"Altruistica": Seeking a return to full financial disclosure and regulatory oversight. A financial market analysis blog for "entertainment purposes" only by an experienced CFA seeking new hedge fund engagements for investment writing and analysis. The author has experience investing internationally, running a hedge fund, making angel investments, and helping launch five startup companies. Investors should do their own due diligence.

17 January 2007

Warm Weather "Borrows" from spring building activity

"U.S. Jan home builder sentiment highest since July" screamed the headline but the actual number still pointed to deteriorating conditions; oh, and the report came from an industry trade group. AND, we are just barely off a 15 year low from last September 2006.
NEW YORK, Jan 17 (Reuters) - U.S. homebuilder sentiment improved in January to its strongest since July 2006, as price cuts, lower mortgage rates and incentives fostered demand, the National Association of Home Builders said on Wednesday. The NAHB/Wells Fargo Housing Market index rose to 35 in January from an upwardly revised 33 in December, marking its highest reading since 39 in July 2006, the group said. Economists polled by Reuters had forecast the index would rise to 33 from an originally reported 32 in December. Readings below 50 mean more builders view market conditions as poor than favorable.
The index hit a 15-year low of 30 last September as five years of double-digit price gains and rising interest rates squeezed housing affordability.

And the SPIN ZONE, from the "chief economist" of NAHB: LOL, why not give the guy a title like "Pumper Extraordinaire" or "Liar in the House"
"Builders are starting to see that the worst is behind them and that buying conditions have improved to the point that greater optimism is warranted," NAHB Chief Economist David Seiders said in a press release. WHAT The "upturn in demand" reflects lower mortgage rates since mid-2006, energy prices that sank from record highs, solid employment and household income growth, home price reductions and builder incentives, he said. Average 30-year mortgage rates dipped to 6.14 percent in December 2006 from 6.24 percent the prior month, and from last year's high of 6.76 percent in July, according to mortgage finance company Freddie Mac [FRE.N].

Now they are up to 6.25% and likely to rise.

Two of the NAHB's three component indexes rose in January and one was unchanged. The gauges of current single-family home sales and prospective buyer traffic each rose 3 points, to respective readings of 36 and 26. The measure of expected sales in the next six months was unchanged from 49, which was upwardly revised from an originally reported 48. "Builders are responding to increased buyer interest at the end of 2006 and beginning of 2007," said NAHB President David Pressly, a home builder from Statesville, North Carolina. "This bodes well for the upcoming spring buying season." Home builders have paid a price for a return toward stabilization. Late last year, the NAHB said that three out of four builders were offering substantial incentives to limit cancellations and push unsold homes out of their inventories.
Some economists think the U.S. housing correction still has room to go on the downside through the first quarter, though the sector may be near its trough. U.S. housing starts in December are seen having slipped to an annualized rate of 1.560 million units from 1.588 million in November, based on a Reuters survey of economists. Unusually warm weather boosted building in past few months months, probably borrowing from spring-time construction activity, several economists said. "Clearly you can see that inventory levels are historically high and we need to reach a point where there's a more normal balance between new home sales and inventory levels" before sustained building growth can return, said Young Kim, economist at Stone & McCarthy Research Associates in Princeton, New Jersey.

What will the Fed do? They can't really honestly explain why rates CAN'T be cut. explains...
Naroff, president of Naroff Economics Advisors Inc., added that the Fed's rate-setting committee "just started worrying about economic growth. The members may now jump back on the inflation-watch bandwagon." In other words, observers were thinking that the Fed would soon cut short-term interest rates, and now observers wonder whether the Fed will raise short-term rates to head off a rise in the inflation rate.On Monday, those observations were confirmed when Donald Kohn, vice chairman of the Federal Reserve, told Rotarians in Atlanta: "I believe it is still too early to relax our concerns about whether the run-up in price pressures in the spring and summer of last year is truly unwinding and whether it is unwinding rapidly enough to forestall a pickup in inflation expectations."


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