sales plummeted by a record 27% to their lowest level in 15 years in July and inventories soared, the National Association of Realtors (NAR) reported yesterday (Tuesday). Home re-sales, which account for 90% of the total market, dropped to an annual rate of 3.83 million in July. And inventories rose to 12.5 months from 8.9 months in June, putting them at their highest level in more than a decade.


"Historically, July is the peak inventory month in any given year," NAR Chief Economist Lawrence Yun told The Wall Street Journal. "The question is whether this pause is a temporary pause."

Purchases will be "soft for at least two more months as the housing market works through the effects of the end of the tax credit," he said.

Many analysts said the drop, more than twice what analysts' projected, shows a lack of jobs threatens to undermine the U.S. economic recovery.

"If foreclosures continue to mount and depress home prices, that could send the economy back into a recession," Celia Chen, an economist who tracks the industry for Moody's Analytics Inc., told Bloomberg News. "The housing market and the broader economy are closely intertwined."

Spending on home construction and accoutrements like furniture and appliances accounted for about 15% of gross domestic product (GDP) in the second quarter, according to West Chester, Pennsylvania-based Moody's Analytics.

Home prices tumbled 33% from their July 2006 peak to the low in April 2009, according to the S&P/Case-Shiller 20-city index. If the economy falls into a double-dip recession, they may drop another 20% by 2012, according to Chen.

In its latest forecast the Federal Reserve scaled back its economic projections, saying it expects the soft job market to continue to hold back economic growth.

Fed Bank of Chicago President Charles Evans said that while the housing market and U.S. economy have made progress, a sustained economic recovery isn't yet guaranteed.

"Although there are some signs of general economic recovery and some evidence of home-price stabilization, we are certainly not out of the woods," Evans said in a speech in Indianapolis, Bloomberg reported.

With 14.6 million Americans unemployed, homeowners are struggling to make their mortgage payments. One in seven mortgages were delinquent or in foreclosure during the first quarter, the highest since 1979, according to the Washington- based Mortgage Bankers Association.

The number of bank-owned homes that will eventually hit the market stood at 7.3 million in the first quarter, according to Laurie Goodman, an analyst at mortgage-bond broker Amherst Securities Group LP. As those properties come to market, economists fear it will put further pressure on already depressed prices, prompting buyers to wait for better deals.

"The problem with housing is there's actually a lot of shadow inventory," Constance Hunter, chief economist at Aladdin Capital Management LLP in Stamford, Connecticut told Bloomberg. "The Fed must enact a second quantitative easing strategy."

The central bank recently said it would increase its purchases of assets like Treasury securities to pump up the money supply and ease credit. The housing report combined with a disappointing rise in unemployment claims may prompt the Federal Reserve to consider additional moves to boost the economy.

A sustained economic recovery depends on the job growth required to boost consumer spending. The unemployment rate may average 9.6% this year, based on the median estimate of economists in a Bloomberg survey. That would be the highest annual rate since 1983.

Home sales collapsed after a federal tax credit for buyers expired in April. Since then, the economic expansion, which began in the second half of 2009, has been fading, with jobless claims rising and factory orders falling.

The government's Home Affordable Modification Program has met with little success. Roughly 48% of 1.31 million loan modifications started under the program were canceled by the end of July, the Treasury Department said Aug. 20. More than half of all modifications defaulted again within 12 months, the Office of the Comptroller of the Currency said June 23.

"The only thing that's going to fix the housing markets right now is a work-through of what excess supply is on the markets and improvement in unemployment," Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, told Bloomberg Television. "That process is a very, very long-term process."

Source : http://moneymorning.com/2010/08/24/housing-market-14/

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

© 2005-2022 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