Is the US housing market crumbling?
The US housing market is critical to the health of the US consumer - which means it is also crucial for the global economy, say Andrew Selsby and John Robson of RH Asset Management. But the stream of bad news coming out of the sector suggests that the US property market is on its last legs. Is a hard landing for the US economy just around the corner?
Update: read US subprime woes start to spread for more insight on the US housing market.
We have repeatedly said that the key indicator for most of the world's major stock markets is the US housing market. The Philadelphia Housing Market Index has now fallen to its major support level of 225. Any further weakness from here would be a prelude to a shock.
Because of the importance of this indicator, it has been our policy each fortnight to publish the latest news from the US housing market it is getting worse!
Ten Las Vegas house projects have been halted or put on hold.
Toll Brothers, one of the major luxury house builders in the US, have said that their second quarter orders were down 33%.
Not surprising, bearing in mind the above, the National Association of House Builders say that the industry's confidence is the lowest it has been since 1995.
According to the Washington Post a greater proportion of mortgage financers tapped their home equity for cash in the first quarter 2006 than any other quarter in 15 years. More than 50% of these applicants borrowed at higher rates.
One of America's leading mortgage lenders, Ameriquest, is closing 229 branches and laying off 3,500 employees. (A clear indication of sharply lower activity.)
According to the Commerce Department, housing starts in April were down 7.4% at an annual rate of 1.85 million, the third consecutive monthly decline and the slowest since November 2004.
According to the Wall Street Journal, late payments on mortgages are rising. Delinquencies are sharply higher on loans made last year.
According to a recent study, 29% of 2005 purchasers now have no equity in the homes.
America's new jobs figure for March was 138,000 - economists had estimated 200,000. 138,000 is the lowest since October last year and it followed three months of downward revisions.
The University of Michigan's Consumer Confidence Index for April was 79, compared to 87.4 in March, the lowest since Hurricane Katrina.
Lombard Street Research said this week that the US economy had peaked and was tipping into an unstoppable bust. The property market is crumbling - "the real US hard landing starts now".
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets. For more from RHAM, visit https://www.rhasset.co.uk/
By John Robson & Andrew Selsby at RH Asset Management Limited, as published in the Onassis Newsletter, a fortnightly newsletter that gives insight into the investment markets.
For more from RHAM, visit https://www.rhasset.co.uk/