25 February 2008 - 12:35Market Commentary 2/25/08

Today’s Existing Home Sales shocked the market by coming in just slightly below last month’s total.  This could be construed to be a sign of some stability returning to the market. Or at least enough bargain hunting as desperate people are dumping at or below cost to maintain good volume. Indeed the average sale price did drop over 3% from last month and I know people in Florida who are taking a bath on real estate who are happily taking $100,000 hits on properties just to be rid of them. With the increased cost of homeowners insurance, higher property taxes due to inflated home prices, and rates rising on the interest only and no money down mortgages these speculators bought with in the hopes of quickly “flipping” these homes it’s no wonder.  True be told I do not feel the least bit sorry for these greedy people who thought it would be strawberry fields forever. They drove up the price or residential real estate to the point where home ownership is impossible for most working class families and are now paying for their sins. It is one thing to inflate a stock price to a ridiculously high level since no one is being forced to buy that stock at outrageous prices but quite another to drive up rents and home prices,  which forces people to move away or leaves them broke. In South Florida the average wage is not enough to pay for a $300,000 ranch home so people are either leaving the area or up to eyeballs in debt trying to make ends meet. Either way it is not good for the economy and I for one am glad to see balance restored and the pigs get slaughtered. Naturally I was not speculating in real estate as I expected this catastrophe in advance, as anyone with some idea of how economics and floating interest rates loans work did. Of course when people are in the middle of a bubble logic and reason are overwhelmed by greed and euphoria. Looking ahead the calendar is interesting with inflation expectations out of New Zealand tonight at 9 pm and GDP out of Germany tomorrow at 2 am. Followed by German IFO at 4 am and then UK CBI industrial trends at 7. Top all this off with U.S. PPI at 8:30 and the Housing Price index at 10 am as well as the Richmond Fed Index and it is easy to see why the market is basically holding it’s breath today waiting for tomorrow. Thaw only pair to make significant moves today was USD/CAD which has just bounced off of Fibonacci support at $.9963. This also completes a chart pattern and I expect this level to hold going into tomorrow.