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August 28, 2007
Financial News, Home Sales and Stocks
by Jack Lee
Home owners awoke this morning to more disturbing news about the downturn in the housing market. Nationwide home prices fell 3.24% in July, the largest dip since 1989, hinting the worst is likely yet to come as we head into winter.
According to CNN, existing home sales fell yet again last month, making July the fifth straight month of such declines in the housing market. Total existing home sales slumped 0.2 percent to 5.75 million units, from 5.76 million in June. July's pace of sales was 9.0 percent below the 6.32 million-unit level in July 2006. While last month's pace was the slowest since November 2002, it still beat economists' average forecast of 5.7 million.
Inventory of homes for sale has continued to pile up, rising 5.1 percent at the end of June to 4.59 million available units. The situation in Chico is a reflection of the overall housing inventory and it's expected thast home prices here will soon take a tumble, it's a matter of the law of supply and demand, noted one local realtor.
Reno Gazzette: "The nationwide median price of an existing home has now fallen every month for a year, not seen in Realtor records in nearly 40 years.
That reflects the geographic magnitude of the housing slump, said Brian Kaiser, analyst at the Center for Regional Studies at the University of Nevada, Reno.
"It gives you a sense of how widespread this whole market correction has been," he said. "We're probably in for another year of declining prices and longer times on the market. This is probably going to stick around for a while."
Home prices in Reno slumped by 12.1% in the 2nd quarter of this year and still inventories remain high, another sign that Chico real estate may be in for a sudden price correction.
In other areas, stocks were down almost 160 points in afternoon trading, but began moving in a fairly tight range as sellers struggle to find a new reason to send stocks lower.
The Energy sector hit afternoon highs but was still down 1.1% and for a moment oil prices perked up by 1%, but had little effect on the overall energy market. The bulls are hoping the upcoming FOMC minutes will provide them with some encouraging news, but so far the news tends toward more consolidation.
AFTER HOURS NEWS: Dow closes down 260 pts. Merrill Lynch said that tighter credit markets will hurt the earnings of Citigroup (C 46.14 -1.65), Bear Stearns (BSC 108.42 -3.78), and Lehman Brothers (LEH 54.28 -3.47).
All three were downgraded to Neutral, leaving many to believe that more negative analyst commentary is forthcoming. Such concerns contributed to a 3.2% sell-off in Financials, which removed a significant source of leadership for the S&P 500 which saw last week's entire 2.3% advance erased in one day.
Posted by Post Scripts at August 28, 2007 11:12 AM