The news is out. Housing starts for October fell 14.6%, to 1.486 million units. This is the lowest level in six years. Nationally, new home prices have fallen 9.7%. Existing home prices have yet to fall, but will soon.
The next shoe to drop will be retail sales, and when it does, the stock market will follow. I don't even think the mighty Altria’s (Phillip Morris) stock performance can help the Dow. Slowing or falling retail sales will be the catalyst that will make the markets fall. When this happens, investors will wake up to the realization that the stock markets recent advance was one of the biggest sucker rallies known to man.
Look for the financial media to have their reporters at the malls the day after Thanksgiving. This will be their way of enticing consumers to spend. But will it work? If the Christmas shopping season does not show signs of an improvement two weeks after Thanksgiving, the retail bust will have begun.
I am really tired of all of the cheerleading by the spin doctors who are telling us that the housing recession has bottomed. Cheering on the real estate market may entice some consumers to buy, but not those who have been around the block a couple of times.
I keep seeing ads by lenders who are still using the old sales pitch- "Rates are still historically low, buy now"- but they don't tell you that the trade-off is that home prices are still very high.
Here in Florida, people are trying to leave but there are no takers. Windstorm insurance costs have skyrocketed. Today, the headline on the front page of the paper says that the state runs insurance company (Citizen’s) is “seeking 1,200% increase on businesses”. By the way, Citizen’s provides insurance for those who cannot get windstorm coverage from public companies because they will no longer write it, or have fled the state.
I don’t live on the water, and my windstorm insurance alone is $1,800. In 2007, the state run insurance company wants to raise their rates another 118%. If you own a condo or home on the water, you are really screwed.
In addition to the insurance woes in Florida, the nation will soon see the effects that exotic mortgages such as interest only loans and adjustable rates are having on the consumer.
