Existing Home Sales higher, but incentive is expiring
Existing home sales jumped 9.4% in September to an annual rate of 5.57 million units, but this will likely be the last month helped by the $8,000 first time home buyer tax rebate.
The key to confidence among the 75 million home owners is stabilized home prices, which may have begun, but is not certain given waves of foreclosures on the horizon. Extending the home buyer tax incentive and preventing foreclosures are keys to a sustainable housing recovery as 45% of home sales over the past twelve months have been first time buyers and 29% has been homes bought at fire sale prices on short sales and foreclosure sales and as lenders dump other real estate owned.
Meanwhile the slow recovery is increasing pessimism
A survey by Sun Life Financial shows that 77% of adults say that they are cutting spending, which is a 10% increase from the prior survey conducted earlier in the year. Being hurt is entertainment, eating out, home improvements and buying an automobile. The holiday season looks subdued as 60% say that they will spend less this year.
IRS finds bogus homebuyer credits of $636 million
Fraudulent claims for the first time home buyer tax credit of $8,000 has been found via IRS audit of the program. The situation includes 19,351 claims totaling $139.4 million for homes not yet purchased. Another 70,005 claimed $479 million in credits despite the fact that they were not first time buyers. There were 582 under aged buyers including a four year old. This makes it tough for Congress to justify extending the program.
The flipside of the story is the fact that there are thousands of legitimate filings for the eight grand who have not received a dime and have been waiting three to six months? Just wait for first time buyers going into default because they did not get the $8,000 in a timely way.
FASB Accounting Rule Changes – Effective November 15, 2009
Banks are running low on lobbying time to prevent FASB rule changes. FASB rules passed in May eliminate off-balance sheet trusts and requires banks to move billions of dollars of assets and liabilities onto their books in 2010. This means that banks will have to raise new capital.
The Daily Charts for Housing and Banking Indices
The daily chart for the Housing Sector Index (HGX) shows a Head and Shoulders Top, and is trading below 21-day and 50-day simple moving averages at 102.18 and 104.75. The downside risk is to the 200-day simple moving average at 87.39.
The daily chart shows the America’s Community Bankers Index (ABAQ) sliding down the 200-day simple moving average at 144.32 since peaking at 158.75 on August 10th.
The daily chart shows the Regional Bankers Index (BKX) below 21-day and 50-day simple moving averages at 46.91 and 46.51, which indicates risk to the 200-day at 36.56.
Disclosure: I Hold No Positions in the Stocks I Cover.
