Housing Market Index June 2010

Today's Coffee

June's Housing Market Index exposed the ugly true state of housing, as builder confidence disappeared. We cover that report, as well as the TIC data, ICSC sales data, Import & Export Prices and all the day's market drivers below.

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Housing Market Index June 2010

A sure fire sign that the real estate market is not yet seeing recovery, the National Association of Home Builders (NAHB) today reported builder confidence dropped sharply in June. Propped up by government stimulus and First-Time Homebuyer Tax breaks, we warned here time and again that the absence of such would likely expose the true, ugly state of the housing market. Well, today's data seems to do so in living color.

The Empire State Manufacturing Survey was covered in an earlier article.

Housing Market Index

The Housing Market Index was reported this morning. According to the National Association of Home Builders (NAHB), builder confidence in the market for newly built, single-family homes dropped five points, to a reading of 17 for June. We warned in recent copy here that the removal of government crutches would leave the crippled economy and housing market with no support to keep it standing. Today's data is very important, because it clearly exposes the level of despair in the builder mindset. It shows just how far off traffic must have fallen once the homebuyer tax credit deadline passed.

The NAHB Chief Economist, David Crowe, said, "...But as today's HMI data shows, builders still remain very cautious and are aware that several factors could impede the nascent housing recovery, including serious problems in obtaining financing for the production of housing, faulty appraisal practices and competition from short sales and foreclosed properties."

Each of the HMI's component indexes recorded declines in June. The component gauging current sales conditions fell five points to 17, which might be attributed to the pulling of sales from May and June into April by the tax credit. The component gauging sales expectations for the next six months declined four points to 23 (from a one-point downward revised index level of 27 in May) and the component gauging traffic of prospective buyers fell two points to 14. We suspect activity will not pick up much into July and through summer, given the still sad state of household economies. Unemployment and under-employment are anchored and far too high to encourage economic recovery.

The HMI also posted losses in every measured region in June. The Northeast, which has the smallest survey sample and is therefore subject to greater month-to-month volatility, fell 17 points to 18 following a 14-point jump in May. The Midwest posted a three-point loss to 14, and the South saw a three-point decline to 19. The West fell four points to 15 from a revised May level of 19.

ICSC Weekly Same-Store Sales

Store sales are settling down as comparables normalize. Recall that last spring was perhaps the least active economic environment in generations. This week's data covering the period ended June 12, saw store sales decrease 0.7% week-to-week, while still measuring 2.9% over last year's soft mark.

Import & Export Prices

Import and export prices were reported for May this morning. U.S. import prices declined 0.6 percent in May, versus expectations for a drop of 1.3%. May's decline follows the 1.1 percent increase seen in April and 0.4 percent gain in March. May's decrease was led by falling fuel prices (-4.9%), which more than offset a rise in nonfuel prices (+0.5%). In contrast, the price index for U.S. exports increased 0.7 percent in May following increases of 1.2 percent and 0.7 percent in April and March, respectively.

TIC Report

The Treasury International Capital (TIC) Report showed net foreign purchases of long-term securities of $83 billion in May, down from $140.5 billion in April. European issues have capital flowing into the States, and so strong demand for US securities has made perfect sense of late.

DC Drivers

General Petraeus passed out while testifying before a Senate panel on the topic of Afghanistan. Petraeus was about to answer a question posed by Senator McCain. Petraeus was able to walk out of the facility, but is being attended to by medical experts. Earlier this week, the US government revealed the discovery of mineral reserves in Afghanistan that hold the potential to cause a fundamental shift in the nation's economic situation. "Hmm," say the conspiracy theorists among you...

Corporate News Drivers

A US bankruptcy court judge is still making important decisions regarding Lehman Brothers. This latest ruling will decide the fate of Lehman's vast art collection; Sotheby's (NYSE: BID) awaits.

The corporate news schedule has Agrium (NYSE: AGU), SRA International (NYSE: SRX), Signet (NYSE: SIG) and Societe Generale (AMEX: GLE) meeting with investors. The Chicago Board of Options Exchange plans to price its IPO. Lincare (Nasdaq: LNCR) will split its shares 3-for-2. The earnings schedule includes news from Best Buy (NYSE: BBY), Bakers Footwear (Nasdaq: BKRS), Casey's General Stores (Nasdaq: CASY), CLARCOR (NYSE: CLC), Dot Hill Systems (Nasdaq: HILL), FactSet Research Systems (NYSE: FDS) and Roadrunner Transportation (Nasdaq: RRTS).



Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (NYSE: FRE), Fannie Mae (NYSE: FNM), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), AMEX: VAZ, AMEX: NKR, AMEX: MZA, AMEX: NXE, AMEX: NFZ, Nasdaq: XNFZX, Nasdaq: FSAZX and Avatar Holdings (Nasdaq: AVTR)

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