Breaking Wall Street Market News & Reports

Stocks moved higher Tuesday as investors awaited word from the Federal Reserve on the direction of interest rates. One would think that the major market indexes are poised to receive good news from the Federal Open Market Committee (FOMC), which is expected to reiterate its stance of holding interest rates steady for an “extended period of time.” However, many analysts belief that this may be the last time this particular language is included, and that the Fed may give such indications in today’s policy statement.

Investors took some comfort from economic reports showing the drop in new housing starts and building permits about in line or even slightly better than expected. Housing and employment are the two main hurdles for the economy to cross yet. U.S. housing starts fell about 5.9% to a seasonally adjusted annual rate of 575,000 in February as several massive snow storms hit the East and South and stalled home building, according to data released Tuesday by the Commerce Department. Starts were down in the Northeast and South, but up in the Midwest and West. Most of the decline in February was in the hugely volatile multifamily sector. Construction of single-family homes fell 0.6% to a 499,000 pace, while building of large condos and apartment buildings plunged 43%.

Building permits which aren’t as affected by weather events as starts, dropped 1.6% to 612,000 in February. Permits for single-family homes fell 0.2% to a 503,000 rate. Many economists consider the single-family permits figure to be the most reliable and important number in the release. Over time, permits and starts are highly correlated. Single-family permits are up 32% compared with February 2009. The industry has slashed production of new homes to work off a massive inventory of unsold homes. The number of homes under construction fell 2.2% to a seasonally adjusted 492,000, the lowest on record dating back to 1970.

Builders remain very pessimistic about a recovery, despite a generous tax subsidy for buyers. In March, the home builders’ sentiment index dropped back to 15 from 17 in February. Builders face tough competition from foreclosures of existing homes, and buyers remain cautious about the job market. I’m led to believe the generous gains from the housing market from 2000 through 2006 will not return. I think we will continue to see a weak housing market. The housing trend has topped out. It had developed over 25 years with a steady increase of 2.5% annualized gain through 2000. We probably won’t see 1-2% annual housing gains for another 3-5 years. There has been an abundance of new homes built the past 10 years. I foresee the next real estate boom happening not for at least another 20 years. It’s the law of cycles. Look what happened during the Depression. It wasn’t until 20 years later after WW II, that we experienced a housing boom. That ended in the 70′s of course. But, owning a home still remains the best asset, that is if you have a long term outlook. It’ll be the best asset to own along with Gold as inflation rears it’s head the next 3-7 years. Fixed Rates and payments on homes remain the same even when everything else rises!

Tags: fed meeting, housing starts, markets

This entry was posted on Tuesday, March 16th, 2010 at 8:02 am and is filed under Commodities, Contributors, Debt, Economics, Stock Market News. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.