NEW YORK (CNNMoney.com) -- The home price plunge stayed on a record pace this summer, according to a widely watched gauge of national real estate markets released Tuesday.
The S&P Case-Shiller Home Price national index recorded a 16.6% decline in the third quarter compared with the same period a year ago. That eclipsed the previous record of 15.1% set during the second quarter.
Prices in Case-Shiller's separate index of 10 major cities fell a record 18.6%, while its 20-city index dropped a record 17.4%.
With foreclosures soaring at record rates, the economic picture dimming and job losses ramping up, all the elements were in place to push prices lower.
"The turmoil in the financial markets is placing further downward pressure on a housing market already weakened by its own fundamentals." said David Blitzer, Standard & Poor's spokesman for the indexes, in a press release. "All three aggregate indices and 13 of the 20 metro areas are reporting new record rates of decline. . . . Prices are back to where they were in early 2004."
The 10-city index is now 23.4% off its peak price, which came in June 2006; the 20-city index is down 21.8% from its July 2006 high and the national index has fallen 21% since the third quarter of 2006.
Green and beautiful without utility bills!
Home prices in the 10-city index have fallen for 26 consecutive months. The decline has broadened over the past 12 months, with prices dropping in every city of the 20-city index during September.
In the weakest market, Phoenix, the 12-month loss came to 31.9%. Las Vegas prices plummeted 31.3% and San Francisco recorded a 29.5% decline. The best performing markets, Dallas and Charlotte, N.C., still posted drops - 2.7% in Dallas and 3.5% in Charlotte.
With San Francisco and Las Vegas, the other members of the 10-city index are: Miami, down 28.4% year-over-year; Los Angeles, down 27.6%; San Diego, down 26.3%; Washington, down 17%; Chicago, down 10.1%; New York, down 7.3%; Boston, down 5.7%; and Denver, down 5.4%.
In addition to Phoenix, Dallas, Charlotte and the cities in the 10-city index, the 20-city index is made up of: Detroit, down 18.6%; Tampa, Fla., down 18.5%; Minneapolis, down 14%; Seattle, down 9.8%; Atlanta, down 9.5%; Portland, Ore., down 8.6%; and Cleveland, down 6.4%.
Foreclosures continue to take a heavy toll, with sales in some cities dominated by properties repossessed by banks and then put back on the market, often at bargain prices. In Las Vegas and Cleveland, for example, about half of all homes for sale are bank-owned properties, according to the real estate Web site, Trulia.com.
"Foreclosures are clearly a part of the market now," said Blitzer.
He added that the national index price trends tend to be more moderate because they encompass many more exurban and rural areas, where, in many cases, home prices never skyrocketed as they did in some of the hotter, urban markets.
Karl Case, the Wellesley economics professor who is the Case in Case-Shiller, said during a news conference about the latest index report that he would hesitate to put a number on how much further prices could fall, but the increasing job losses will surely worsen the situation.
"There's no cushion against unemployment," he said.
And Pat Newport, an economist with Global Insight, pointed out that the latest numbers don't even capture the impact of some of the events of the past couple of months.
"The real economy took a sharp turn for the worse towards the end of the third quarter," he said. "Since then, housing permits are down, the National Association of Home Builders index of activity dropped to a record low in November and purchase loan applications were down 15%. That's telling us the housing market has worsened a lot."
Add to that a jumping unemployment rate and more bank woes and it adds up to lousy home price numbers for months to come, according to Newport.
"As bad as the latest Case-Shiller numbers appear to be, they are bound to get a lot worse," he said.
Tuesday, November 25, 2008
Friday, November 21, 2008
Marc Faber Nov. 20 2009
Well, I think we have reached extreme points in the sense that asset markets are, by and large terribly oversold, whether these are gold mining shares, or commodities, or equities. On the other hand, we have an overbought U.S. dollar and overbought U.S. Treasury bonds. So I think that volatility will continue. But what you could get within the next 3 months is a very strong rebound in asset markets, in equities, and a sell-off in bonds, and eventually a selloff in the dollar.
http://www.cnbc.com/id/27835292/
http://www.cnbc.com/id/27835292/
Wednesday, November 19, 2008
Friday, November 14, 2008
Thursday, November 13, 2008
Tuesday, November 11, 2008
Banks!
Perhaps if Goldman Sachs goes belly up, the government will stop appointing guys from that firm to run the Treasury. The models that permeate throughout Wall Street got us into this mess. We need some original thinking from outside lower Manhattan to get us out.
I continue to have a bullish stance near-term, given both the tremendous negativity in the market and extreme oversold levels. But days like today make it tough.
I contend that what would surprise money managers the most is not the S&P 500 hitting 750 but rather the S&P 500 hitting 1150. The unrelenting bearishness I am hearing is deafening.
The last time we had a 35% decline over two months as we did from the close on August 28 to the close on October 27 was in 1937. In fact, there have only been 13 occasions since 1928 when the market fell by 35% or more from any given daily close out of 20,305 trading days.
The first eight occasions all occurred around the crash of 1929, with a two-month decline of 35% occurring on October 29, 1929, November 6, 1929, and each day from November 11 through 18, 1929.
A month after October 29, the market was up 2.5%. The nadir was on November 13, with the market having been cut in half from its peak in August. Stocks then rallied 23% over the next month.
On October 5, 1931, the market was down 34.9% compared to the previous month (thus not making it one of the 13 in the sample). Stocks bounced 23% a month later.
On May 3 and May 5, 1932, the market had also fallen at least 35% over two months. However, returns were negative a month later, with declines of 22% and 14% respectively. Two other 35% declines occurred on May 31 and June 1 of that year. The market was flat a month later, with a loss of 0.7% and a gain of 2.5% respectively.
The final two-month decline occurred on October 18, 1937. A month later, stocks were up 6%.
For what it’s worth.
The positive news today? NYSE Composite volume was 4.38 billion, down from 4.79 billion on Friday. That is the lowest volume since September 24, and one the lowest volume days in months. Also, breadth was 2.3:1, the lowest negative breadth on a down day in nearly a month. Generally, the selling as of late has been program driven, with negative breadth on down days more likely to be 10:1 or 20:1.
More good news? The 2-year swap spread ticked down to 1.07%, although it was below 1% at the open this morning.
LIBOR was down. However, the TED spread ticked up because 3-month T-bills hit a yield of 0.20%, nearing the multi-year lows set in September and October.
I asked our bond guys why the T-bill yield was so low. Short-term interest rates are hitting lows seen during the panic in October. We are not panicking now. In fact, spreads are narrowing. So why are short-term interest rates dropping like a stone? They called around the Street to ask but nobody seemed to know.
We came to the conclusion that the low yield is probably because of cash hoarding to meet redemptions. As I understand it, most hedge fund investors have until November 15 to ask for their money back at the end of the year. Rather than selling after the fact, funds are liquidating pro-actively. Mutual funds have also been selling to meet expected redemptions. Pension funds, which have been caught in highly illiquid asset-backed commercial paper in their cash accounts, are over-invested in T-bills. In other words, large investors are sitting in the most liquid asset available to meet expected capital calls.
This leads to an interesting proposition - what if redemptions are not as large as funds expect? One contact told me that their prime broker is saying that hedge fund redemption request are coming in a bit higher than expected. However, there appears to be a great deal of liquidity floating around.
Staying on fixed income, here is a graph of the yield curve.
Usually, this means that the economy is going to be okay. The bears will argue that is because the long-end of the curve is either a.) discounting inflation, or b.) deluded and will eventually fall.
The VIX is interesting here.
It may be in the process of tracing out a lower high. Perhaps the chart is forming the right shoulder of a head-and-shoulders pattern those technicians like to see. Or maybe it is the process of re-testing the highs. We will know over the next few days.
Speaking of the technicals, we may be seeing positive divergences in MACD and RSI for the market.
The RSI at the top may be hitting higher lows while MACD at the bottom is nowhere near the levels experienced last month.
Make your conclusions accordingly
I continue to have a bullish stance near-term, given both the tremendous negativity in the market and extreme oversold levels. But days like today make it tough.
I contend that what would surprise money managers the most is not the S&P 500 hitting 750 but rather the S&P 500 hitting 1150. The unrelenting bearishness I am hearing is deafening.
The last time we had a 35% decline over two months as we did from the close on August 28 to the close on October 27 was in 1937. In fact, there have only been 13 occasions since 1928 when the market fell by 35% or more from any given daily close out of 20,305 trading days.
The first eight occasions all occurred around the crash of 1929, with a two-month decline of 35% occurring on October 29, 1929, November 6, 1929, and each day from November 11 through 18, 1929.
A month after October 29, the market was up 2.5%. The nadir was on November 13, with the market having been cut in half from its peak in August. Stocks then rallied 23% over the next month.
On October 5, 1931, the market was down 34.9% compared to the previous month (thus not making it one of the 13 in the sample). Stocks bounced 23% a month later.
On May 3 and May 5, 1932, the market had also fallen at least 35% over two months. However, returns were negative a month later, with declines of 22% and 14% respectively. Two other 35% declines occurred on May 31 and June 1 of that year. The market was flat a month later, with a loss of 0.7% and a gain of 2.5% respectively.
The final two-month decline occurred on October 18, 1937. A month later, stocks were up 6%.
For what it’s worth.
The positive news today? NYSE Composite volume was 4.38 billion, down from 4.79 billion on Friday. That is the lowest volume since September 24, and one the lowest volume days in months. Also, breadth was 2.3:1, the lowest negative breadth on a down day in nearly a month. Generally, the selling as of late has been program driven, with negative breadth on down days more likely to be 10:1 or 20:1.
More good news? The 2-year swap spread ticked down to 1.07%, although it was below 1% at the open this morning.
LIBOR was down. However, the TED spread ticked up because 3-month T-bills hit a yield of 0.20%, nearing the multi-year lows set in September and October.
I asked our bond guys why the T-bill yield was so low. Short-term interest rates are hitting lows seen during the panic in October. We are not panicking now. In fact, spreads are narrowing. So why are short-term interest rates dropping like a stone? They called around the Street to ask but nobody seemed to know.
We came to the conclusion that the low yield is probably because of cash hoarding to meet redemptions. As I understand it, most hedge fund investors have until November 15 to ask for their money back at the end of the year. Rather than selling after the fact, funds are liquidating pro-actively. Mutual funds have also been selling to meet expected redemptions. Pension funds, which have been caught in highly illiquid asset-backed commercial paper in their cash accounts, are over-invested in T-bills. In other words, large investors are sitting in the most liquid asset available to meet expected capital calls.
This leads to an interesting proposition - what if redemptions are not as large as funds expect? One contact told me that their prime broker is saying that hedge fund redemption request are coming in a bit higher than expected. However, there appears to be a great deal of liquidity floating around.
Staying on fixed income, here is a graph of the yield curve.
Usually, this means that the economy is going to be okay. The bears will argue that is because the long-end of the curve is either a.) discounting inflation, or b.) deluded and will eventually fall.
The VIX is interesting here.
It may be in the process of tracing out a lower high. Perhaps the chart is forming the right shoulder of a head-and-shoulders pattern those technicians like to see. Or maybe it is the process of re-testing the highs. We will know over the next few days.
Speaking of the technicals, we may be seeing positive divergences in MACD and RSI for the market.
The RSI at the top may be hitting higher lows while MACD at the bottom is nowhere near the levels experienced last month.
Make your conclusions accordingly
Sunday, November 9, 2008
Jeremy Grantham: Letter to investors
On October 10th we can say that, with the S&P at 900, stocks are cheap in the U.S. and cheaper still overseas. We will therefore be steady buyers at these prices. Not necessarily rapid buyers, in fact probably not, but steady buyers. But we have no illusions. Timing is difficult and is apparently not usually our skill set, although we got desperately and atypically lucky moving rapidly to underweight in emerging equities three months ago. That aside, we play the numbers. And we recognize the real possibilities of severe and typical overruns. We also recognize that the current crisis comes with possibly unique dangers of a global meltdown. We recognize, in short, that we are very probably buying too soon. Caveat emptor…
Rounds I and II – the asset bubbles breaking and the credit crisis – will soon be mostly behind us, but the effect on the real world of economic output lies, unfortunately for all of us, almost entirely ahead. Employing our usual historically loaded armchair technique, we have been writing for several quarters that global economic weakness will be substantially worse and will last substantially longer than the official forecasts. We maintain that view even though official forecasts have dropped considerably. The global economy is likely to show the scars of this crisis for several years. In particular, the illusion of wealth created by over-inflated asset prices has been dramatically reduced and, though most of this effect is behind us, a substantial part of the housing decline in some European countries and the U.S. is still to occur…
This reversal of the illusory wealth effect added to deleveraging will be felt worldwide, but especially in the so-called Anglo-Saxon countries, and will be a permanently depressing feature of the next decade or so compared with the last decade. It is indeed the end of an era.
Rounds I and II – the asset bubbles breaking and the credit crisis – will soon be mostly behind us, but the effect on the real world of economic output lies, unfortunately for all of us, almost entirely ahead. Employing our usual historically loaded armchair technique, we have been writing for several quarters that global economic weakness will be substantially worse and will last substantially longer than the official forecasts. We maintain that view even though official forecasts have dropped considerably. The global economy is likely to show the scars of this crisis for several years. In particular, the illusion of wealth created by over-inflated asset prices has been dramatically reduced and, though most of this effect is behind us, a substantial part of the housing decline in some European countries and the U.S. is still to occur…
This reversal of the illusory wealth effect added to deleveraging will be felt worldwide, but especially in the so-called Anglo-Saxon countries, and will be a permanently depressing feature of the next decade or so compared with the last decade. It is indeed the end of an era.
Saturday, November 8, 2008
Galbraith on Economists' Inability to Forecast the Credit Crisis
Do you find it odd that so few economists foresaw the current credit disaster? Some did. The person with the most serious claim for seeing it coming is Dean Baker, the Washington economist. I saw it coming in general terms.
But there are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis? Ten or 12 would be closer than two or three.
What does that say about the field of economics, which claims to be a science? It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.
But there are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis? Ten or 12 would be closer than two or three.
What does that say about the field of economics, which claims to be a science? It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.
Wednesday, November 5, 2008
Morgan Stanley strategist points to buy signal
The strategist who warned investors to sell equities in June 2007, just before the credit crisis, is saying the market is sending its strongest buy signal for six years.
The last time Morgan Stanley flagged a "full house buy" for European equities was in September 2002, just before a five-year bull market began.
Teun Draaisma, European equity strategist at Morgan Stanley, said yesterday that full house buy signals had a near-perfect track record and had been very good at indicating when markets were nearing a turning point.
He said that "each of the four indicators [valuation, capitulation, risk, fundamentals] tell us to buy.
"The latest elements that pushed us there have been a capitulation among retail investors, purchasing managers and sell-side analysts, as measured by record mutual fund outflows, ISM new orders below 40 and analysts' revisions collapsing . . . When these three groups know about the bad news, equity prices are probably already reflecting it."
Mr Draaisma warned that full house signals had sometimes been early but had only been wrong once, in November 2001. This was later followed by all indicators giving a sell signal in April 2002.
"Despite the bad fundamental outlook, prudent investors should not be short equities," he said.
The bank believes the market is in the worst earnings recession for 40 years but that the bad news is already priced in.
"We see 15 per cent upside to our 12 month target for MSCI Europe."
Mr Draaisma believes the "severe part of the bear market is over" even though he points to many short-term risks.
The FTSE Eurofirst 300 yesterday completed its first five-day winning streak since October 2007 as expectations grew the the ECB would cut rates.
"The more prudent investor may wish to stay in cash and not be overweight equities, but our advice is not to be short or underweight any more," Mr Draaisma said.
"Our advice is also for long-term investors to keep on averaging in at these and lower levels."
The last time Morgan Stanley flagged a "full house buy" for European equities was in September 2002, just before a five-year bull market began.
Teun Draaisma, European equity strategist at Morgan Stanley, said yesterday that full house buy signals had a near-perfect track record and had been very good at indicating when markets were nearing a turning point.
He said that "each of the four indicators [valuation, capitulation, risk, fundamentals] tell us to buy.
"The latest elements that pushed us there have been a capitulation among retail investors, purchasing managers and sell-side analysts, as measured by record mutual fund outflows, ISM new orders below 40 and analysts' revisions collapsing . . . When these three groups know about the bad news, equity prices are probably already reflecting it."
Mr Draaisma warned that full house signals had sometimes been early but had only been wrong once, in November 2001. This was later followed by all indicators giving a sell signal in April 2002.
"Despite the bad fundamental outlook, prudent investors should not be short equities," he said.
The bank believes the market is in the worst earnings recession for 40 years but that the bad news is already priced in.
"We see 15 per cent upside to our 12 month target for MSCI Europe."
Mr Draaisma believes the "severe part of the bear market is over" even though he points to many short-term risks.
The FTSE Eurofirst 300 yesterday completed its first five-day winning streak since October 2007 as expectations grew the the ECB would cut rates.
"The more prudent investor may wish to stay in cash and not be overweight equities, but our advice is not to be short or underweight any more," Mr Draaisma said.
"Our advice is also for long-term investors to keep on averaging in at these and lower levels."
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