August 2010 Fundatmentals
- Thread starter Ally
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U.S. deflation
Some of the world`s leading investors are becoming more worried about deflation and are re-shaping their portfolios to prepare for a possible period of falling prices.
Bond-fund heavyweight Bill Gross, investment manager Jeremy Grantham and hedge-fund managers David Tepper and Alan Fournier are among the best-known investors who are bracing for a possible bout of deflation, a development that could cripple global economies and world stock markets.
The investors cite weak economic figures and a mounting consensus that global policy makers are reluctant, or unable, to take further steps to boost economic growth as reasons for their market positions.
"Deflation isn`t just a topic of intellectual curiosity, it`s happening," says Mr. Gross, who runs the $239 billion mutual fund Pimco Total Return Fund, citing an annualized 0.1% decline over the past two years in the U.S. consumer-price index. "It`s an uncertain world that`s tipping toward deflation."
These investors are walking a fine line. Deflation scares immediately following the 2008 financial crisis didn`t materialize, in large part because central banks intervened.
Read the full article here.
Some of the world`s leading investors are becoming more worried about deflation and are re-shaping their portfolios to prepare for a possible period of falling prices.
Bond-fund heavyweight Bill Gross, investment manager Jeremy Grantham and hedge-fund managers David Tepper and Alan Fournier are among the best-known investors who are bracing for a possible bout of deflation, a development that could cripple global economies and world stock markets.
The investors cite weak economic figures and a mounting consensus that global policy makers are reluctant, or unable, to take further steps to boost economic growth as reasons for their market positions.
"Deflation isn`t just a topic of intellectual curiosity, it`s happening," says Mr. Gross, who runs the $239 billion mutual fund Pimco Total Return Fund, citing an annualized 0.1% decline over the past two years in the U.S. consumer-price index. "It`s an uncertain world that`s tipping toward deflation."
These investors are walking a fine line. Deflation scares immediately following the 2008 financial crisis didn`t materialize, in large part because central banks intervened.
Read the full article here.
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U.S. recovery loses momentum
The U.S. economy lost momentum in the second quarter as consumers remained frugal and a cycle of restocking by businesses, which helped propel growth in previous quarters, showed signs of petering out.
The latest and broadest snapshot of the U.S. economy, released Friday by the Commerce Department, said that gross domestic product—the value of all goods and services produced by the economy—grew at a 2.4% annual rate in the period. That is down from an upwardly revised 3.7% in the first quarter and 5.0% in the final quarter of 2009.
The growth slowdown bodes poorly for the rest of the year, and some economists indicated they would cut growth estimates for the second half based on the report. Also Friday, the government released revised GDP numbers for the past three years, which showed the recession was worse than previously thought.
The downbeat GDP reports come as businesses are logging high profits, underscoring a wide divide between companies and ordinary consumers. With 70% of companies in the S&P 500 having reported earnings through Thursday, second-quarter earnings are running 42% higher than a year ago, even though sales were up only 9%.
The Dow Jones Industrial Average fell 1.22 points Friday to 10465.94. For the year, it has risen 0.36%.
Read the full article here.
The U.S. economy lost momentum in the second quarter as consumers remained frugal and a cycle of restocking by businesses, which helped propel growth in previous quarters, showed signs of petering out.
The latest and broadest snapshot of the U.S. economy, released Friday by the Commerce Department, said that gross domestic product—the value of all goods and services produced by the economy—grew at a 2.4% annual rate in the period. That is down from an upwardly revised 3.7% in the first quarter and 5.0% in the final quarter of 2009.
The growth slowdown bodes poorly for the rest of the year, and some economists indicated they would cut growth estimates for the second half based on the report. Also Friday, the government released revised GDP numbers for the past three years, which showed the recession was worse than previously thought.
The downbeat GDP reports come as businesses are logging high profits, underscoring a wide divide between companies and ordinary consumers. With 70% of companies in the S&P 500 having reported earnings through Thursday, second-quarter earnings are running 42% higher than a year ago, even though sales were up only 9%.
The Dow Jones Industrial Average fell 1.22 points Friday to 10465.94. For the year, it has risen 0.36%.
Read the full article here.
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U.S. revisions
The recession was deeper, and the subsequent recovery slower, than the government originally estimated, the Commerce Department said Friday.
The revisions help explain why the U.S. economy has lost so many more jobs than economists would have predicted given the magnitude of the previously reported decline in GDP.
The government marked down earlier estimates of gross domestic product, the value of all goods and services produced in a year, for each of the past three years. GDP was revised down in seven of the 12 quarters of 2007, 2008 and 2009, primarily because consumer spending grew more slowly and home building fell more sharply than previously estimated.
The overall depth of the latest recession surpassed that of any other downturn since the late 1940s. GDP fell by 4.1% from the fourth quarter of 2007, when the recession officially began, to the second quarter of 2009, when many economists believe it ended. The previous estimate for the peak-to-trough decline was 3.7%.
The new data show that the worst of the recession came in the last quarter of 2008, which included severe disruptions in financial markets following the collapse of Lehman Brothers. Previously, the first quarter of 2009 was reported as the worst quarter of the recession.
Read the full article here.
The recession was deeper, and the subsequent recovery slower, than the government originally estimated, the Commerce Department said Friday.
The revisions help explain why the U.S. economy has lost so many more jobs than economists would have predicted given the magnitude of the previously reported decline in GDP.
The government marked down earlier estimates of gross domestic product, the value of all goods and services produced in a year, for each of the past three years. GDP was revised down in seven of the 12 quarters of 2007, 2008 and 2009, primarily because consumer spending grew more slowly and home building fell more sharply than previously estimated.
The overall depth of the latest recession surpassed that of any other downturn since the late 1940s. GDP fell by 4.1% from the fourth quarter of 2007, when the recession officially began, to the second quarter of 2009, when many economists believe it ended. The previous estimate for the peak-to-trough decline was 3.7%.
The new data show that the worst of the recession came in the last quarter of 2008, which included severe disruptions in financial markets following the collapse of Lehman Brothers. Previously, the first quarter of 2009 was reported as the worst quarter of the recession.
Read the full article here.
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U.S. commercial real estate slump predicted for later in year as foreign property buyers hover
Commercial real estate purchases in the US may slump later this year as prices rise and lenders require buyers to put more cash into deals, it is claimed.
A double dip in the commercial real estate market may come as soon as September, according to Joe Cosenza vice chairman of the Inland Real Estate Group.
He believes that banks will reduce the share of debt they contribute to purchases and that is going to back up a lot of deals.
Commercial real estate sales fell 67% to $44 billion in 2009 from a year earlier, according to New York based real estate research company Real Capital Analytics.
Sales rebounded 58% to $34.2 billion in the first half of 2010 compared with the year earlier period, according to preliminary figures from Real Capital.
But cap rates for commercial real estate are at 7 to 7.5%, down from 9.5 to 10% in the first five months of 2009. `I haven`t seen cap rates that high for years, maybe dating back to 1999. Most people were frozen in their tracks and sat on their hands. It was an opportunity you should never miss,` said Cosenza.
Read the full article here.
Commercial real estate purchases in the US may slump later this year as prices rise and lenders require buyers to put more cash into deals, it is claimed.
A double dip in the commercial real estate market may come as soon as September, according to Joe Cosenza vice chairman of the Inland Real Estate Group.
He believes that banks will reduce the share of debt they contribute to purchases and that is going to back up a lot of deals.
Commercial real estate sales fell 67% to $44 billion in 2009 from a year earlier, according to New York based real estate research company Real Capital Analytics.
Sales rebounded 58% to $34.2 billion in the first half of 2010 compared with the year earlier period, according to preliminary figures from Real Capital.
But cap rates for commercial real estate are at 7 to 7.5%, down from 9.5 to 10% in the first five months of 2009. `I haven`t seen cap rates that high for years, maybe dating back to 1999. Most people were frozen in their tracks and sat on their hands. It was an opportunity you should never miss,` said Cosenza.
Read the full article here.
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U.S. economy adds 42,000 jobs in July
NEW YORK — Private employers added 42,000 jobs in July, compared to a revised gain of 19,000 in June, a report by a payrolls processor showed on Wednesday.
The June figure was originally reported as a gain of 13,000.
The median of estimates from 33 economists surveyed by Reuters for the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC, was for a rise of 40,000 private-sector jobs in July.
The ADP figures come ahead of the government`s much more comprehensive labour market report on Friday, which includes both public and private sector employment.
Read the full article here.
NEW YORK — Private employers added 42,000 jobs in July, compared to a revised gain of 19,000 in June, a report by a payrolls processor showed on Wednesday.
The June figure was originally reported as a gain of 13,000.
The median of estimates from 33 economists surveyed by Reuters for the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC, was for a rise of 40,000 private-sector jobs in July.
The ADP figures come ahead of the government`s much more comprehensive labour market report on Friday, which includes both public and private sector employment.
Read the full article here.
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U.S. jobless claims jump to highest level since April
WASHINGTON — New claims for US jobless benefits rose unexpectedly last week to the highest level since April, the government said Thursday, underscoring concerns unemployment could scuttle the economic recovery.
Initial claims climbed 4.1 percent to 479,000 in the week to July 31, the Labor Department said, baffling most analysts who had expected claims to fall to 455,000.
"The initial claims level was a clear disappointment," analysts at Briefing.com wrote to clients.
It reflects "a recovery that is losing steam," added economist Andrew Gledhill at Moody`s Economy.com.
Initial claims ended 2009 around 450,000 and have not improved since then even as the economy emerged in the middle of last year from a brutal recession.
Read the full article here.
WASHINGTON — New claims for US jobless benefits rose unexpectedly last week to the highest level since April, the government said Thursday, underscoring concerns unemployment could scuttle the economic recovery.
Initial claims climbed 4.1 percent to 479,000 in the week to July 31, the Labor Department said, baffling most analysts who had expected claims to fall to 455,000.
"The initial claims level was a clear disappointment," analysts at Briefing.com wrote to clients.
It reflects "a recovery that is losing steam," added economist Andrew Gledhill at Moody`s Economy.com.
Initial claims ended 2009 around 450,000 and have not improved since then even as the economy emerged in the middle of last year from a brutal recession.
Read the full article here.
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Dismal job news shows U.S. recovery on the ropes
WASHINGTON — Private employers added fewer workers to their payrolls in July than expected and hiring in June was much weaker than had been thought, a blow to an economic recovery that is failing to gain traction.
The dismal news on jobs poses a challenge to Democrats hoping to retain their congressional majorities in November elections, as well as to officials at the Federal Reserve who are debating whether more needs to be done to foster growth.
Overall non-farm payrolls fell 131,000 last month, the Labour Department said on Friday, as temporary government jobs to conduct the decennial census dropped by 143,000.
Private employment, a better gauge of labor market health, rose a modest 71,000 after gaining just 31,000 in June.
The government revised payrolls for May and June to show 97,000 fewer jobs than previously reported.
Analysts polled by Reuters had forecast overall employment falling 65,000 in July and private-sector hiring increasing 90,000.
Read the full article here.
WASHINGTON — Private employers added fewer workers to their payrolls in July than expected and hiring in June was much weaker than had been thought, a blow to an economic recovery that is failing to gain traction.
The dismal news on jobs poses a challenge to Democrats hoping to retain their congressional majorities in November elections, as well as to officials at the Federal Reserve who are debating whether more needs to be done to foster growth.
Overall non-farm payrolls fell 131,000 last month, the Labour Department said on Friday, as temporary government jobs to conduct the decennial census dropped by 143,000.
Private employment, a better gauge of labor market health, rose a modest 71,000 after gaining just 31,000 in June.
The government revised payrolls for May and June to show 97,000 fewer jobs than previously reported.
Analysts polled by Reuters had forecast overall employment falling 65,000 in July and private-sector hiring increasing 90,000.
Read the full article here.
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U.S. and Japan: Land of the falling price
When some of the top economic policy makers in the U.S. meet on Tuesday in Washington, it`s fair to say their minds will wander to a place thousands of kilometres to the east.
For 20 years, Japan has struggled to pull itself out of an economic funk, which began when a gigantic property bubble burst and later morphed into a financial crisis. That narrative, long a cautionary tale, is starting to sound uncomfortably familiar on the other side of the Pacific.
As the U.S. recovery loses steam, some investors and economists are arguing that slower growth is a prelude to a period of Japan-style economic malaise: recurrent recessions, lacklustre recoveries, and ominously, falling prices.
It`s an outcome that investors – especially in the bond market – are giving more attention.
It`s an outcome that investors – especially in the bond market – are giving more attention. Seeking safety, they`re piled into government bonds in recent weeks, sending yields, which move in the opposite direction as prices, sharply lower.
Read the full article here.
When some of the top economic policy makers in the U.S. meet on Tuesday in Washington, it`s fair to say their minds will wander to a place thousands of kilometres to the east.
For 20 years, Japan has struggled to pull itself out of an economic funk, which began when a gigantic property bubble burst and later morphed into a financial crisis. That narrative, long a cautionary tale, is starting to sound uncomfortably familiar on the other side of the Pacific.
As the U.S. recovery loses steam, some investors and economists are arguing that slower growth is a prelude to a period of Japan-style economic malaise: recurrent recessions, lacklustre recoveries, and ominously, falling prices.
It`s an outcome that investors – especially in the bond market – are giving more attention.
It`s an outcome that investors – especially in the bond market – are giving more attention. Seeking safety, they`re piled into government bonds in recent weeks, sending yields, which move in the opposite direction as prices, sharply lower.
Read the full article here.
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Uh-oh, China can`t save us
It turns out not everyone can export their way to economic salvation at once.
Figures Wednesday showed exports from the United States tumbled in June, enough to knock growth in the world`s biggest economy sharply lower and dashing hopes that demand in China and other emerging markets could make up for weakness at home.
But reliance on China was probably misplaced from the outset. As is blaming China`s currency policy for the trade woes of the West, said Brian Bethune, chief U.S. financial economist at IHS Global Insight.
Although the Chinese economy has posted some staggering growth rates, its economy is still too underdeveloped and its personal income levels are still too low to generate a sufficient source of demand for North American goods.
"I really don`t see that it`s realistic to expect there to be significant exports of the typical high-technology products that Canada and the U.S. make," Mr. Bethune said.
"So there`s not really a huge export potential there. And we shouldn`t try to oversell that."
Read the full article here.
It turns out not everyone can export their way to economic salvation at once.
Figures Wednesday showed exports from the United States tumbled in June, enough to knock growth in the world`s biggest economy sharply lower and dashing hopes that demand in China and other emerging markets could make up for weakness at home.
But reliance on China was probably misplaced from the outset. As is blaming China`s currency policy for the trade woes of the West, said Brian Bethune, chief U.S. financial economist at IHS Global Insight.
Although the Chinese economy has posted some staggering growth rates, its economy is still too underdeveloped and its personal income levels are still too low to generate a sufficient source of demand for North American goods.
"I really don`t see that it`s realistic to expect there to be significant exports of the typical high-technology products that Canada and the U.S. make," Mr. Bethune said.
"So there`s not really a huge export potential there. And we shouldn`t try to oversell that."
Read the full article here.
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Jobless claims jump shows labour market ailing
WASHINGTON — The number of U.S. workers filing new claims for unemployment insurance unexpectedly rose last week to its highest level in close to six months, a fresh signal of a weak jobs market.
The number of new claims for jobless benefits rose 2,000 to 484,000 in the week ended August 7, the second straight increase, the Labor Department said on Thursday. Economists had expected claims to edge down to 469,000.
"This is not a good number," said John Brady, an analyst at MF Global in Chicago. "Claims are going the wrong way. That has the market concerned."
U.S. stocks opened lower on both the data and a disappointing revenue forecast from tech bellwether Cisco Systems Inc, while U.S. Treasury debt prices pared losses and the dollar trimmed gains against the yen.
"We are seeing a large number of mixed signals in both the market and from our customers` expectations," Cisco CEO John Chambers told analysts on Wednesday. "We think the words `unusual uncertainty` are an accurate description of what is occurring.
Read the full article here.
WASHINGTON — The number of U.S. workers filing new claims for unemployment insurance unexpectedly rose last week to its highest level in close to six months, a fresh signal of a weak jobs market.
The number of new claims for jobless benefits rose 2,000 to 484,000 in the week ended August 7, the second straight increase, the Labor Department said on Thursday. Economists had expected claims to edge down to 469,000.
"This is not a good number," said John Brady, an analyst at MF Global in Chicago. "Claims are going the wrong way. That has the market concerned."
U.S. stocks opened lower on both the data and a disappointing revenue forecast from tech bellwether Cisco Systems Inc, while U.S. Treasury debt prices pared losses and the dollar trimmed gains against the yen.
"We are seeing a large number of mixed signals in both the market and from our customers` expectations," Cisco CEO John Chambers told analysts on Wednesday. "We think the words `unusual uncertainty` are an accurate description of what is occurring.
Read the full article here.
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3 South Florida foreclosure law firms probed
Three South Florida law firms that represent mortgage lenders are being investigated by the state attorney general over allegations they forged documents filed with the courts in foreclosure cases.
The Florida attorney general issued the subpoenas this week, requesting reams of paperwork by the end of the month from attorneys working in the foreclosure capital of the country.
The investigation targets firms considered to be handling the largest number of foreclosures in Florida on behalf of lenders, in some cases handling thousands of cases a month. They are the Law Offices of David J. Stern in Plantation; the Law Offices of Marshall C. Watson in Fort Lauderdale; and Shapiro & Fishman, which has offices in Boca Raton and Tampa.
The subpoenas request documents going back to at least Jan. 1, 2008.
Read the full article here.
Three South Florida law firms that represent mortgage lenders are being investigated by the state attorney general over allegations they forged documents filed with the courts in foreclosure cases.
The Florida attorney general issued the subpoenas this week, requesting reams of paperwork by the end of the month from attorneys working in the foreclosure capital of the country.
The investigation targets firms considered to be handling the largest number of foreclosures in Florida on behalf of lenders, in some cases handling thousands of cases a month. They are the Law Offices of David J. Stern in Plantation; the Law Offices of Marshall C. Watson in Fort Lauderdale; and Shapiro & Fishman, which has offices in Boca Raton and Tampa.
The subpoenas request documents going back to at least Jan. 1, 2008.
Read the full article here.
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The U.S. is bankrupt
Let`s get real. The United States is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: "Directors welcomed the authorities` commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP."
Read the full article here.
Let`s get real. The United States is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: "Directors welcomed the authorities` commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP."
Read the full article here.
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U.S. home foreclosures surge
The number of U.S. homes lost to foreclosure surged in July, as lenders take back more properties from homeowners
who have been in default for months on end.
Lenders repossessed 92,858 properties last month, up 9 per cent from June and an increase of 6 per cent from July, 2009, foreclosure listing firm RealtyTrac Inc. said Thursday.
Banks have stepped up repossessions this year to clear out the backlog of bad loans. July makes the eighth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.
Still, the number of homeowners who have fallen behind on their payments remains high, and these borrowers are being allowed to stay in their homes longer. That`s partly because lenders are reluctant to add to the glut of foreclosed homes on the market. They also are swamped with an unprecedented number of defaulting properties and have been overwhelmed by the volume.
The number of properties receiving an initial default notice – the first step in the foreclosure process – rose 1 per cent last month from June, but was down 28 per cent versus July last year, RealtyTrac said.
Read the full article here.
The number of U.S. homes lost to foreclosure surged in July, as lenders take back more properties from homeowners
who have been in default for months on end.Lenders repossessed 92,858 properties last month, up 9 per cent from June and an increase of 6 per cent from July, 2009, foreclosure listing firm RealtyTrac Inc. said Thursday.
Banks have stepped up repossessions this year to clear out the backlog of bad loans. July makes the eighth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.
Still, the number of homeowners who have fallen behind on their payments remains high, and these borrowers are being allowed to stay in their homes longer. That`s partly because lenders are reluctant to add to the glut of foreclosed homes on the market. They also are swamped with an unprecedented number of defaulting properties and have been overwhelmed by the volume.
The number of properties receiving an initial default notice – the first step in the foreclosure process – rose 1 per cent last month from June, but was down 28 per cent versus July last year, RealtyTrac said.
Read the full article here.
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Jobless claims jump shows labour market ailing
WASHINGTON — The number of U.S. workers filing new claims for unemployment insurance unexpectedly rose last week to its highest level in close to six months, a fresh signal of a weak jobs market.
The number of new claims for jobless benefits rose 2,000 to 484,000 in the week ended August 7, the second straight increase, the Labor Department said on Thursday. Economists had expected claims to edge down to 469,000.
"This is not a good number," said John Brady, an analyst at MF Global in Chicago. "Claims are going the wrong way. That has the market concerned."
U.S. stocks opened lower on both the data and a disappointing revenue forecast from tech bellwether Cisco Systems Inc, while U.S. Treasury debt prices pared losses and the dollar trimmed gains against the yen.
"We are seeing a large number of mixed signals in both the market and from our customers` expectations," Cisco CEO John Chambers told analysts on Wednesday. "We think the words `unusual uncertainty` are an accurate description of what is occurring.
The data comes two days after the Federal Reserve downgraded its assessment of the economy`s health and said it would take steps to ensure its support for the fragile recovery does not wane.
Read the full article here.
WASHINGTON — The number of U.S. workers filing new claims for unemployment insurance unexpectedly rose last week to its highest level in close to six months, a fresh signal of a weak jobs market.
The number of new claims for jobless benefits rose 2,000 to 484,000 in the week ended August 7, the second straight increase, the Labor Department said on Thursday. Economists had expected claims to edge down to 469,000.
"This is not a good number," said John Brady, an analyst at MF Global in Chicago. "Claims are going the wrong way. That has the market concerned."
U.S. stocks opened lower on both the data and a disappointing revenue forecast from tech bellwether Cisco Systems Inc, while U.S. Treasury debt prices pared losses and the dollar trimmed gains against the yen.
"We are seeing a large number of mixed signals in both the market and from our customers` expectations," Cisco CEO John Chambers told analysts on Wednesday. "We think the words `unusual uncertainty` are an accurate description of what is occurring.
The data comes two days after the Federal Reserve downgraded its assessment of the economy`s health and said it would take steps to ensure its support for the fragile recovery does not wane.
Read the full article here.
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Thoughts of real estate double dip deter investors
Whether the housing market is in another free-fall or not, just the thought of a double dip is forcing real estate investors to re-think how and where they spend their money. And maybe even if they should spend it at all.
"The days of flipping real estate, commercial or otherwise are pretty much over," says Tom Casey, a certified financial planner at Casey Thomas & Associates, who advises his clients on real estate. "There are very few hot markets for flipping with so many people unemployed and property values down. It`s really a time for renting property, not trying to sell it for a profit."
What`s forcing the shift to buy and rent is a depressed U.S. housing market that can`t recover its once sky-high values. From 1999 to 2006, housing prices doubled. But those days are gone and the doubling is now in the opposite direction.
"Housing is entering a double dip in prices," says Paul Dales, chief economist at the research group, Capital Economics. "They are headed down even more over the next 18 months by as much as 5%. Anyone looking for a short term gain by selling a property is heading for trouble."
That`s not to say flipping isn`t going on — it is. But fewer investors are taking the plunge, according to the National Association of Realtors (NAR). The group says that only 4% of transactions this summer were for homes owned less than a year.
Read the full article here.
Whether the housing market is in another free-fall or not, just the thought of a double dip is forcing real estate investors to re-think how and where they spend their money. And maybe even if they should spend it at all.
"The days of flipping real estate, commercial or otherwise are pretty much over," says Tom Casey, a certified financial planner at Casey Thomas & Associates, who advises his clients on real estate. "There are very few hot markets for flipping with so many people unemployed and property values down. It`s really a time for renting property, not trying to sell it for a profit."
What`s forcing the shift to buy and rent is a depressed U.S. housing market that can`t recover its once sky-high values. From 1999 to 2006, housing prices doubled. But those days are gone and the doubling is now in the opposite direction.
"Housing is entering a double dip in prices," says Paul Dales, chief economist at the research group, Capital Economics. "They are headed down even more over the next 18 months by as much as 5%. Anyone looking for a short term gain by selling a property is heading for trouble."
That`s not to say flipping isn`t going on — it is. But fewer investors are taking the plunge, according to the National Association of Realtors (NAR). The group says that only 4% of transactions this summer were for homes owned less than a year.
Read the full article here.
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U.S. Employers cutting jobs again?
New applications for unemployment insurance reached the half-million mark last week for the first time since November, a sign that employers are likely cutting jobs again as the economy slows.
The Labor Department said Thursday that initial claims for jobless benefits
rose by 12,000 last week to 500,000, the fourth increase in the past five weeks. Wall Street economists forecast that claims would drop.
The four-week average, a less volatile measure, rose by 8,000 to 482,500, the highest since December. There were no special factors that distorted the numbers, a Labor Department analyst said.
The increase suggests the economy is creating even fewer jobs than in the first half of this year, when private employers added an average of about 100,000 jobs per month. That`s barely enough to keep the unemployment rate from rising. The jobless rate has been stuck at 9.5 per cent for two months.
Stock futures fell on the news. The Dow Jones industrial average futures had risen more than 50 points before the report was released. They dropped quickly and were down as much as 20 points afterward.
Read the full article here.
New applications for unemployment insurance reached the half-million mark last week for the first time since November, a sign that employers are likely cutting jobs again as the economy slows.
The Labor Department said Thursday that initial claims for jobless benefits
rose by 12,000 last week to 500,000, the fourth increase in the past five weeks. Wall Street economists forecast that claims would drop. The four-week average, a less volatile measure, rose by 8,000 to 482,500, the highest since December. There were no special factors that distorted the numbers, a Labor Department analyst said.
The increase suggests the economy is creating even fewer jobs than in the first half of this year, when private employers added an average of about 100,000 jobs per month. That`s barely enough to keep the unemployment rate from rising. The jobless rate has been stuck at 9.5 per cent for two months.
Stock futures fell on the news. The Dow Jones industrial average futures had risen more than 50 points before the report was released. They dropped quickly and were down as much as 20 points afterward.
Read the full article here.
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The Crisis climbs over the Mountains
With a $150,000-a-year job at a title insurance company, Nan Holmes thought she had an insider`s view of the local real estate market when she bought a new three-bedroom home in Boise, Idaho, in 2007. Then she watched the bottom fall out of housing in California, Nevada, and Florida, precipitating a severe recession. Now the real estate crunch has hit Idaho and the rest of the Northwest, and Holmes, 55, is in trouble. The title insurance business has shrunk along with home sales; her income has fallen by half, forcing her to turn to savings. She stopped paying her mortgage in April and put the house on the market for about $145,000 less than she owes the bank. "How long will it take for the market to turn so I can just break even?" she asks.
The mortgage crisis, far from easing, is deepening in the Northwest and Midwest. With 15 million Americans out of work, home prices and consumer spending are under pressure. Another tumble in property values could push the economy back into recession, former Federal Reserve Chairman Alan Greenspan said on Aug. 1. "The numbers are exploding due to unemployment and economic displacement," says Rick Sharga, senior vice-president for marketing at mortgage-data firm RealtyTrac in Irvine, Calif. "We will see them get a lot worse unless we see some job creation."
Read the full article here.
With a $150,000-a-year job at a title insurance company, Nan Holmes thought she had an insider`s view of the local real estate market when she bought a new three-bedroom home in Boise, Idaho, in 2007. Then she watched the bottom fall out of housing in California, Nevada, and Florida, precipitating a severe recession. Now the real estate crunch has hit Idaho and the rest of the Northwest, and Holmes, 55, is in trouble. The title insurance business has shrunk along with home sales; her income has fallen by half, forcing her to turn to savings. She stopped paying her mortgage in April and put the house on the market for about $145,000 less than she owes the bank. "How long will it take for the market to turn so I can just break even?" she asks.
The mortgage crisis, far from easing, is deepening in the Northwest and Midwest. With 15 million Americans out of work, home prices and consumer spending are under pressure. Another tumble in property values could push the economy back into recession, former Federal Reserve Chairman Alan Greenspan said on Aug. 1. "The numbers are exploding due to unemployment and economic displacement," says Rick Sharga, senior vice-president for marketing at mortgage-data firm RealtyTrac in Irvine, Calif. "We will see them get a lot worse unless we see some job creation."
Read the full article here.
- Joined
- Mar 24, 2009
- Messages
- 16,743
U.S. home sales dive record 27%
WASHINGTON -- Sales of previously owned U.S. homes took a record drop in July to their lowest pace in 15 years, suggesting further loss of momentum in the economic recovery.
As the National Association of Realtors issued the report, Chicago Federal Reserve President Charles Evans warned that the risk of a double-dip recession was higher than six months ago although he did not think output would contract, describing the recovery as ongoing but modest.
Existing home sales dropped a record 27.2% from June to an annual rate of 3.83 million units, the lowest since May 1995. June`s sales pace was revised down to a 5.26 million-unit pace from a previously reported 5.37 million.
Analysts polled by Reuters had expected sales to fall 12% to a 4.70 million-unit rate last month.
"This is a worrisome report and while it reflects the volatility caused by the end of the (government home-buyer) tax credits, it also indicates a deterioration in the underlying trend for housing demand," said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch in New York.
Read the full article here.
WASHINGTON -- Sales of previously owned U.S. homes took a record drop in July to their lowest pace in 15 years, suggesting further loss of momentum in the economic recovery.
As the National Association of Realtors issued the report, Chicago Federal Reserve President Charles Evans warned that the risk of a double-dip recession was higher than six months ago although he did not think output would contract, describing the recovery as ongoing but modest.
Existing home sales dropped a record 27.2% from June to an annual rate of 3.83 million units, the lowest since May 1995. June`s sales pace was revised down to a 5.26 million-unit pace from a previously reported 5.37 million.
Analysts polled by Reuters had expected sales to fall 12% to a 4.70 million-unit rate last month.
"This is a worrisome report and while it reflects the volatility caused by the end of the (government home-buyer) tax credits, it also indicates a deterioration in the underlying trend for housing demand," said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch in New York.
Read the full article here.
- Joined
- Mar 24, 2009
- Messages
- 16,743
Housing fades as means to build wealth, analysts say
Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.
Adam and Allison Lyons plan to rent their condo in Chicago until the housing market recovers.
The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.
More than likely, that era is gone for good.
"There is no iron law that real estate must appreciate," said Stan Humphries, chief economist for the real estate site Zillow. "All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn`t hold up."
Read the full article here.
Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.
Adam and Allison Lyons plan to rent their condo in Chicago until the housing market recovers.
The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.
More than likely, that era is gone for good.
"There is no iron law that real estate must appreciate," said Stan Humphries, chief economist for the real estate site Zillow. "All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn`t hold up."
Read the full article here.