February 11. 2011: Housing: Traffic Up, Prices Down

Credit Suisse has issued their monthly Real Estate Survey. The data from over fifty major markets across the United States indicates that buyer traffic has increased and home prices continue to soften.

For the third straight month buyer traffic has increased. The level for January was the highest since April, 2010 (the last month of the homebuyer tax credit). However, the buyer remains focused on bargains. This creates trouble for new homes, as homebuilders have not reduced prices by as much as existing home prices have fallen. This is in stark contrast to several months ago, when new homes were selling on par with existing homes - evidently home owners to a large degree are now throwing in the towel and selling at what the market dictates.It is noted that much of the increased homebuyer traffic is in warm weather locations such as Arizona, California and Florida.

In addition to the above, positive trends are occurring in Charlotte, Dallas, Minneapolis, and Washington, D.C. As a whole, here is how buyer traffic stacks up over the past twelve months (50 is normal, below 50 graduated weaker, above 50 graduated stronger)

BUYER TRAFFIC INDEX
Feb. 2010 41.1
March 2010 43.1
April 2010 48.7
May 2010 31.5
June 2010 19.1
July 2010 16.9
Aug. 2010 17.0
Sept. 2010 17.9
Oct. 2010 16.3
Nov. 2010 22.1
Dec. 2010 29.1
Jan. 2011 39.1

The Home Price Index sits at 26.9, compared with 43.4 in April 2010. This indicates a continued capitulation of sellers to rid themselves of property. The Time To Sell Index sits at 29,2 compared with 43.1 in April, 2010. This indicates that it is taking longer to sell a home compared with April, 2010 even at reduced prices.

My observation is that another avalanche of foreclosed homes will hit the market during March-June. This will add yet another reason to predict continued falling home prices. Homebuilders will continue to be squeezed between falling existing home prices and rising commodity costs that must be factored into new homes. Investors who thought they were getting "deals" a year ago are learning the hard way that market forces are unpredictable. Most of these investors are likely to pause instead of doubling down ,which may create even more downward pricing pressure. Another issue will be inflation and home mortgage rates. At what point will investors or primary home buyers throw in the towel because of continued stringent stips and higher mortgage rates?

The Credit Suisse monthly Real Estate Survey is a dense, boots on the ground compilation of local practitioners who have been shown to be an excellent predictive resource, based upon the success of this survey over the past few years.

February 9, 2011: Investors, Use Intelligence

Since I began to invest in 1972, the universe of tools available to assist both professional investors and the rest of us has increased exponentially. I recall going to the public library and pawing through the bible-sized Value Line Investment Survey (Arnold Bernhard) and putting life on hold to watch PBS' Wall Street Week With Louis Rukeyser to gain both stock tips and investment insight for my embryonic portfolio. Computers were a novelty and news was ABC,NBC or CBS. There was also The Wall Street Journal and Barrons as they are today.

Today, investors of all stripes are barraged with news networks, talking heads, scores of investment vehicles and plain hype with enough kill power to make one's head explode.Yet one source has yet to be explored by most investors and that is worldwide intelligence reports from experts in the field. Why this type of service has not been promoted to investors escapes me.

Google "investor intelligence" and "business intelligence" and you will find a plethora of sites featuring charts, graphs, security reports, analyst findings and newsletters telling you what and when to buy (or sell) securities. What you rarely find is pure intelligence to alert you to social,political and international military event probability in the future.I have found one service out of several that should be useful to investors. That service is STRATFOR (www.stratfor.com),

Founded by George Friedman, STRATFOR provides timely intelligence pertaining to worldwide security, financial and economic events, regional issues, regional/ worldwide defense and energy reports,making this service a valuable investigative tool for investments here and abroad.

A sampling of articles posted today on the STRATFOR site includes China Security Memo, U.S Strategy Toward Preserving the Egyptian Regime, Nordic-Baltic Alliance and NATOs Arctic Thaw, U.S. 2011 National Military Strategy, China and the Offshore Yuan Market, Australian South Pacific Ties, ASEAN and the Geopolitics of Trade Agreements,Egypt and Israel Strategic Reconsiderations, Japan's New Military Units and Military Stance, Guinea Government Revising Mining Laws, Japan Looking to Invest Billions in Africa,China and Iran Railway Network Deal Signed, South Africa Unlikely to Nationalize Mines, U.S Panel's Decision to Raise Drilling Pipe Duties Up To 450%, of many. Importantly, investors receive in-depth intelligence and predictive data which, combined with the usual financial idea and research tools such as Seeking Alpha, should result in a more informed investment decision.

Investor's interested in exploring what STRATFOR predicts nationally and internationally for the next decade may want to read the "hot off the press" book by George Friedman entitled The Next Decade. His pronouncements may surprise investors obsessed with China and the Pacific Rim. Russia again will menace the West. Germany may again look eastward and "new Europe" countries of Poland, Hungary, The Czech Republic and Slovakia become more importsnt to U.S interests. Brazil will be problematic.

Investors not reaching for another valid and useful source of information as worldwide investing becomes the new normal for even the smallest of investors could be making a tactical mistake.