Yesterday the markets took a real tanker, dropping over 366 points on more bank losses. Wachovia reported a 10% drop in income and a 1.3 billion dollar loss, much better than the Citigroup loss of almost 57%.
Given the bank reported losses of recent days this wasnt as bad as it could be. What caused this real drop was that Caterpillar reported a decline in income...causing fears that the real estate recession was spreading. A small panic set in and sellers stepped up.
Looking closer: Caterpillar posted a 21 percent gain in quarterly profit but fell short of analysts’ estimates. The company cut its full-year profit forecast, sending its stock down 5.3 percent, to $73.57. Net income at Honeywell, the manufacturer based in New Jersey, climbed 14 percent, and the company raised its yearly sales expectations. But the stock still fell nearly 4 percent, to $58.32.
Can we draw any conclusions for the real estate industry
1. People are really nervous
2. Seems some of this is a small panic, but Monday will tell us more.
Are we Dead in the Water
According to Freddie MAc's Richard Syron: Some parts of the housing market are literally frozen up. It has introduced an enormous amount of fear into large parts of the household sector about what's going to happen to them when they get to reset [their mortgage rates] . . . I think this is a substantial depressive to the overall economy . . . I would put the possibility [of a US recession] in the 40 to 45 per cent range.
1. The volume of applications filed to refinance an existing loan was down 1.1% on a week-to-weak basis.
2. Applications for loans to purchase homes rose a seasonally adjusted 2.1%.
The trick is to find those sectors in your area that are doing well.
1. Depressed prices draw long term investors
2. Foreclosures draw bargain hunters
3. Multi Family is doing well because rentals become in short supply lifting cash flow
4. Vacation homes are doing well
5. Certain retirement communities may not be tied to the economic cycle
Thanks for Reading