Thursday January 14, 2010

Thursday, January 14, 2010
It is hard to believe that there could be more foreclosures in 2010 than there were in 2009! And that people will continue to walk away from their 'home' due to negative equity positions...

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Subject: S&Y PSG Morning Market Update for Thursday January 14th

* In a report released early this morning (1/14), Realty Trac Inc predicts 3 million homes will move into the foreclosure process at some point in 2010. This is up from the 2.8 million foreclosures in 2009. The Realty Trac report cited continued high unemployment and the fact that housing prices, although stabilizing, still remain well below mortgage amounts in many cases.
In 2010, the rate of “strategic defaults” is expected to skyrocket. Homeowners with negative equity in which home is worth far less than the amount owed on the mortgage have little incentive to keep paying he mortgage and will walk away in record numbers. This relatively bleak forecast will undoubted serve to inhibit a recovery in the housing sector and will constrain overall economic growth.


* Yesterday’s (1/13) 10 year auction (reopening) was relatively well received. Demand was strong with a bid to cover ratio of 3.00, up noticeably from last month’s 2.62 and above the 2.49 average over the past two years.

* The Census Bureau reported this morning (1/14) a surprising drop in retail sales for December; down -0.3%, which was well below the consensus forecast of +0.5%. It appears that holiday season spending was not as strong as some had hoped. However, the previous month’s (November) sales figure was adjusted upward to +1.8% from the original +1.3%. The Census Bureau also reported that retail sales less automobiles and gasoline were down an identical -0.3% for December.

* The Department of Labor released initial jobless claims for the first week in January and the report showed a +11,000 rise in initial claims to 444,000. This was slightly ahead of the consensus estimate of 437,000. There was a much larger change in the weekly continuing claims which dropped -211,000 to 4,596,000. Except for an occasional blip, continuing claims have been declining steadily for 18 weeks; since the beginning of September 2009. If the number of unemployed receiving extended benefits is factored in, the decline in continuing claims was approximately -135,587 from last week.

* Finally, the Bureau of Labor Statistics reported there was no change in import prices in December, after rising in each of the previous four months.