Saturday, February 27, 2010
Thursday, February 25, 2010
Housing prices- More down predicted
Despite signs that the real estate market might be lurching forward, prices are expected to fall further this year and next.
The average home price in the United States will fall by about 6% by September 2011, according to a joint report between Fiserv and Moody's Economy.com. And that's after plunging more than 27% in the past three years.
Most of the projected home price decline will occur during the usually slow summer months of 2010. After that, prices should begin to stabilize, according to Fiserv, and stay almost flat through fall of 2011.
The main reason for continued decline, according to Mark Zandi, economist and co-founder of Economy.com, is foreclosures -- the same thing that's plagued markets for the past three years.
"Foreclosure sales will pick up this spring as mortgage servicers figure out who can qualify for a modification and who can't," said Zandi.
He figures there are at least 4.5 million mortgage loans either in foreclosure or clearly headed in that direction. When that additional inventory hits the market, it will provide numerous choices for buyers and encourage sellers to drop their listing prices.
The end of two federal programs, which have been propping up markets, will also tamp down prices.
The Federal Reserve has been purchasing mortgage-backed securities since early 2009, scooping up as much as $1.25 trillion worth. That has dampened rate increases by providing a ready market for the securities. But the Fed's program lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates.
Any resulting rise in rates will cause some buyers to withdraw from the market and others to look for lower priced homes. Either way, demand for homes drops and so do prices.
A month after the Fed bows out of the mortgage-buying market, the homebuyer tax credit will start to expire. To qualify for the $8,000 credit, homebuyers must sign a contract before April 30 and close by June 30. When the first date passes, many buyers are expected to vacate the market, weakening the demand for homes.
In a broader sense, home prices are ultimately decided by employment. "If [the job market] improvement is stronger than expected, prices will get better. If it's weaker than expected, prices will be worse," Zandi said.
Worst of the worst
The worst performing market will be Miami, Fla. Moody's projects prices there to drop a heart-stopping 29.2% by Sept. 30. That follows a 47.7% decline the metro area recorded in the past three years. Grand total: 64% drop.
Other disastrous performances will be turned in by the Hanford, Calif., metro area, where prices are projected to plummet 27.2% through Sept. 30, 2010 following their 36.9% drop for the previous 36 months. Ft. Lauderdale and West Palm will also register steep drops.
There's some good price news coming out of California's Central Valley for a change; prices will begin to emerge from their free fall toward the end of this year.
In Merced, for example, which crashed and burned by 71.8% in the past three years (through last September), they'll only fall only another 6.2% in the next six months before bouncing back with a rise of 10.1% by Sept. 30, 2011.
The average home price in the United States will fall by about 6% by September 2011, according to a joint report between Fiserv and Moody's Economy.com. And that's after plunging more than 27% in the past three years.
Most of the projected home price decline will occur during the usually slow summer months of 2010. After that, prices should begin to stabilize, according to Fiserv, and stay almost flat through fall of 2011.
The main reason for continued decline, according to Mark Zandi, economist and co-founder of Economy.com, is foreclosures -- the same thing that's plagued markets for the past three years.
"Foreclosure sales will pick up this spring as mortgage servicers figure out who can qualify for a modification and who can't," said Zandi.
He figures there are at least 4.5 million mortgage loans either in foreclosure or clearly headed in that direction. When that additional inventory hits the market, it will provide numerous choices for buyers and encourage sellers to drop their listing prices.
The end of two federal programs, which have been propping up markets, will also tamp down prices.
The Federal Reserve has been purchasing mortgage-backed securities since early 2009, scooping up as much as $1.25 trillion worth. That has dampened rate increases by providing a ready market for the securities. But the Fed's program lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates.
Any resulting rise in rates will cause some buyers to withdraw from the market and others to look for lower priced homes. Either way, demand for homes drops and so do prices.
A month after the Fed bows out of the mortgage-buying market, the homebuyer tax credit will start to expire. To qualify for the $8,000 credit, homebuyers must sign a contract before April 30 and close by June 30. When the first date passes, many buyers are expected to vacate the market, weakening the demand for homes.
In a broader sense, home prices are ultimately decided by employment. "If [the job market] improvement is stronger than expected, prices will get better. If it's weaker than expected, prices will be worse," Zandi said.
Worst of the worst
The worst performing market will be Miami, Fla. Moody's projects prices there to drop a heart-stopping 29.2% by Sept. 30. That follows a 47.7% decline the metro area recorded in the past three years. Grand total: 64% drop.
Other disastrous performances will be turned in by the Hanford, Calif., metro area, where prices are projected to plummet 27.2% through Sept. 30, 2010 following their 36.9% drop for the previous 36 months. Ft. Lauderdale and West Palm will also register steep drops.
There's some good price news coming out of California's Central Valley for a change; prices will begin to emerge from their free fall toward the end of this year.
In Merced, for example, which crashed and burned by 71.8% in the past three years (through last September), they'll only fall only another 6.2% in the next six months before bouncing back with a rise of 10.1% by Sept. 30, 2011.
See-Saw
See Sawing week to week. We are down 160 point after just 15 minutes of trading and I am just waiting for a break either way to take advantage. Though you know I am a medium term bear that does not been we don't play on the long side in the shorter term, problem here is we are in such a narrow range it is best to stay neutral till be get a firm break.
Last year I stressed on this phenomenon could happen of a longer term narrow range bound market, I personally think this is just a preview of what we will see longer term.
Last year I stressed on this phenomenon could happen of a longer term narrow range bound market, I personally think this is just a preview of what we will see longer term.
Wednesday, February 24, 2010
Unbelievable: But not surprised
WASHINGTON (AP) -- Federal regulators on Wednesday imposed new curbs on the practice of short-selling, hoping to prevent spiraling sales sprees in a stock that can stoke market turmoil.
The Securities and Exchange Commission, divided along party lines, voted 3-2 at a public meeting to adopt new rules.
The rules put in a so-called circuit breaker for stock prices, restricting for the rest of a trading session and the next one any short-selling of a stock that has dropped 10 percent or more.
Short-sellers bet against a stock, in a practice that is legal and widely used on Wall Street. They borrow a company's shares, sell them and then buy them when the stock falls and return them to the lender -- pocketing the difference in price.
The SEC move followed months of wrestling with the controversial issue. The SEC asked for public comment last April on several alternative approaches to restraining short-selling, and a bipartisan group of senators have been pushing the agency to act or face legislation.
The agency got more than 4,300 comments on the issue.
Investor confidence was shaken as the market plunged amid the financial crisis in the fall of 2008, and proponents of restoring restraints said they were needed to prevent abusive trading. They maintained that the absence of restraints fanned market volatility, prompting hedge funds and other aggressive investors to target weak companies with an avalanche of short-selling.
But opponents said new restrictions could eliminate the benefits of short-selling -- bringing capital into the markets and accurate stock prices to the surface -- and actually hurt investor confidence.
Under the new rule, once a "circuit breaker" has been triggered, short-selling in the affected stock will be permitted only if the price is above the current highest bid for the stock. That restriction would apply for the rest of the trading session and the next day's session.
The SEC said the rule strikes a balance between two objectives: preventing short sellers from driving the price of a gutted stock even lower and preserving the benefits to investors from legitimate short-selling, such as pumping cash into the market. The balance comes, the agency said, because the "circuit breaker" restrictions are temporary and are applied to a specific trading session, in contrast to other alternatives that would institute permanent constraints.
"The reason this rule makes sense is because it recognizes that short-selling can potentially have both a beneficial and a harmful impact on the market -- depending on the circumstances," SEC Chairman Mary Schapiro said before the vote.
Schapiro said it is important for the SEC and the markets "to have in place a measure that creates certainty about how trading restrictions will operate during periods of stress and volatility."
But the two Republican commissioners, Kathleen Casey and Troy Paredes, disputed that the curbs would bolster investor confidence and said they could hurt the market's efficiency.
Casey said she was "deeply concerned" that the action seemed to be guided more by "public relations" than evidence of the benefit of the rules. It could "undermine our credibility in the long run," she said.
In July 2007, when the stock market was near its peak, the SEC abolished a 70-year-old uptick rule, put in during the Depression that followed the 1929 market crash that allowed short-sellers to come in only at a price above the highest current bid for the stock.
Last July, the SEC made permanent an emergency rule enacted at the height of the fall 2008 tumult that targets so-called "naked" short-selling -- when sellers don't even borrow the shares before selling them, and look to cover positions after the sale.
That rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.
Brokers acting for short-sellers must find a party believed to be able to deliver the shares within three days after the short-sale trade. If the shares aren't delivered within that time, there is deemed to be a "failure to deliver." Brokers can be subject to penalties if the failure to deliver isn't resolved by the start of trading on the following day.
The Securities and Exchange Commission, divided along party lines, voted 3-2 at a public meeting to adopt new rules.
The rules put in a so-called circuit breaker for stock prices, restricting for the rest of a trading session and the next one any short-selling of a stock that has dropped 10 percent or more.
Short-sellers bet against a stock, in a practice that is legal and widely used on Wall Street. They borrow a company's shares, sell them and then buy them when the stock falls and return them to the lender -- pocketing the difference in price.
The SEC move followed months of wrestling with the controversial issue. The SEC asked for public comment last April on several alternative approaches to restraining short-selling, and a bipartisan group of senators have been pushing the agency to act or face legislation.
The agency got more than 4,300 comments on the issue.
Investor confidence was shaken as the market plunged amid the financial crisis in the fall of 2008, and proponents of restoring restraints said they were needed to prevent abusive trading. They maintained that the absence of restraints fanned market volatility, prompting hedge funds and other aggressive investors to target weak companies with an avalanche of short-selling.
But opponents said new restrictions could eliminate the benefits of short-selling -- bringing capital into the markets and accurate stock prices to the surface -- and actually hurt investor confidence.
Under the new rule, once a "circuit breaker" has been triggered, short-selling in the affected stock will be permitted only if the price is above the current highest bid for the stock. That restriction would apply for the rest of the trading session and the next day's session.
The SEC said the rule strikes a balance between two objectives: preventing short sellers from driving the price of a gutted stock even lower and preserving the benefits to investors from legitimate short-selling, such as pumping cash into the market. The balance comes, the agency said, because the "circuit breaker" restrictions are temporary and are applied to a specific trading session, in contrast to other alternatives that would institute permanent constraints.
"The reason this rule makes sense is because it recognizes that short-selling can potentially have both a beneficial and a harmful impact on the market -- depending on the circumstances," SEC Chairman Mary Schapiro said before the vote.
Schapiro said it is important for the SEC and the markets "to have in place a measure that creates certainty about how trading restrictions will operate during periods of stress and volatility."
But the two Republican commissioners, Kathleen Casey and Troy Paredes, disputed that the curbs would bolster investor confidence and said they could hurt the market's efficiency.
Casey said she was "deeply concerned" that the action seemed to be guided more by "public relations" than evidence of the benefit of the rules. It could "undermine our credibility in the long run," she said.
In July 2007, when the stock market was near its peak, the SEC abolished a 70-year-old uptick rule, put in during the Depression that followed the 1929 market crash that allowed short-sellers to come in only at a price above the highest current bid for the stock.
Last July, the SEC made permanent an emergency rule enacted at the height of the fall 2008 tumult that targets so-called "naked" short-selling -- when sellers don't even borrow the shares before selling them, and look to cover positions after the sale.
That rule includes a requirement that brokers must promptly buy or borrow securities to deliver on a short sale.
Brokers acting for short-sellers must find a party believed to be able to deliver the shares within three days after the short-sale trade. If the shares aren't delivered within that time, there is deemed to be a "failure to deliver." Brokers can be subject to penalties if the failure to deliver isn't resolved by the start of trading on the following day.
What I Fear is happening
What I feared with the markets is happening. The continuation of the narrow range bound trading which ended 2009 continues for 2010. One thing is for sure, it won't last forever and when we do break either way it will be violent. I have my guesses but it is not prudent to guess but to wait for the break and trade as such. In the mean time it is safer to stay flat.
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