Yesterday the news came out that new home sales jumped 9.6% for the month of July. It was the fourth straight increase in sales. Sales rose to an annual rate of 433,000, up from June’s rate of 395,000. Many are saying that the bottom is definitely in and now is the time to buy, but is that really the case.
.
Yes, sales are up more than 30% from the bottom in January, but nowhere near the peak of four years ago. Of course that’s was because of the inflated bubble that was created by the Fannie Mae and Freddie Mac sub-prime loans.
.
So does this really mean that the bottom is in and we can expect the economy to turn around? I doubt it. Why I think that is because of the fact that the numbers are (I feel) are mis-leading. Many of the new home sales that have been happening in the last month or so were first-time home buyers. That’s because of the government’s incentive plan for first-time homeowners who qualify for an $8000 tax credit. That in itself is misleading on the fact of it’s a tax credit, not a rebate. Which means of you don’t have enough of tax liability, you won’t be able to write off all of the $8000.
.
What does that mean for the industry? Well, home builders saw a jump in their stock price today, but will it be able to maintain those levels? I doubt that too. mainly because when the program will be terminated at the end of November. I believe the market will dry up again with sales. As it is, some builders have already seen a dip in home sales. In Arizona, A.F. Sterling Homes stated that sales in July stalled because the builder couldn’t guarantee the homes would be completed in time to qualify. The industry (real estate agents and builders) are really leaning on Congress to extend the the credit on the grounds of the sales could reverse from their current trend. As a matter of fact, Randy Agron, the vice president of A.F. Sterling Homes was quoted as saying “The real estate market is really a fragile thing. It’s not the right time to take (the tax credit) away”.
.
With that in mind, do you really think the bottom is in? It has been proven in the past that when the government gets involved with trying to “save” the economy, it actually extends it by not letting the free market follow it’s natural course. With this program as well as the financial bailouts and “Cash For Clunkers”, we have three major industries being manipulated within the American economy.
.
All I can say is…hang on, it’s going to be a bumpy ride.
Today is turning out to be the day that most were expecting to see being that it’s the day before the election. Many investors are waiting to see what will happen tomorrow. With the way things are right now in the race, no one really knows what is to come.
As it stands right now, the markets have been holding steady throughout the day. At best it was up about 90 points and so far the lowest it’s been down is 60 points at 3:00pm.
.
Reports are coming out that the credit market is tighten up lending to each other, while there really isn’t anyone out there looking to borrowing at the moment. I can relate to both sides to that issue. I’ve been holding off for some time to buy some rental properties for investment purposes. That also includes me being involved in any lending to anyone. So I have decided to hold off on it until the markets stabilize as well as waiting to see what the outcome of the election is.
.
Until the election is over I will advise my readers to hold off on doing any trading except for selling some of your profits. I am expecting the market to be quite volatile throughout the day tomorrow. If Senator Obama is leading in the race too early in the day I expect the markets to be down real big. As to it having a rally after the sell off.. who knows.
The stock market has taken a beaten for the month of September (as well as the last twelve months) and I do expect more of the same as the rest of the year. The main reason for it is the credit and housing crisis issues that have plagued us for some time now. I spoke about it before on this site and have voiced my opinion on it.
.
I don’t know where many of my readers stand on many issues, but I’m pretty sure that most would agree that this issue came about from the greedy people in the business as well as irresponsible borrowers. Some people out there feel that this issue started in the last few years and the powers-that-be are to blame.
.
What people need to do is to go and get the information for themselves because “knowledge is power”. Someone may be able to take your car or your money, but they can’t take away what you learned. Once you learn something, no one can take it from you. This is why I’m putting up this video for my readers. We as investors and traders should know the history that brought us to this problem, so we can reconize the pattern for the future.
.
This video is meant to be politically related, but it deals with the history of the credit and housing crisis. (I will tell you that I’m a Libertarian, I don’t agree completely with either the Democrats or the Republicans. I’m an American that believes in a smaller government, and less government involvement in my life). For that reason you need to watch it. If there’s anything that you dispute or disagree with being truthful, then do as the video says and Google any of the information that’s in this video. The video is almost eleven minutes long, but very informative.
.
.
Please feel free to voice your opinion on this video or if you want to vent, be my guest.
.
.
P.S. Want to learn more about the stock market? take a free two week trail with Jim Cramer from TheStreet.com