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1. Home Prices Drop Most in 35 Years
2. Greenspan Says Housing Woes 'Probably Behind Us'
3. Big Ticket Orders Surge on Airplane Orders
4. Exxon Posts 2nd Biggest Profit on Record
1. Home Prices Drop Most in 35 Years
The median price of a new home plunged 9.7 percent in September from a year ago,
the largest drop in more than 35 years, reports the Commerce Department.
The median home price dropped to $217,000 in September from $239,300 in August.
That was the lowest median price since September 2004. The 9.7 percent plunge
was the sharpest year-over-year decline since December 1970.
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The plunge in new home prices follows a record plunge in existing home prices.
As MoneyNews told readers yesterday, the 2.5 percent year-over-year decline in
existing home prices was the biggest in the National Association of Realtor's
nearly 40-year record.
Clearly home prices across the board are in the midst of a serious correction,
one which our sister publication, Financial Intelligence Report, told readers
about months ago. Both Sir John Templeton and Yale Professor and real estate
expert Robert Shiller told FIR readers that they expected the housing market
correction to result in prices plunging up to 40 percent. And, unfortunately, it
looks like their predictions will be spot on.
We hope readers took their advice to protect and profit from falling home
prices. If not, there's still time for action. Make sure you read those FIR
special reports now.
Homebuilders are slashing prices on homes and boosting incentives such as free
pools, wood floors, and other upgrades to attract buyers. And to some extent,
buyers did come trickling in this month.
New home sales rose for the second consecutive month in September, increasing
5.3 percent. However, that follows three months of sales declines from May to
July. And sales are still down 14.2 percent from a year ago.
Inventories also dipped in September. New homes on the market fell to 557,000
from 568,000 in August. That represents a still higher-than-average 6.4 months
worth of inventory at the current sales pace.
Though the media may present the higher sales and shrinking inventories as a
sign that the housing slump is stabilizing, the plunge in prices is proof that
that's not the case.
When homebuilders need to slash prices to lure a somewhat larger percentage of
buyers than the month before, it really means they'll need to slash prices even
more next month to get that many more buyers to bite. In other words, when
prices start falling, most people wait to see if prices will keep falling before
they rush in.
The freefall in home prices is far from over.
Editor's Note:
2. Greenspan Says Housing Woes 'Probably Behind Us'
Former Federal Reserve Chairman Alan Greenspan, the chief architect of the
housing bubble, said Thursday that the housing market isn't in dire straits.
"Most of the negatives in housing are probably behind us," Greenspan told a
conference sponsored by the Commercial Finance Association. "The fourth quarter
should be reasonably good, certainly better than the third quarter."
Greenspan retired as Fed Chairman in February of this year. Greenspan slashed
interest rates from 6 percent in January 2001 to 1 percent in June 2003 to avoid
a recession following the bursting tech bubble. In that low interest rate
environment, the housing sector surged.
"There are early signs of stabilization (in housing)," Greenspan tells his
audience. But hedged his prediction by saying of the housing slump, "It's not
over."
"The evidence is that we're beginning to see a flattening in statistics for
sales of new homes," he continued. "The rate of construction is well below the
rate of purchases."
He added that buyers were "beginning to dig into the inventories of unsold
homes."
Greenspan's remarks run counter to current Fed Chairman Ben Bernanke, who said
on October 5 that the housing slump is "one of the major drags causing the
economy to slow now." Bernanke estimates that the "substantial correction" in
housing will shave 1 percent off the nation's economic growth in the second half
of 2006.
Editor's Note:
3. Big Ticket Orders Surge on Airplane Orders
New orders for U.S.-made durable goods climbed on strong civilian aircraft sales
in September, but core orders gained only modestly, a government report said
Thursday likely to confirm the inflation-wary Federal Reserve's projection of
modest economic growth.
Orders for durable goods - items meant to last three or more years - leaped a
much greater-than-expected 7.8 percent in September on a rush of civilian
aircraft orders, a Commerce Department report showed.
But orders rose a smaller-than-forecast 0.1 percent when volatile transportation
orders were stripped from the total.
U.S. Treasury debt prices rose and the dollar slipped against the euro and the
yen after the report, which markets took to show that the economy is growing at
a slower pace than earlier this year.
"Outside of the volatile aircraft orders, manufacturing is still subdued and
that's consistent with an economy that's growing moderately," said Gary Thayer,
chief economist at A.G. Edwards and Sons in St. Louis.
Financial markets were waiting for further clues about slowing growth in the
U.S. economy from a government report on new home sales due at 10 a.m. EDT (1400
GMT). A Commerce Department report on economic growth in the third quarter of
2006 is due on Friday.
In Thursday's durables release, the biggest overall jump in orders since June
2000 was propelled by a 183.2 percent rise in nondefense aircraft and parts
orders. That was the highest gain since a 210.4 percent rise in July 2002.
Analysts polled by Reuters were expecting a 1.9 percent climb in durables orders
and a 1.0 percent gain when transportation orders were excluded.
When defense orders were stripped out, durables orders rose 6.3 percent. That
was well above the 0.5 percent increase analysts were expecting.
A proxy for business spending, non-defense capital goods excluding aircraft,
rose a larger-than-expected 1.1 percent. Analysts forecast a 0.8 percent gain in
that category.
A separate Labor Department report showed the number of workers applying for
jobless benefits rose by 8,000 last week to 308,000, in line with expectations
and still pointing to a relatively healthy job market.
© 2006 Reuters.
Editor's Note:
4. Exxon Posts 2nd Biggest Profit on Record
Oil industry behemoth Exxon Mobil's earnings rose to $10.49 billion in the third
quarter, the second-largest quarterly profit ever recorded by a publicly traded
U.S. company. Its shares briefly rose to a 52-week high.
The report Thursday comes as high crude prices this year have fueled record
profits in the oil industry, triggering an outcry from consumers who were being
asked to pay about $3 a gallon for gasoline in early August.
The largest quarterly profit ever was Exxon Mobil Corp.'s $10.71 billion profit
in the fourth quarter of 2005.
The company may beat that next quarter, said Howard Silverblatt Standard &
Poor's Senior Index Analyst. "Then in all likelihood they will be at that $40
billion mark for the year."
That would put the company on track for the highest annual profit ever by a U.S.
company. Exxon Mobil holds that record with a 2005 profit of $36.1 billion.
Although crude oil prices began to decline toward the end of the third quarter,
the average market price for crude held at around $70 a barrel in the period
after peaking above $78 per barrel in July. Oil futures prices have recently
traded near $61 a barrel, and gasoline prices have dropped to an average of
about $2.43 a gallon.
Exxon Mobil, the world's biggest publicly traded oil company, said its net
income amounted to $1.77 per share for the July-September period, up from $9.92
billion, or $1.58 per share, a year ago.
The results surpassed the expectations of Wall Street analysts. On average,
analysts expected the company to earn $1.59 per share in the quarter.
Exxon Mobil shares rose 46 cents to $71.47 in morning trading on the New York
Stock Exchange after rising to a new 52-week high of $72.33 earlier in the
session.
Revenue fell to $99.59 billion from $100.72 billion from a year ago, which saw
then-record oil prices because of hurricanes Katrina and Rita.
Still, Exxon's revenue for the three-month period was greater than the annual
gross domestic product of some major oil producing nations, including the United
Arab Emirates ($98.1 billion) and Kuwait ($52.76 billion), according to
statistics maintained by the Central Intelligence Agency.
More than two-thirds of Exxon Mobil's profits come from oil and natural-gas
production outside the U.S., with rising production in Africa, the Middle East
and Russia consistently offsetting declining output in the United States, Canada
and Europe.
Exxon Mobil said it pumped 7 percent more oil and natural gas than it did during
the same quarter a year earlier. At the beginning of the year, some analysts had
forecast a 5 percent growth.
Another major international oil company, Royal Dutch Shell PLC said its
third-quarter profit fell 34 percent to $5.94 billion even as revenues rose 10
percent to $84.3 billion. But the Anglo-Dutch company's operating profit rose as
higher oil prices outweighed worsening refining margins.
Earlier this week, ConocoPhillips reported its profit rose 2 percent to $3.88
billion in the third quarter while another major oil company, BP PLC, said its
earnings fell 3.6 percent to $6.23 billion.
A fifth major oil company, Chevron Corp., is expected to report its results
Friday.
High oil prices helped Irving, Texas-based Exxon Mobil realize earnings from its
oil and gas drilling activities of $6.49 billion, up 13 percent from the prior
year. The company also saw stronger earnings from its refining operations and
gas stations, and profits at its chemicals segment more than doubled.
The company said its average sale price for crude oil in the U.S. during the
quarter was $62.07 a barrel, compared to $56.97 a year earlier. Internationally,
however, Exxon said the average sale price for oil was $65.64 compared to $58.24
a year ago. Natural gas sales in the U.S. were slightly lower in the U.S. but
higher around the world.
© 2006 Associated Press.
Editor's Note:
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