Archive for August, 2013

Signed contracts to buy US homes slip in July but remain at healthy pace, despite higher rates

The small decline suggests sales of previously owned homes should remain healthy in the coming months. There is generally a one- to two-month lag between a signed contract and a completed sale.

Final sales jumped to an annual pace of 5.4 million in July, the highest in 3 ½ years, the Realtors said last week. That’s consistent with a healthy housing market.

Higher mortgage rates appeared to have had a bigger impact on new-home sales, which plummeted last month. That raised fears that rate increases were restraining the housing recovery.

But many economists note that home prices and mortgage rates remain low by historical standards. Consistent job gains and rising consumer confidence may also support sales in the coming months.

“Higher mortgage rates are clearly negative for housing, but other key drivers, including the labor market, confidence, and expectations for prices and interest rates still point to improvement,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics, said in a note to clients.

The average rate on a 30-year mortgage reached 4.58 percent last week, the highest level in two years and up from 3.35 percent in early May. Still, that’s below the average since 1985 of about 7 percent, according to Bankrate.com.

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Sales of New U.S. Homes Fell More Than Forecast in July

Builders are holding back amid constraints on available land and materials in a bid to boost prices and revenue. At the same time, their confidence is surging because more jobs and pent-up demand will probably help sustain gains in housing as homebuyers rush to take advantage of historically low borrowing costs before they rise further.
“The thing that continues to be a little bit puzzling is that builder confidence is still very high and that’s in the face of lower volumes,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. “They’re still pretty confident about the backdrop. That gives us a little bit of optimism going into the next few months.”
Stocks were little changed after the report, trimming earlier gains. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,657.93 at 10:19 a.m. in New York. The S&P Supercomposite Homebuilding Index dropped 3.5 percent.
Survey Results
Last month’s sales pace was lower than any estimate of economists surveyed, which ranged from 445,000 to 525,000 after a previously reported 497,000 pace in June. Sales data going back to April were revised down.
New-home purchases were 6.8 percent higher in July than the same period in 2012 on an adjusted basis, today’s report showed. The median price of a new home increased 8.3 percent last month from a year ago to $257,200.
Purchases declined in all four regions in July, paced by a 16.1 percent slump in the West.
The supply of homes at the current sales rate rose to 5.2 months from 4.3 months in June. There were 171,000 new houses on the market at the end of July, up from 164,000 the month before.
Sales of new properties, which are tallied when purchase contracts are signed, are considered a more timely measure of the market than sales of previously owned dwellings, which are counted when a sale is final.

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U.S. Consumer Confidence Falls From a Six-Year High

Consumer confidence in the U.S. unexpectedly dropped in August from a six-year high as Americans faced rising interest rates.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 80 from 85.1 in July, which was the highest since July 2007. The median projection of 68 economists surveyed by Bloomberg called for little change at 85.2. The decline this month was the biggest since December.

Higher mortgage rates are threatening to crimp momentum in the housing market that’s contributed to the economic expansion. At the same time, job growth and increased personal wealth tied to stock portfolios and home values are helping offset the effects of higher payroll taxes and federal government budget cuts that began early this year.
“Interest rates are going up a little bit, that never helps,” Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, said before the report. “But we still have the background of what looks like a still-improving housing market.”
Stocks were little changed after the report. The Standard & Poor’s 500 Index declined 0.1 percent to 1,659.24 at 10:23 a.m. in New York.
Survey Results
Estimates (CONSSENT) in the Bloomberg survey of economists ranged from 82 to 87. The index averaged 89 in the five years leading up to the last recession that began in December 2007 and 64.2 during the 18-month slump that ended in June 2009.
The early August setback in the Michigan index was larger than projected by the weekly Bloomberg Consumer Comfort Index, which slipped from its highest level in more than five years. The comfort gauge fell to minus 26.6 for the period ended Aug. 11, its first drop in a month. The reading was the second-strongest since January 2008, behind the prior week’s minus 23.5.
The Michigan survey’s current conditions index, which takes stock of Americans’ view of their personal finances, dropped to 91 from a six-year high of 98.6 in July. The 7.6 point decline was the biggest in three years.
The group’s index of expectations six months from now decreased to 72.9 in August from 76.5 last month.

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A Private BlackBerry Won’t Matter

NEW YORK (TheStreet) — Shares of beleaguered tech giant BlackBerry (BBRY_) are up nearly 7% Friday following a Reuters report the company‘s CEO and board of directors are “increasingly coming around to the idea that taking BlackBerry private would give them breathing room to fix its problems out of the public eye.”

This move, if true, would not be much of a surprise. For more than a year, we’ve chronicled every step that BlackBerry has taken that would have led to this decision; each step forward, followed by two steps back. It was a tired dance.

Going private, or “underground,” is the logical next step to the company’s recent changes to its disclosure policies.

In the recent quarter, management threw hints that BlackBerry was no longer interested in the public’s scrutiny. It was bad enough that the company could not meet the competitive standards laid out by Apple (AAPL_) and Google (GOOG_), but it was also clear management became frustrated with its own performance standards, which were being lowered each quarter. Following the big “swing and a miss” with its flagship BlackBerry 10 phones, management insisted that going forward it would no longer provide unit shipments numbers or subscription results for its service.

It was clear at that point that BlackBerry, as we knew it, was about to embark on a change. I was curious as to what the company was trying to hide. The company felt that somehow burying bad news would somehow make things better.

I have some serious issues with the idea that BlackBerry management believes that an uneducated body of investors serves the company’s long-term interest. In that regard, it boggles the mind seeing how investors are once again jumping on board this stock this morning.

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Stocks fall after tepid jobs report

A tepid jobs report caused the stock market to stall on Friday, a day after the Standard & Poor’s 500 index broke through 1,700 points for the first time.
Indexes edged down after the U.S. added fewer jobs than forecast in July, curbing optimism that the economy is poised to pick up strength in the second half of the year.

The government reported that 162,000 jobs were created last month, pushing the unemployment rate down to a 4 1/2 -year low of 7.4 percent. The number of jobs added was the lowest since March and well below the 183,000 economists polled by FactSet were expecting.

Brad Sorensen, Charles Schwab‘s director of market and sector research, said the jobs report was “moderately disappointing.”

“That tepid growth we’ve seen, (the economy) not being able to reach escape velocity, continues to be the story,” Sorenson said.

Investors have been watching economic reports closely and trying to anticipate when the Federal Reserve will start easing back on its economic stimulus. The central bank is buying $85 billion in bonds every month to keep long-term interest rates low and encourage borrowing.

The decline in stocks Friday was muted, and indexes gradually erased some of their losses by early afternoon. While the jobs report was disappointing, it likely ensured that the Fed would take its time cutting back on stimulus, said Doug Lockwood of Hefty Wealth Partners.

“As long as there’s this concept that the Fed may still need to be involved and stimulate, that’s good for both the bond and the stock market,” said Lockwood. “You’re seeing the trampoline effect; the market drops and then comes back up.”

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