Mortgage Applications Drop to 2008 Low.
You have to love how the bad news about mortgage applications is hidden. Usually you see it first thing on Wednesday. But not today. I wonder why.
MBA said its seasonally adjusted index of mortgage application activity dropped 11% to 567 in the week ended April 25. That's lowest since Dec. 28. Mortgage applications are falling even as home prices are dropping.
http://www.cnbc.com/id/24382734
Economy grew at .6% in first quarter. Rising inventories helped prevent a slump. If we got a bump from rising inventories, we may get a lower reading in the next quarter.
Price inflation gauges eased in the first quarter. For instance, the price index for personal consumption expenditures rose by 3.5% after increasing 3.9% in the fourth quarter. The PCE price gauge excluding food and energy rose 2.2%, after increasing 2.5% in the fourth quarter.
Inflation seems like the biggest joke to me. It seems like we are the only country in the world avoiding high inflation.
Another component of GDP, housing, took a big bite out of the economy. Residential fixed investment dropped by 26.7%, reducing overall GDP by 1.23 percentage points. Fourth-quarter investment had fallen by 25.2%. The 26.7% plunge was the deepest since 35.1% in fourth-quarter 1981.
It's going to be a while before housing adds to GDP.
http://online.wsj.com/article/SB120955760584356061.html?mod=hps_us_whats_newsBusiness spending fell by 2.5%. Investment in structures went down 6.2%. Equipment and software outlays decreased 0.7%. Overall fourth-quarter outlays by businesses had climbed 6.0%
Inventories rose slightly in the first quarter. Stockpiles of all goods increased by $1.8 billion, after going down $18.3 billion in the fourth quarter and going up $30.6 billion in the third quarter. The acceleration boosted January-March GDP by 0.81 percentage point. But the small increase in inventories was likely unintended, fed by slowing demand, and could be followed by a second-quarter drop that detracts from GDP in that period.
S&P on Housing: 'No Sign of Bottom'
S&P's composite month-over-month index of 10 metro areas slid 2.8% in Feb to 190.58. Annually, it declined by a record amount of 13.6%.
"There is no sign of a bottom in the numbers," David Blitzer, chairman of the index committee at S&P, said in a press release.
Even with the decline, the invetories are too high. Add foreclosures, and we have a long way to go before we can even think about the bottom.
Housing still has a long way to go.
Home foreclosures fillings jumped 23 percent in the first quarter from 2007 Q4. First quarter fillings surged 112% from last year! Forget housing, we are not even at the foreclosures bottom.
"I'm more convinced that we haven't seen the peak of foreclosure activity yet, and the wave probably won't crest until late third or fourth quarter of 2008," he added.
That means no bottom in housing at least till 2009. Unsold inventories are still to high and foreclosures are adding to it.
Even Eli Broad, KB Home Co-founder, said he expects home prices to drop another 20 percent.
``I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. ``We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.'' .....
The number of mortgage borrowers behind on their monthly payments rose to a 22-year high in December, according to the Washington-based Mortgage Bankers Association. The trade group estimated that 16 percent fewer mortgages will be issued this year compared with 2007.
http://www.cnbc.com/id/24363800
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGKDdHK2T9eo
Vincent Reinhart, a scholar at the American Enterprise Institute, who retired from Fed last fall called the Bear Stearns "the worst policy mistake in a generation."
The action is comparable to "the great contraction" of the 1930s and "the great inflation" of the 1970s, said Vincent Reinhart, a scholar at the American Enterprise Institute, who retired from the Fed last fall.
http://online.wsj.com/article/SB120941300416350473.html?mod=hps_us_whats_news
S&P's Bold Prediction
S&P sees oil prices at $91... +/- $50. Yes folks, Oil could be at anywhere between $41 or $141!
In another prediction, S&P Investment Chief says the worst for stocks is over. Never mind the consumer confidence. Never mind the economy is tanking. Never mind the housing is still tanking. But the worse is over.
