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This Market Is "Going Vertical" – And so Are These Stocks

In our Aug. 6 Private Briefing report, "It’s the Biggest and the Fastest Growing – Here’s How to Profit," we updated our bullishness on China‘s e-commerce market and gave you two ways to ride along.

We had a lot of confidence in both recommendations. But I have to be honest with you: Even I didn’t expect the stocks would soar like they have in the two seeks since.

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Housing Market- Money Morning - Only the News You Can Profit From.

  • U.S. Housing Market Flooded by Short Sales

    Home sweet home has been anything but for scores of Americans these past few years, and the picture hasn't brightened much to date.

    The housing market is still hurting and the foreclosure fiasco continues to loom despite record-low mortgage rates.

    Homes in some stage of foreclosure accounted for more than one in four home sales during the first quarter of 2012, RealtyTrac reported today (Thursday).

    Distressed properties that were either in default, scheduled for auction or bank-owned made up 26% of all residential sales during the first quarter. That was up from 22% in the prior quarter and 25% from the same period a year earlier, according to Thursday's data.

    To continue reading, please click here…

  • Investing in Home Builder Stocks: What You Need to Know

    After years of tumbling share prices, investing in home builder stocks has been a profitable venture over the past few months.

    Year to date, the exchange-traded fund for the home building industry, SPDR Home Builder (NYSE: XHB), is up by 26.1%.

    It's the same story for individual home builder stocks, too.

    Luxury home builder Toll Brothers (NYSE: TOL) has risen 25.9% since the first of the year. The largest home builder by market capitalization, Lennar Corp. (NYSE: LEN), has soared 43.6% in 2012.

    So confident are home builders now that Lennar is expanding its corporate headquarters in Miami by 30,000 feet, an increase of one-third in square footage, according to an article in the South Florida Business Journal.

    Home builder stocks, however, could be near the end of their steep rise. The housing market remains unstable and has triggered more skepticism in the sector.

    Here's what you should consider before investing in home builder stocks.

    To continue reading, please click here….

  • Case-Shiller Index: Is This the Housing Market Bottom?

    Analysts, government officials and certainly homebuyers are spending hours trying to figure out if we have reached the housing market bottom.

    Yesterday's (Tuesday's) data would seem to suggest the bottom is a bit bumpier than most people think.

    According to the S&P/Case-Shiller home price index of 20 cities, home prices declined 3.5% from a year ago, while the 10-city composite slipped 3.6%. That meant fresh new post-bubble lows for home prices.

    New-home sales in March also fell from their February level, the Commerce Department said. Together, they pointed to a more lackluster market.

    "We're still in a slow period," said Robert Shiller, who co-founded the index that bears his name. "We're still in a funk."

    But behind those numbers, there are reasons to be hopeful.

    With borrowing costs near all-time lows, an economy that's bouncing back and cheap foreclosure properties attracting buyers, housing could be on the mend.

    Knowing whether the housing market has bottomed out is important because nobody wants to pay thousands of dollars more for a property that could decline in value next week, next month or next year.

    "The perception that prices could go lower…that's certainly keeping some people on the sidelines," Louis Cammarosano, general manager at HomeGain told Bankrate.com.

    That's a problem because until buyers come back in significant numbers, the housing market can't completely regain its health. And without a housing market recovery, there won't be a real economic recovery.

    But while we'd all like to know where the bottom is – pinpointing the exact date really doesn't matter.

    Here's why…

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  • Case-Shiller Home Price Index and Home Sales: What the Latest U.S. Housing Market Data Show

    The latest U.S. housing market data released Tuesday underscore the persisting trend of uneven performance in the industry.

    The S&P/Case-Shiller Home Price Index showed prices hit post-bubble lows in February, and U.S. home sales data show that while not all housing news is dismal, a strong and stable recovery is a long way off.

    The U.S. housing sector has been a drag on the economy since a home price bubble burst and helped cause the 2007-2009 recession. While many economists maintain that a budding recovery is blooming in the troubled sector, recent housing market data are simply another wake-up call.

    Here's a look at the numbers.

    Case-Shiller Home Price Index Falls

    The Case-Shiller Home Price Index of 20 cities revealed a price drop from January to February of 0.8% (on a non-seasonally adjusted basis). The 10-city index also fell 0.8%.

    The 20-city index declined 3.5% from a year ago, while the 10-city composite slipped 3.6%.

    "Nine housing markets and both composites hit post crisis lows," David Blitzer, a spokesman for S&P, told CNN Money. Included in the nine markets are Atlanta, Charlotte, Chicago, Las Vegas and New York.

    Blitzer went on to note, "While there might be pieces of good news in this report, such as some improvements in many annual rates of return, February 2012 data confirm that, broadly speaking, home prices continued to decline in the early months of the year."

    Foreclosures and other distressed property sales continue to be the main challenge for home prices, Pat Newport, an analyst for IHS Global Insight relayed to CNN.

    "We still have 6 million homeowners who are late on their payments," said Newport. "We'll still have lots of foreclosures, which will depress prices."

    In fact, with January's mammoth $26 billion mortgage settlement between five major banks and a group of state attorneys general, foreclosures that had been held up for a year or more are now moving forward.

    "Enough homes are in the foreclosure pipeline to keep house prices falling through much of this year," Celia Chen, a housing economist at Moody's Analytics, told the Los Angeles Times.

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  • U.S. Housing Market Forecast: How to Profit as Real Estate Rebounds

    It was the most atrocious bubble in U.S. history, pushing tens of millions of Americans into financial misery.

    Even today, the last of the lawsuits have yet to be filed.

    But five years later it's finally coming back.

    The housing market has bottomed and there's money to be made on its return.

    Click here to continue reading…

  • New Wave of Foreclosures Will Sink the Housing Market Rebound

    The long-anticipated housing market rebound will hit a speed bump this year as the number of foreclosures rises again.

    With January's mammoth $26 billion settlement between five major banks and a group of state attorneys general, foreclosures that had been held up for a year or more are now moving forward.

    The spike in foreclosures will arrive just as other data, such as the 5.1% increase in new construction permits reported on Tuesday, had begun to point to a housing market rebound.

    "We expect to see foreclosure-related sales increase in 2012, particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months," Brandon Moore, CEO of RealtyTrac, told CNN Money.

    RealtyTrac's February report showed new default notices – the first step in the foreclosure process – were up 1% from January. Default notices increased dramatically in some states, such as Pennsylvania (35%), Florida (33%) and Indiana (37%).

    "The pig is starting to move through the python," Daren Blomquist, director of marketing for RealtyTrac, told CNN Money.

    Distressed sales already account for about one out of three U.S. home sales.

    The National Association of Realtors (NAR) reported this week that 20% of home sales in February were foreclosures and 14% were short sales.

    In a short sale, an owner who owes more on their home than it's worth agrees to sell for less, with the bank agreeing to accept the loss.

    That's a far cry from a normal housing market, when distressed sales are less than 5%.

    For 2012, RealtyTrac predicts a 25% increase in foreclosures, which will push the portion of distressed sales even higher.

    And the picture doesn't figure to improve for quite some time. Paul Dales of Capital Economics estimates as many as an additional 3 million foreclosures over the next several years.

    The Uneven Impact on the Housing Market

    However, the impact of this wave of foreclosures will be felt unevenly.

    All of the states that saw increases in new default notices were those in which the courts play a role in foreclosures. The robo-signing issues addressed in the bank settlement occurred almost exclusively in such states.

    States that don't use a judicial foreclosure process didn't accumulate a backlog. In fact, foreclosure activity in those states was down 5% in February from the previous month, and down 23% from the February 2011.

    But among the 26 states that use a judicial foreclosure process, activity rose 2% in February from the month before. Foreclosure activity was up 24% from the previous year.

    That leaves little room for optimism in hard-hit states such as Florida.

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  • The Housing Market's Biggest Hurdle

    Forget about optimistic headlines on the housing market.

    Whether it's record low mortgage rates, improvement in the Case-Shiller Index, higher housing starts, or any other report, the headlines don't tell the whole story – and the story matters.

    The real story is that the housing bubble was inflated by cheap and abundant mortgage financing and a sustainable recovery is only possible if that story has a second chapter.

    But, that's not happening.

    In fact, structural changes in the mortgage industry are about to make buying a home loan a lot tougher than it has been in the last quarter century.

    Let's start with the premise that no matter how cheap a house is, and no matter how low interest rates go, nobody is buying anything if they can't qualify for a mortgage.

    Or, if lenders decide to charge too high a rate because they're either not constrained by competition or they can't offload the mortgages they underwrite, how can there be a housing recovery?

    The Changing Landscape in Mortgage Finance

    Let's look at what's happening in terms of buyer qualification standards, competition in the mortgage industry, and lenders' ability to package and offload mortgages.

    Lenders have been consistently raising standards for borrowers. Long gone are the days of the famously named NINJA loans, as in: no-income, no-job, no-assets, no-problem.

    The primary reason standards have risen is that buyers of securitized loans crammed with mortgages have "putback" rights that force mortgage lenders to buy them back.

    Fannie Mae and Freddie Mac, who ultimately bought hundreds of billions of dollars of mortgage-backed securities, have been forcing lenders to buy-back billions of dollars of non-performing mortgages.

    In 2011, Fannie and Freddie demanded $33 billion in mortgages be bought back. That was a 10% increase over what they putback to lenders in 2010.

    Basically, the standards by which lenders were supposed to judge borrowers were overlooked or fraudulently misrepresented. Other factors, like faulty appraisals, are also a factor in accessing the covenants that lenders have to abide by when they sell mortgages.

    I'll come back to higher borrower standards in a moment, but the standards issue flows immediately into what's happening on the competitive landscape today.

    Big banks not only got heavily into the mortgage origination business during the boom, they also bought mortgages that were already underwritten from "correspondent" lenders.

    Correspondent lenders have contractual relationships with bankers that allow them to sell the mortgages they make to the banks, thus freeing up correspondents' invested capital to underwrite more loans.

    Correspondent lenders are not depository institutions.

    They are usually private companies that have their own capital to make loans or borrow money through what's called a warehouse line of credit.

    Here's how it works.

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  • Has the Housing Market Finally Bottomed?

    It was the most atrocious bubble in U.S. history pushing tens of millions of Americans into financial misery.

    Even today, the last of the lawsuits have yet to be filed.

    But five years later it's finally coming back.

    The housing market has bottomed and there's money to be made on its return.

    The evidence of this case continues to build.

    Signs of a Housing Bottom

    For instance, the National Association of Homebuilders' Housing Market Index rose five points to 29 in February marking its fifth consecutive monthly increase.

    Admittedly, 50 is supposed to be a neutral level for the index. Even still, the current level of 29 is up 20 points off of the low, and is the highest it has been since 2007.

    Then there are housing starts, which rose in January to an annualized 699,000 units.

    Again, that's not very impressive compared to 2005's total of 2,068,000. But it's still a hell of a lot better than 2009's average of 554,000 and 2010's 586,000.

    Incidentally, there's some important data in the details here. Multi-family starts were 175,000, up more than 70% over 2009, while single-family starts of 508,000 were only modestly above the 2009 average.

    Meanwhile foreclosures in January 2012 were down 19% from a year earlier.

    Since the "robosigning" scandal and the delays that followed it now seem to have passed through the system, that decline suggests that the level of troubled mortgage borrowers is also trending downwards.

    The bottom line: Housing has found a bottom and is trending back up again.

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  • U.S. Housing Market: New Home Sales Decline Has a Silver Lining

    Another comforting sign for the U.S. housing market come today (Friday) as new home sales data for January exceeded forecasts, another bullish sign for home improvement-related stocks like The Home Depot Inc. (NYSE: HD).

    New home sales in January fell 0.9% to a 321,000 annual rate. That pace is down slightly from the 324,000 pace set in December, but sales beat the expected rise of 315,000, according to a poll by Bloomberg News.

    December sales were previously reported at 307,000 but were revised upward. Total 2011 home sales hit 304,000, down 5.8% from 2010.

    But the dip in numbers isn't a bad sign.

    "Don't read anything into the 0.9 per cent month-on-month fall in new home sales," Paul Dales, senior US economist at Capital Economics, told The Financial Times. "Sales only fell because December's estimate was revised up from 307,000. If all the revisions were concentrated in January, then sales would have risen by 8.1 per cent month-on-month. Moreover, sales are now at a level not seen for two years."

    The supply of homes on the market fell to 5.6 months' worth – the lowest since January 2006 – compared with 5.7 months in December. The median price for a new home rose 0.3% to $217,100.

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  • Cash for Keys: Avoid Foreclosure, Pay the Bank Less Than What You Owe… and Get $30,000