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New Home sales - up, up and away? Not so fast
We reported yesterday that new home sales shot up 6.2% compared to the 2% projected rise, and that prices dropped by the smallest margin in nearly a year.. Not only that, but the excess inventory that had everyone worried is gone. “New home inventory is now plumbing depths we haven’t seen in 38 years,” writes Weiss Research analyst Mike Larson. “If you’re looking for a sign that builders will need to start swinging their hammers again soon, this is it.” On the face of it everything seems to be getting better, but the Wall Street Journal has sounded a note of caution. First, it points out that builders have been in a downward spiral for some time, so even a small rise looks good - and this is a small increase, well-below the market’s roughly 1.4 million sales reported in July of 2005. The number of new homes that sold in October is only a seasonally-adjusted 430,000, up from 405,000 a month earlier. Next, rise is localized in the south - everywhere else sales are down. The $8000 tax credit has also had an impact. It was set to expire on Nov. 30, so the few buyers ready to act - not sure if it would be extended or not - rushed to ink deals in time. (The credit has since been extended.) Builders already report weak November traffic. One private builder in Raleigh, N.C. - long considered a strong market because of tech and higher-education employers - reports no shoppers at all in the first week. “Obviously, the key question is whether this is a true indication of the future or an aberration,” writes Stephen East, an analyst with Pali Capital. “We believe the actual sales number was a bit of an aberration, while the rest of the data in the report is real and continues to show an improving new-home market.”
Dubai defaults, shocks stock markets
Late Wednesday, Dubai World, the city state's largest corporate entity asked creditors for a six-month stay on repayment of its $60 billion in debts. The news is sending shock waves through world stock markets. Asian and European markets sold off Thursday on the news, while our US markets were closed for a holiday. World stocks tumbled again today amid fears that the fallout from Dubai's problems repaying the debt would derail the global financial and economic recovery. Wall Street, which was closed Thursday for the Thanksgiving Holiday, opened down over 200 points. Oil, gold and other commodities fell sharply too. Oil futures were recently down nearly 5% to $74.16 a barrel, while gold futures dropped 2% to $1,162.70 an ounce. "Investors have been taken by surprise by all of this, which to some extent surprises me because the problems in Dubai are well known," said Lars Christensen, chief analyst at Danske Bank in Copenhagen. "This comes at a time when investors are quite nervous about valuations in general, whether we're talking equities or currencies or fixed income."
Foreclosure scams
The Federal Trade Commission (FTC) announced six new lawsuits brought against companies accused of running foreclosure rescue and loan modification scams. The suits are the latest action federal and state authorities are taking in “Operation Stolen Hope,” which to date includes 118 actions by 26 federal and state agencies, including a total of 28 FTC lawsuits filed against alleged fraudulent firms. According to the FTC, foreclosure “rescue” professionals identify targets by researching public information about foreclosures. They often send a personalized letter to distressed homeowners and they may also rely on public advertising. They promise they will save your home and may promise they can negotiate a better deal with your lender. But there's always a catch. Often these firms want you to pay an upfront fee. Sometimes scam artists require you to make payments directly to them while they negotiate with your lender. In both cases, once the money leaves your hands, the scammer disappears. Other tactics include having you sign documents that surrender the title of your home to the scammer, or asking you to “rent-to-buy” your own home after surrendering title.
The appeal of this scheme is that you are told you can remain in your home as a renter and repurchase it within a few years. But the terms of the deal are usually unfavorable for you, and the scam artist walks off with most of the home's equity or worse — if they default on the loan, you get evicted. A variation on the theme occurs when a scammer says they have a buyer for the home, and asks you to transfer the deed. The scammer then rents out the home and keeps the profits while the foreclosure proceeds. Even worse, you are still responsible for the unpaid mortgage, because transferring a deed doesn't dismiss a mortgage obligation. A final tactic is when a scam artist files a bankruptcy case in your name, sometimes without you even knowing about it. The scam artist keeps the fee for his “services” during a temporary pause in home foreclosure proceedings, while you end up with the fallout from having a bankruptcy on your credit history.
Dubai shocks currency markets too
In the wake of the Dubai default, investors are also keeping a close eye on associated developments in the currency markets after the dollar slid to a new 14-year low of 84.81 yen. However, the dollar climbed back off its lows to 86.46 yen amid mounting expectations that the Bank of Japan may intervene in the markets by buying dollars or selling yen after Japan's finance minister Hirohisa Fujii said he was "extremely nervous" about the movements in the yen and that the "market had moved too far in one direction." On Thursday, the Swiss National Bank reportedly intervened to buy dollars to prevent the export-sapping appreciation of the Swiss franc. That seems to have worked -- for now, at least -- as the dollar has moved back above parity, trading 0.9% higher at 1.0118 Swiss francs. The Brazilian real lost 1.37% to 1.75 per U.S. dollar, while the Mexican peso shed 1.12% to 12.969 after closing at its strongest since November 2008 on Wednesday. The South African rand lost more than three%. Russia's rouble sank to a four-week low against its currency basket as the specter of capital-inflow curbs grew. Emerging currencies were broadly weaker.
Interest rates at all time lows
Average interest rates for 30-year fixed rate mortgages (FRMs) are at all-time lows in two weekly surveys. Freddie Mac’s weekly survey put the 30-year FRM at 4.78% with a 0.7 point, down from last week when it was 4.83% and one year ago when it was 5.97%. This week’s rate ties the record for lowest ever in the weekly survey’s history, which was previously reached twice in April this year. Bankrate.com’s survey put the 30-year FRM at 5%, a new low for the company’s survey of large US banks and thrifts, and is down 6bps from last week, which was the previous all-time low. Freddie put the 15-year FRM at 4.29% with an average 0.6 point, a new low for the survey. Last week’s 4.32% was the previous all-time low. Bankrate.com put the 15-year FRM at 4.47%. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.18% with an average 0.6 point in Freddie’s survey, down from last week’s 4.25%. Bankrate.com put the five-year ARM at 4.54%, down 4 bps from last week. Both rates are record lows for in the respective surveys. The one-year Treasury-indexed ARM averaged 4.35% this week with an average 0.7 point, unchanged from last week, Freddie Mac said.
Above Post Written by: Chris Mclaughlin with Short Sale Riches.com
Glendale, CA
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