http://biz.yahoo.com/prnews/070102/nytu099.html?.v=80
http://www.finfacts.com/irelandbusinessnews/publish/article_10008539.shtml
Opinions Abounding…
Starting off the New Year with a “BANG!” comes today’s “Construction Spending” report showing truly astounding and ever accelerating weakness to the nations construction activity.
Most notably was the decline to single family construction and improvement spending which dropped and whopping 20.4% as compared to November 2005.
This is a particularly important report in that it is both a precursor to additional declines that will likely be seen in the “fixed residential investment” line item of the upcoming Q4 GDP report as well as representing a key indicator of the housing market in general.
Additionally, this severe down draft to construction activity should serve as a harbinger of things to come for the residential construction and related job markets.
As 2007 progresses we are likely to see a correspondingly sharp increase in unemployment as residential construction projects complete and unneeded workers are shed in the tens of thousands nationwide.
Recently, it has been reported that there are roughly two million vacant newly constructed homes in the US apparently representing one million more homes than normal.
By all accounts, it will take the home builders and investors that are holding all of these homes quite some time to work through this excess inventory which should continue to put a serious damper on construction spending and the job market as well.
Today’s report posted the eighth straight monthly decline to total dollars and the twelfth consecutive year-over-year decline as a percentage change.
Key Report Details:
- The seasonally adjusted annul rate of private residential construction spending has now dropped 11.47% from the peak set back in December of 2005.
- Overall private residential construction spending dropped 11.13% as compared to November 2005.
- Single Family residential construction spending dropped an astounding 20.4% as compared to November 2005.
*]The latest 11.13% year-over-year decline is the **largest percentage drop in over 12 years **and the greatest drop to date for this year and for this cycle.
Stick with commercial inspections and you won’t care…!!!..
Mortgage Lenders Network USA stops funding new loans
By David Enrich, Dow Jones Newswires | January 2, 2007
NEW YORK --Mortgage Lenders Network USA, a major issuer of loans to people with blemished credit histories, says it has stopped funding loans and accepting applications for new loans.
Breaking News Alerts MLN, which bills itself as one of the country’s top subprime mortgage lenders, also is “currently exploring strategic alternatives” for its wholesale business lines, according to telephone recordings at at least two of its wholesale lending offices.
MLN, based in Middletown, Conn., says its goal last year was to produce more than $12.1 billion in loans, 80 percent of which would be in the subprime space. The company has four regional wholesale lending offices.
MLN’s outside public relations representatives referred inquiries to company executives. MLN officials, including the chief executive and general counsel, didn’t respond to phone calls or e-mails. On Dec. 8, the company posted a note on its Web site saying it continued to operate normally.
MLN also has a big mortgage servicing arm, with a portfolio of more than $14 billion and over 100,000 accounts, according to the company’s Web site. The status of the servicing business wasn’t clear.
Come on Joe…work with me…!!!..
[quote=jburkeson1
Recently, it has been reported that there are roughly two million vacant newly constructed homes in the US apparently representing one million more homes than normal. [/quote]
According to thses figures the economy make not be OK for long. A major cutback in construction spending is the perfect primer for a recession.
Who knows???
http://www.bizjournals.com/extraedge/washingtonbureau/archive/2007/01/01/bureau2.html
January 1, 2007
Housing expected to rebound, but some markets will feel pain
Kent Hoover Washington Bureau Chief
Economists expect the housing market to rebound in 2007 for most of the nation, but some areas will take longer to recover.
“We may be bottoming out on the sales side,” says David Lereah, chief economist for the National Association of Realtors.
Sellers are “being a lot more flexible,” he says, and lower prices are bringing some buyers back into the market. Home builders have cut back on production of new houses, which will “make for a much healthier market going forward,” he says.
David Seiders, chief economist for the National Association of Home Builders, expects house values will decline about 1 percent in 2007. That’s not, he says, “a major threat to the housing wealth effect.”
Stock market gains have offset declining house values, says Martin Regalia, chief economist for the U.S. Chamber of Commerce. People are continuing to spend – good news since 70 percent of the U.S. economy is dependent on consumption, he says.
“It just doesn’t look like the American consumer is going away,” Regalia says.
A few more months of price declines actually will be good for the housing market because they will make houses more affordable, Lereah says.
“Affordability is the problem in housing right now,” he says.
The housing market will grow in three-fourths of the country in 2007, Lereah predicts. Markets in the rest of the country – including California and coastal resort areas from Delaware to Florida – “are going to experience some pain,” he says.
“It’s going to take a while to work off some of the excess,” Lereah says.
The Naples, Fla., market, for example, has a 15-month supply of houses on the market.
"You need to look at local markets independently of one another to get a good feel" for them, Lereah says.
http://wjz.com/business/finance_story_002110724.html
Jan 2, 2007 11:30 am US/Eastern
Consumer Confidence, Home Sales Rise
(AP) WASHINGTON The U.S. economy is ending the year with a hopeful set of reports showing that consumer confidence soared in December and the worst of the downturn for the battered housing market may be over. The Conference Board reported Thursday that consumer confidence shot up to an eight-month high of 109.0 in December.
That was only slightly below last April’s 109.8, when confidence had hit the highest point in four years before soaring gasoline prices and a slumping housing market took their toll on Americans’ perception of the future.
Meanwhile, the National Association of Realtors reported that sales of existing homes edged up 0.6 percent in November to a seasonally adjusted annual rate of 6.28 million units, after a 0.5 percent rise in sales in October.
It marked the first back-to-back increases in sales of existing homes since the spring of 2005 and followed news Wednesday that sales of new homes rose 3.4 percent last month.
The better-than-expected showing for both new and existing home sales could be signaling that this year’s severe slide in housing is starting to bottom out, analysts said.
However, they cautioned not to expect a sharp rebound. Rather, they said they look for prices to continue falling for several more months as sellers are forced to trim their asking prices more in the face of near-record levels of unsold homes.
For October, the median price for an existing home fell for a record fourth consecutive month, dropping to $218,000, down 3.1 percent from a year ago.
David Lereah, the Realtors’ chief economist, estimated that each 1 percent fall in home prices brings an additional 50,000 buyers into the market.
The stronger-than-expected performance of consumer confidence and home sales failed to bolster Wall Street, where investors worried that the newfound economic strength will mean that the Federal Reserve will not feel any urgency about cutting interest rates in the early part of 2007.
The Dow Jones industrial average fell 9.05 points to close at 12,501.52.
Housing had been the economy’s standout performer as the lowest mortgage rates in four decades gave the country five straight years of record sales of both new and existing homes.
This year sales of existing homes should fall by about 9 percent with a smaller 1 percent decline expected in 2007, Lereah said.
He said that one-fourth of the country, the formerly hottest markets in such areas as California and Florida, will see prices decline further while the other three-fourths of the country will see sales and prices keep rising.
Other economists cautioned that while they believe housing has hit bottom, it could be a prolonged period of weakness that will last for much of next year, given the size of inventories that must be reduced.
“A lot of people who had been sitting on the sidelines are beginning to move back into a buying mode, but we don’t look for things to turn up significantly until next summer,” said Nariman Behravesh, chief economist at Global Insight.
The backlog of unsold existing homes dropped 1 percent in November to 3.82 million units, which represented a 7.3-month supply at the current sales pace.
The rise in the consumer confidence readings was a good sign that the housing slowdown was not more seriously affecting consumers’ willingness to spend money, analysts said.
The fear had been that the severe slump in housing would cause people to stop spending and possibly contribute to an outright recession, much as the bursting of the stock market bubble in 2000 helped trigger the 2001 downturn.
“The latest data show us that the economic expansion remains firmly intact at year’s end,” said Mark Zandi, chief economist at Moody’s Economy.com. “Consumers have jobs, gasoline prices are down and the stock market is up so people feel good.”
But some analysts cautioned that it would take more increases in consumer confidence to be sure that the economy is on a sound footing.
“Given the seesaw pattern in recent months, it is too soon to tell if this boost in confidence is a genuine signal that better times are ahead,” said Lynn Franco, director of the Conference Board’s consumer research center.
There was good news on jobs Thursday as the Labor Department reported that the number of laid off workers filing applications for unemployment benefits rose by only 1,000 last week to 317,000. That’s a level that analysts said indicated the job market was remaining strong in spite of the slowdown in overall economic growth.
By region of the country, sales of existing homes were down 1.6 percent in the South and unchanged in the Midwest while sales shot up by a strong 6 percent in the Northeast and were up 0.8 percent in the West.
Time will tell, but were I a gambling man I would bet we are headed for a recession, if we are not in one already. Hope for the best & plan for the worst.
http://wjz.com/business/finance_story_002110724.html
Jan 2, 2007 11:30 am US/Eastern
Consumer Confidence, Home Sales Rise
(AP) WASHINGTON The U.S. economy is ending the year with a hopeful set of reports showing that consumer confidence soared in December and the worst of the downturn for the battered housing market may be over. The Conference Board reported Thursday that consumer confidence shot up to an eight-month high of 109.0 in December.
That was only slightly below last April’s 109.8, when confidence had hit the highest point in four years before soaring gasoline prices and a slumping housing market took their toll on Americans’ perception of the future.
Meanwhile, the National Association of Realtors reported that sales of existing homes edged up 0.6 percent in November to a seasonally adjusted annual rate of 6.28 million units, after a 0.5 percent rise in sales in October.
It marked the first back-to-back increases in sales of existing homes since the spring of 2005 and followed news Wednesday that sales of new homes rose 3.4 percent last month.
The better-than-expected showing for both new and existing home sales could be signaling that this year’s severe slide in housing is starting to bottom out, analysts said.
However, they cautioned not to expect a sharp rebound. Rather, they said they look for prices to continue falling for several more months as sellers are forced to trim their asking prices more in the face of near-record levels of unsold homes.
For October, the median price for an existing home fell for a record fourth consecutive month, dropping to $218,000, down 3.1 percent from a year ago.
David Lereah, the Realtors’ chief economist, estimated that each 1 percent fall in home prices brings an additional 50,000 buyers into the market.
The stronger-than-expected performance of consumer confidence and home sales failed to bolster Wall Street, where investors worried that the newfound economic strength will mean that the Federal Reserve will not feel any urgency about cutting interest rates in the early part of 2007.
The Dow Jones industrial average fell 9.05 points to close at 12,501.52.
Housing had been the economy’s standout performer as the lowest mortgage rates in four decades gave the country five straight years of record sales of both new and existing homes.
This year sales of existing homes should fall by about 9 percent with a smaller 1 percent decline expected in 2007, Lereah said.
He said that one-fourth of the country, the formerly hottest markets in such areas as California and Florida, will see prices decline further while the other three-fourths of the country will see sales and prices keep rising.
Other economists cautioned that while they believe housing has hit bottom, it could be a prolonged period of weakness that will last for much of next year, given the size of inventories that must be reduced.
“A lot of people who had been sitting on the sidelines are beginning to move back into a buying mode, but we don’t look for things to turn up significantly until next summer,” said Nariman Behravesh, chief economist at Global Insight.
The backlog of unsold existing homes dropped 1 percent in November to 3.82 million units, which represented a 7.3-month supply at the current sales pace.
The rise in the consumer confidence readings was a good sign that the housing slowdown was not more seriously affecting consumers’ willingness to spend money, analysts said.
**The fear had been that the severe slump in housing would cause people to stop spending and possibly contribute to an outright recession, much as the bursting of the stock market bubble in 2000 helped trigger the 2001 downturn.
“The latest data show us that the economic expansion remains firmly intact at year’s end,” said Mark Zandi, chief economist at Moody’s Economy.com. “Consumers have jobs, gasoline prices are down and the stock market is up so people feel good.”
But some analysts cautioned that it would take more increases in consumer confidence to be sure that the economy is on a sound footing.
**
“Given the seesaw pattern in recent months, it is too soon to tell if this boost in confidence is a genuine signal that better times are ahead,” said Lynn Franco, director of the Conference Board’s consumer research center.
There was good news on jobs Thursday as the Labor Department reported that the number of laid off workers filing applications for unemployment benefits rose by only 1,000 last week to 317,000. That’s a level that analysts said indicated the job market was remaining strong in spite of the slowdown in overall economic growth.
By region of the country, sales of existing homes were down 1.6 percent in the South and unchanged in the Midwest while sales shot up by a strong 6 percent in the Northeast and were up 0.8 percent in the West.
It’s been a curious year in the markets from MoneyWeek’s perspective. Anyone who was bullish on the plays that we were bullish on - commodities, emerging markets, the return of nuclear power - saw a decent return. But so did investors diametrically opposed to us.
Our least favourite major equity market - the US - roared ahead, with the Dow reaching new highs. The **UK property bubble **continues to inflate, and risky debt still trades as if the cycle has been abolished. Almost the only bulls to lose money this year were those punting on the Gulf stock markets, which are likely to take years to regain their highs.
In short, it was a perfect environment for everyone. Demand was strong, profits were high and inflation was officially subdued (we have our doubts but the bond market apparently doesn’t). The big question now is whether these benign conditions will continue next year…
[size=2]Everything hinges on the US, the consumer of last resort. A US slowdown will surely affect the rest of the world; the idea that Europe and Asia can “decouple” entirely remains a pipedream. Alternatively, renewed US strength should mean a resurgent global bull market.[/size]
[size=2]
It’s clear that we’re at a turning point. As usual at turning points, some signs suggest there could be a soft landing followed by a reacceleration later next year. Other indicators point to a recession. It’s hard to cut through the noise and hear the signal, but on balance we feel that the probabilities point towards recession.
[/size]
[size=2]Among the most important reasons for this are** housing** and consumer debt. Housing is always a crucial industry to watch, because it’s highly cyclical and housing busts are highly correlated to recessions.[/size]
[size=2]At present, every time home loan applications rise or housing starts pick up we hear a lot of confident claims that housing has bottomed. That seems highly optimistic. While you can never ignore the prospect that things will turn out differently this time, such a short and mild slowdown from such a high point would be unprecedented.[/size]
[size=2]Meanwhile, it looks as if the American consumer’s spending power will fade in the months ahead. Wages have lagged far behind profits during this boom, so consumers have dipped into their savings to compensate. Even more importantly, they have been borrowing against the value of their homes and blowing the proceeds.[/size]
[size=2]Now that** house prices **are sliding, this seems less of a good idea. Recent figures show that mortgage **equity withdrawal **has fallen sharply. More broadly, the Federal Reserve’s latest flow of funds data shows that household borrowing is suddenly declining year-over-year at the rates normally associated with a recession or very bumpy landing. The loss of this additional liquidity is likely to show up in consumer spending next year.[/size]
[size=2]Of course, if firms start spending the bumper profits they’ve made in this boom - ie wages rise faster and corporate investment strengthens - a** recession **can be averted. What we see so far doesn’t suggest that’s happening, but a sudden pick up remains a possibility. However, if that happens, it’s hard to see the Fed cutting rates, so it certainly won’t be good news for everyone - 2007 would likely be a painful year for those many US homeowners with adjustable rate mortgages due to reset.[/size]
[size=2]Since the bearish signs point to a recession by mid-2007, the next six months are crucial. If we get through the first half of the year with the economy strengthening, the boom is probably back on again for a while.[/size]
[size=2]There are still plenty of imbalances out there that will eventually implode: too much** junk debt**, too many reckless private equity deals and the not-fully-understood ramifications of the vast growth in derivatives we’ve seen. But the reckoning might be deferred for a while if the economy remains robust.[/size]
Either way, it’s going to be an interesting year. We hope that it’s a prosperous one for you.