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Friday, August 22, 2008

Housing and the Economy

I have been asked how the market looks for housing.

Consider this, summer is seasonally the time when most home purchases occur. This uptick from month to month is not a relavent figure. Sales normally increase in July and August. There are too many problems even with prime borrowers. This latest uptick is the worst.

Now, even "prime" quality borrowers are falling behind on payments at a record pace. The delinquency rate on prime mortgages hit 3.71% in the first quarter of this year, according to the Mortgage Bankers Association. That's the highest since the MBA started splitting out subprime and prime borrowers back in 1998. The overall delinquency figures go much farther back — to 1979. They show the same thing: A record high delinquency rate of 6.35%.



Home prices are way down, but they show little signs of bottoming out just yet. How Many families can afford 48,000 a year to own a home in Orange County. Yes, intrest rates % are down but how much of a persons income will housing take, 50% or more, this is the fundamental problem. Figures from S&P/Case-Shiller reflect that home prices down 15.8% in May from the same month a year earlier. That's the largest drop on record. Prices fell in all 20 metropolitan areas the firm tracks. Las Vegas (-28.4%), Miami (-28.3%), Phoenix (-26.5%), and multiple markets in California (-24.6% in L.A., -23.2% in San Diego, and -22.9% in San Francisco) are leading the way.

Aug 22 S&P 500 Hourly chart with support and divergence


Have an open gap here from yesterday. Looks like sentiment will hold this market up a little bit.
LEH might be purchased by a Korean Development bank which will help the financials incredibly.
Sentiment is hopeful.
Don't fall in love with the upside on this market.

Economic News Bernanke, oil and treasury

Treasuries declined after Federal Reserve Chairman Ben S. Bernanke suggested that the central bank is relying on slowing growth and a strengthening dollar to contain inflation. The decline pushed yields on two-year notes up the most in a month. Government debt had slumped earlier after the Korea Development Bank said it's ``considering'' an investment in Lehman Brothers Holdings Inc., easing concern about the fallout from credit market losses.

Bernanke called dollar stability and price declines in oil and other commodities ``encouraging.'' Still, the inflation outlook remains ``highly uncertain'' and the Fed ``is committed to achieving medium-term price stability and will act as necessary to obtain that objective,'' he said at the Fed Bank of Kansas City's annual symposium in Jackson Hole, Wyoming.

Treasury notes also declined as gains in European and U.S. stocks tempered demand for the safest of assets. The Standard & Poor's 500 Index rose 0.9 percent, while the Dow Jones Stoxx 600 Index rose 1.6 percent. Futures contracts on the Chicago Board of Trade show odds of 56 percent the Fed will raise its 2 percent target for overnight bank lending in January. A month ago, traders predicted a rate increase in December. Banks and securities companies have reported more than $500 billion of writedowns and credit-related losses linked to the collapse of the subprime mortgage market since the start of 2007.

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