NOT SURE WHY...BUT WE'LL TAKE IT
By Charles Payne, CEO & Principal Analyst
2/11/2010 1:23:25 PM Eastern Time
You have to love the intraday reversal of the market today, although one has to wonder why it was off to begin with. Before the bell, there was word of a resolution of the situation in Greece and initial jobless claims beat consensus. Okay, I admit the situation in Greece will be flaky in reality for a long time and the initial jobless claims number was something to cry about not cheer. But, the market needed something to cling to, and these are two difficult areas. Now that there is some action to the upside it's lacking the critical element of convincing volume. Hey, beggars can't be choosy. Moreover, weak volume was part of the market in 2009, but the rally never ran out of steam. The housing market seems to be in play today as homebuilder stocks are substantially higher even after mixed news on the foreclosure front.
Foreclosure Trends
David Urani, Housing Analyst Wall Street Strategies
According to RealtyTrac, foreclosure filings decreased by 9.7% from December to January, although year over year comparisons remained constant at a 15% increase (foreclosures increased 15% from November to December as well). The market seems to be taking the report positively, although we would be cautious, considering we saw a similar sequential drop last January that turned out to be just a speed bump amidst quickly rising foreclosures. We are also inclined to take foreclosure readings these days with a grain of salt, perhaps a handful of salt; banks, Fannie Mae, Freddie Mac, and the government are all experimenting with several different alternatives to foreclosure, which is causing delays in the pipeline, but a good portion of these loans that are being delayed are still expected to be foreclosed on.
Another thing to worry about is the high levels of bank repossessions. Despite total foreclosure filings being up 15% year over year, actually repossessions (industry jargon uses the term "REO" which stands for real estate owned property) of homes by banks are up 31%, indicating that vacant homes are actually hitting the market faster than they were a year ago. Given that fact, and the idea that foreclosures are still above the 300,000 level, it's clear the housing market is still in crisis mode.
Interestingly one of the larger public homebuilders, Lennar (LEN), today announced it purchased approximately $3.0 billion of mortgages that the FDIC picked up from failed banks. The purchase price was $243 million, a steep discount. This could be taken as a sign that Lennar expects delinquencies to moderate, but we see it more of a bargain pickup; it seems like the majority of those mortgages could still go bust and Lennar could would still be able to make a profit.
Technical Point of View
It's good that the Dow Jones Industrial Average is above 10,000 and fought for dear life whenever that number was challenged, but the big news comes when the index gets above 10,200 and finds the catalyst(s) to breakout through 10,500