Minyanville's daily Five Things You Need to Know to stay head of the pack on Wall Street:
1. Housing Slump Well Contained
If ever you find yourself beginning to doubt that problems in the economy related to housing are not well contained, just sit down and listen for a moment. Because soon enough a Federal Reserve official or the US Treasury Secretary will remind you that housing problems are indeed "well contained." Take a look.
- February 21, 2007: "I'm waking up less at night than I was [over the slowdown in housing]. So far, there's been remarkably little effect [from housing] on the rest of the economy."
- San Francisco Fed President Janet Yellen
- March 28, 2007: "At this juncture...the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained."
- Federal Reserve Chairman Ben Bernanke
(Source: AFX News)
- April 5, 2007: "The damage from the subprime market has been largely contained."
- Dallas Fed President Richard Fisher
(Source: Dallas News)
- April 20, 2007: "I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained."
- US Treasury Secretary Henry Paulson
- April 20, 2007: "We do see some stabilization of demand in the housing market ... there is some indication that the market could be bottoming out."
- Federal Reserve Governor Frederic Mishkin
- [Editor's Note: Any of the above look familiar? Click here to see more of the street's personalities and their look-a-likes in Minyanville's Separated at Birth]
- So there you have it. The housing slump is well contained.
It's well contained to the following...
2. Well Contained to Existing Home Sales
Existing Home Sales fell 8.4% in March, below expectations for a decline of 4.3% according to the National Association of Realtors.
- Single family home sales dropped 9.5% and are 11.9% lower year-on-year.
- The national median home price for all housing types fell to $217,000, down 0.3% year-on-year.
- The median price for single-family homes fell even more... down 0.9%.
- Overall, sales fell in all regions of the country.
- The actual text of the NAR press release crossed the line far beyond mere marketing and spin control, venturing into territory normal people consider insulting.
- We can only assume it was written by someone who apparently believes we are idiots.
- How else can you explain these sentences?:
- "David Lereah, NAR's Chief Economist, expected the drop."
- "We also may be seeing some losses as a result of the subprime fallout. However, this is masking improved fundamentals in the housing market, with lower mortgage interest rates and motivated sellers."
- And here's the kicker:
- "The national median existing-home price for all housing types was... 0.3% below March 2006... However, the percentage change in recent months has been distorted by a geographic shift in the composition of sales from high-cost markets to moderately priced areas."
- Hahaha! Ok boss! So the decline in the national median price is due to the decline in the national median price as existing home sales have shifted geographically from areas where houses aren't selling due to the high cost of the houses to areas where houses are selling due to sellers lowering their prices. Hahaha! Okie dokie.
Existing Home Sales - Lowest for the post-bubble cycle
3. Well Contained to Largest Cement Producer in U.S.
Cemex SA (CX), the world's third-largest cement producer, said first-quarter profit fell 21% as U.S. sales were hurt by wait for it... wait for it... the housing slump.
- The sales decline in the U.S., one of the company's most profitable markets, and rising costs caused first-quarter net income to fall.
- U.S. cement sales measured by tons declined 18 percent and ready-mix concrete sales dropped 25 percent, the company said.
- Cemex said sales plummeted 20%... even as average cement prices rose 7%.
- But at least sales in Spain were red hot!
- Sales in Spain jumped 24 percent to $510 million on higher prices, which rose an average of 20 percent in dollars.
- So the good news is the company can count on Spain's hot market to take up any slack caused by the housing slump in the U.S.
4. Well Contained to Spain
Spanish stocks fell 2% following a plunge in shares of real estate developer Astroc Mediterraneo SA fueled concern about the strength of the country's housing market, Bloomberg reported.
- Astroc Mediterraneo SA dropped 8.6% to 16.10 euros, bringing the decline for the past week to 65%.
- "This is the burst of the Spanish real-estate bubble,'' Alberto Espelosin, a strategist at Zaragoza told Bloomberg.
- Home prices in Spain climbed an average 15% a year between 1999 and 2005.
- And between 1998 and the end of 2006, the amount that Spanish banks lent for real-estate activity rose ten-fold to 107 billion euros, according to the bank of Spain.
- "Interest rate increases, overvaluations, the slowing of the housing market and the".... wait for it.... wait for it... "subprime crash in the U.S. are all finally adding up in investors heads and causing them to flee property stocks,'' Guillermo Escribano, a fund manager at Metagestion SGIIC SA in Madrid told Bloomberg.
5. Well Contained to Auto Sales
General Motors (GM) Vice Chairman Bob Lutz says he expects sales of new vehicles to show a dip due to... wait for it... wait for it... the housing slump.
- Speaking at an automotive industry conference in Kentucky, GM's Lutz said that while April's sales figures have not yet been confirmed he expects new vehicle sales to show a decline as homeowners struggle to meet mortgage repayments.
- "[This] has come as a result of the housing market problems and the mortgage industry meltdown," Lutz said according to Reuters.
- "A lot of people are finding themselves in a position of reduced affordability and that has had an impact, not just on us, but across the industry," he added.
- GM in March said it expected results from finance company GMAC, in which it retains a 49% stake, to remain under pressure due to increased defaults in subprime mortgages.
- GMAC last week said it would lay off as many as 700 workers at its ResCap home-lending unit due to mounting losses in subprime loans.
No positions in stocks mentioned.
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