Orange County
Real Estate
with
Monica Ruggieri

Monday, May 18, 2009

U.S. homebuilder sentiment vaults to 8-month high

WASHINGTON (Reuters) - U.S. homebuilder sentiment jumped to its highest level in eight months in May, a private survey showed on Monday, supporting views that the three-year housing slump might be close to an end.

The National Association of Home Builders/Wells Fargo Housing Market Index rose to 16 from 14 in April, in line with market expectations. The NAHB also said its measure of housing affordability surged 10 points to a record 72.5 in the first quarter of this year.

The NAHB attributed the second straight monthly increase in the housing market gauge -- which measures builder confidence in the market for newly built, single-family homes -- to "the best home-buying conditions of a lifetime."

The group's chief executive officer, Jerry Howard, told Reuters that the two consecutive months of gains in the index were encouraging signs.

"It is a very important indicator that we are approaching the bottom and market stability could be just around the corner, that is what we are hoping for," said Howard.

"We are looking to reach bottom during the course of this summer and probably bounce along the bottom until early fall before things really start to get back to normal. We don't expect market equilibrium until 2012."

The Dow Jones home construction index surged 6.65 percent, also buoyed by Citigroup's upgrading of its rating on the second largest U.S. homebuilder, Lennar Corp, to "buy."

The Federal Reserve's aggressive cuts in interest rates to almost zero percent and buying of mortgage-backed securities have lowered the cost of home loans.

BOTTOM NOT TOO FAR AWAY

That, together with an $8,000 tax credit for first-time buyers, is helping to lend some stability to the distressed housing market. Other housing indicators have recently shown a sharp slowing in the pace of the market's decline, raising optimism that a bottom is not too far away.

Howard said he was also encouraged by a gradual reduction in the stock of unsold existing houses, currently at around an 11-month supply. He said the ideal level for inventories of existing home sales was a supply of six months.

The collapse of domestic house prices and the subsequent global credit crisis were the main catalysts for the U.S. recession, now in its 17th month, and restoring stability to the housing market is a key element to a recovery in the economy.

Housing starts and building permits data due out on Tuesday could bolster the argument of a gradual market recovery. A Reuters survey forecast housing starts to have picked up modestly in April to an annual rate of 520,000 units after falling to 510,000 the previous month.

"The good news is that we likely have the worst of the housing crisis behind us. The bad news is that the housing market is only improving with turtle speed," said Torsten Slok, a senior economist at Deutsche Bank in New York.

NAHB chief economist David Crowe told reporters that while affordability was the best in years -- thanks to mortgage rates at historic lows and house prices at levels last seen in 2003 -- access to credit posed a major headwind to recovery.

"Our greatest concern is the access to credit for both the borrower and the builder. Underwriting standards have been tightened. Buyers are sometimes asked to put larger payments down and builders are finding it difficult to get credit to build those homes," said Crowe.

The NAHB report also showed two out of three subindexes of the Housing Market Index rising in May.

The current sales conditions gauge climbed two points to 14, while the sales expectations measure for the next six months rose three points to 27. The traffic of prospective buyers index was unchanged at 13 in May.

"While we are not ready to pop the champagne, there is light at the end of the tunnel here," said Howard.

Source: Reuters

Labels: Market Info

posted by Monica Ruggieri at 5/18/2009

Treasury Secretary Timothy Geithner: Economy has stabilized

Video Via Reuters: Geithner on Economy, May 18th.

Labels: Market Info

posted by Monica Ruggieri at 5/18/2009

Monday, March 23, 2009

Stocks surge on bank plan, rise in home sales

NEW YORK (AP) — Wall Street is getting the good news it wants on the economy's biggest problems: banks and housing. Investors reignited a two-week rally Monday, cheering the government's plan to help banks remove bad assets from their books as well as a report showing a surprising increase in home sales. Major stock indicators jumped more than 5 percent including the Dow Jones industrial average, which soared more than 400 points.

The Treasury Department's bad asset cleanup program would tap money from the government's $700 billion financial rescue fund and also involve help from the Federal Reserve, the Federal Deposit Insurance Corp. and the participation of private investors.

The government's announcement was what the market had waited weeks to hear. Treasury Secretary Timothy Geithner had announced an outline of the program last month but provided few details then about how it would work, leading to a poor reception in the markets.

Meanwhile, the housing report released Monday was overwhelmingly positive for the markets even though it showed a decline in home prices in February. Investors are embracing any sign that a glut in homes for sale may be easing.

The market had received another dose of housing good news last week on the troubled industry as housing starts for February came in much better than expected.

Collapsing home prices and the damage they have caused banks are at the center of the economy's current problems and are a major focus for the stock market. Banks have sharply curbed lending after becoming weighed down with loans that have gone bad, especially mortgages.

Investors had been largely disappointed in the government's efforts to date to restore the banks to health, but finally seemed encouraged by the long-awaited announcement Monday of details for the government's bad loan cleanup plan.

"The actions that we're getting from a policy standpoint are very helpful in removing the sand from the gears," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "That is going to be good for the financials."

The plan seeks to draw in private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases. The government will share the risks if the assets fall further in price.

Shares of the country's largest banks, which have been pounded in recent weeks over concerns about their ability to weather the crisis, soared on Monday. Citigroup Inc. jumped 17 percent, and Bank of America Corp. added 18 percent.

Even banks regarded as more sound posted big advances. JPMorgan Chase & Co. rose 18 percent, while Wells Fargo & Co. rose 17 percent.

In late afternoon trading, the Dow rose 405.06, or 5.6 percent, to 7,684.34.

Broader stock indicators also surged. The Standard & Poor's 500 index rose 42.34, or 5.5 percent, to 810.88, crossing the psychological milepost of 800. The Nasdaq composite index rose 42.34, or 5.5 percent, to 1,531.94.

The Russell 2000 index of smaller companies rose 24.79, or 6.2 percent, to 424.90.

More than 10 stocks rose for every one that fell on the New York Stock Exchange, where volume came to a moderate 1.14 billion shares.

Source: AP via Google

Labels: Market Info

posted by Monica Ruggieri at 3/23/2009