Home Sales

by Larry Levin

The market was pulled from two different ends again today; home sale data tried to pull the market higher, while job loss announcements tried to pull it underwater. Within the first hour or so, pink slip announcements totaled 48,000.

Announcements came from:
Caterpillar, -20,000
Government Motors, -2,000 (more)
Home Depot, -7,000
Pfizer, -19,000
Texas Instruments, -3,400 (announced after the close)

“What is remarkable about today is the layoffs seem to be coming from every corner of the economy. Usually there are sectors that get hit particularly hard. This recession has been focused on housing and financial services, although automotives have come into it as well. But now we have other areas, like retail and technology, as the next wave of the recession hits,” said John Challenger, CEO of Challenger, Gray & Christmas Inc.

This bad news, however, was initially overwhelmed by housing data. Sales of existing homes rose 6.5% in December to a seasonally adjusted annualized rate of 4.74 million, led by a big rebound in the West where prices have fallen more than 30%.

I’m not sure if foreclosure sales are included in this data because many foreclosure sales are handled outside the Realtors’ system and are not reported by the National Association of Realtors (NAR). Moreover, about 45% of the transactions in December were considered distress sales, either a short sale or a home in foreclosure.

The median sales price fell to $175,400 in December, down a record 15.3% compared with a year earlier. For all of 2008, median prices dropped 9.3% to $198,600, the lowest level since 2004. An economist for the NAR believes it to be the sharpest price decline since the Great Depression.

So the belief was that low prices are bringing in buyers and this is removing the overhang of inventory in the housing market, but that may not be entirely true. There is probably even more excess housing inventory gumming up the market than current statistics indicate, thanks to a wave of foreclosures that has yet to hit the market.

Banks are calling their massive and growing inventory of distressed and foreclosed homes “ghost inventory” - and keeping it off the market. Banks are withholding adding the “ghost inventory” to the listing for fear of further depressing the already low and declining sale prices. RealtyTrac, for example, looked into this and found that its listings in four states, California, Maryland, Florida and Wisconsin, and found that they contained only a third of the foreclosures it has in its database.

Since RealtyTrac has a total of 1.5 million bank-owned properties on its site, the good news of declining inventory may be a mirage.

Previous Day's Trading Room Results:

Trade Date: 1/26/09

E-Mini S&P Trades*
(before fees and commissions):

1) OTF buy @ 10:00am at 843.75 = -2.00 (1 lot)

2) 80% sell @ 1:45pm at 830.25 = -1.75 (1 lot)

3) Algorithm positions (4)...combined SofT and Algo total...-5.50

ZB (30 Year Bond) Trades*
(before fees and commissions):


1) No trades today.



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