The NYT on A1 has our Quote of the Day, summing up the reason for all the stock-market volatility.
“Opinions are really sharply divided,” said Brian Gendreau, a strategist at ING Investment Management. “Is this going to be a short and shallow recession? Or the beginning of the end of the world as we know it?”
Bloomberg says the market this year has been more volatile than at any time since the Great Depression, and reports that mutual funds are putting more of their investments in cash than they have since April 2001.
Housing lobby hooha
Investors liked the new Bear deal as well as good news out of the housing market, which saw sales of existing homes edge up for the first time in six months, by 3 percent from last month. But looked at year over year, sales were down 24 percent, with median prices off a record 8.2 percent.
Unsurprisingly, the National Association of Realtors thinks it’s a sign that the market is “stabilizing,” according to a quote from an NAR economist in the WSJ’s story on A20. Why does anyone still quote these guys with a straight face?
But the NAR isn’t alone in calling a bottom, as another pundit ties himself to the tracks in the NYT’s story:
“Sellers are capitulating and slashing prices,” said Mark Zandi, chief economist at Moody’s Economy.com. “Housing looks like it’s approachable now, compared to a year ago when it was just completely out of reach ”
“It’s not the all-clear sign for the housing market,” Mr. Zandi said. “But it signals the beginning of the end of what will be a long bottom.”
Hey, have you guys checked out the still-cavernous disparity between house prices and income levels lately? The Journal has, in its A1 story that’s mostly uninfected by housing-lobby hooha:
As measured by the S&P/Case-Shiller national index, home prices jumped 74% in the six years through 2006. During the same period, U.S. median household income rose just 15%. (Neither figure is adjusted for inflation.) That discrepancy made housing unaffordable for many Americans.
The home-price index already has come down about 10% from its peak in mid-2006. But prices might need to fall much further, some analysts say. A recent Credit Suisse report projects that average home prices have another 40% to fall in the Miami metropolitan area, 36% in Phoenix, 26% in Los Angeles and 20% in Las Vegas if they are to become more in line with income levels.
Down, down, down
Here’s the WSJ’s lede:
A glut of foreclosed homes of historic proportions is starting to drive down U.S. home prices faster as lenders put more properties on the market and buyers show signs of interest.
The ability of America’s lenders to manage this fire sale will be crucial to determining how long the housing market stays in the dumps—and how quickly blighted neighborhoods can heal. The oversupply is severe: In some major markets, including Las Vegas and San Diego, foreclosure-related sales have accounted for more than 40% of all sales in recent months.
The Journal reports that about one in nine homes for sale is in foreclosure, compared to about one in fifteen a year ago.
And analysts haven’t all gone off their meds. Here’s one who warms our cold, bearish hearts:
The overabundance of foreclosed homes in the market is likely to push down home prices in much of the country for the next several years, says Ivy Zelman, chief executive of Zelman & Associates, a housing-research firm in Cleveland.
The WSJ, in an accompanying piece on A20, says lenders can’t sell foreclosed homes as fast as their defaulted buyers can mail in the keys. Foreclosure sales were up 4.4 percent last year, while foreclosures more than doubled. The foreclosure rate is the highest since record-keeping began in 1979 and the WSJ says “lenders describe the current situation as the worst since the Great Depression.”