Fed Rate Decision To Shield Dollar From Horrid Housing Market

According to the Standard & Poor’s/Case-Shiller home price index released today, US home prices in 20 cities fell by 12.7% in February compared to a year ago. This decline was worse than the 12% drop expected by many, and steeper than the 10.7% drop posted in January.

Record annual declines were seen in 17 of the 20 metro areas. Las Vegas and Miami have the worst declines: Home prices dropped 23% in Las Vegas and 22% in Miami. The only area with a gain was Charlotte which registered a 1.5% increase, defying the overall housing sentiment.

February marked the sixth consecutive decline in all the 20 metro areas. The housing situation in the US is unlikely to get better anytime soon, as declining property prices spark off a vicious cycle of less buying interest, more defaults on loan payments, increasing number of foreclosures and eventually more price declines.

Incidentally, RealtyTrac reported today that the number of homes going into foreclosures increased 112% in Q1 to 649,917 this year compared to last year. That’s more the double the foreclosure rate in 2007.

Americans, unhappy with the erosion of their property prices, are feeling more pessimistic about their spending ability, and this is reflected in today’s release of the Conference Board’s consumer confidence index which fell to 62.3 in April from a prior 65.9 (revised from 64.5). This was slightly better than the 61.5 reading expected. The present situation index dropped to 80.7 from 90.6, while the expectations index rose to 50.1 from 49.4.

Fed Starts Meeting

Bernanke et al are beginning their two-day meeting today, the most probable outcome of which is likely to be a 25 basis points rate cut from 2.25% to 2%. Most traders are sitting on their hands, preferring to let the event pass over before committing to more positions in the market.

Forex Trading

EUR/USD is lower today, dipping to a low of 1.5540 before bouncing up again to 1.5600, in line with expectations of support around 1.5530-50. Another possible support netting is around 1.5480-1.5510. USD/CHF went up to a high of 1.0400, and has yet to overcome resistance around 1.0430, followed by 1.0460 then 1.0500. GBP/USD fell 200 pips today, sliding towards 1.9700 on weak UK data showing consumer lending slowing to its lowest level in nearly six years and mortgage approvals falling to a record low.

Wednesday:

Eurozone CPI estimate, unemployment rate 0900 GMT

US MBA mortgage applications 1100 GMT

US ADP employment 1215 GMT

Canada GDP 1230 GMT

US GDP, core PCE 1230 GMT

Chicago PMI 1345 GMT

FOMC rate decision 1815 GMT (rate expected to be cut to 2% from 2.25%)

Comments

[proseadvocate:]

Well written facts leaving the reader to draw the obvious conclusion. Let's see more from and of this writer since, she is good to read and great to look at!

2008 Apr 29 06:22 PM

[CatGut:]

What is it with 'housing' anyway? It's real estate property values in general that are plummeting! Land values are what went up like crazy and not housing alone - it's land. The rise in actual building costs have not gone up substantially versus land costs. So why is it this topic is shielded in terms of just housing anyway? That's a story...

2008 Apr 29 07:00 PM

[billddrummer:]

I agree with proseadvocate. More Grace Cheng!

2008 Apr 29 07:34 PM

[Adam Axler:]

Grace, ignore the sexist comments and expand on the facts....RealtyTrac also predicts bank-owned homes will make up 40% of the market in the future, further supporting the inability of anybody to sell a home even at auction prices.

2008 Apr 29 08:30 PM

[razormdthe2nd:]

...why is this even here?...nothing's here that wasn't already widely reported today...there's no added insight, no added anything!..."seekingal... is turning into a useless mix anonymous stock pumpers and people looking to advertise their websites!

2008 Apr 29 11:03 PM

[TraderGreg:]

Grace - you are one heck of good looking Lady. Nothing wrong in stating the obvious. Your articles are very good and informative.
Keep writing, and we willkepp reading.
Ignore the politically correct folks.

Best
Greg

2008 Apr 29 11:53 PM

[cfish:]

Guys, show some respect. This is not 1956. Also, this is the internet, are you really, really sure you are flirting with who you believe you are? You're making a fool out of yourself.

2008 Apr 30 01:16 AM

[InvestBaboo:]

Greg:

Why don't you put your ph no in there also, make unwelcome advances and also get on the floor like a dog and lick your balls and try look cute?

Pathetic! I guess guys like you can't score with women enough that you have to come to websites and hit on women. Sheeeesh!

2008 Apr 30 01:55 AM

[TraderGreg:]

Prognostic and others:

Get life. Get some sleep. You are just a bunch of egomaniacs. You think that you know something. Well - you don't. I don't, She doesn't. She reported facts - and she did it well. You are trashing author after author. Just write something better, and stop endlessly complaining. Publish your thoughts here, and then another egomaniac will trash you. Then you will understand....I hope.

2008 Apr 30 02:17 AM

[mallarde:]

"et al" should be "et al." The "al." is an abbreviation for the Latin "alios," meaning "others."

2008 Apr 30 03:14 AM

[sivere:]

The time has come to


TakeBackTheFed.com

2008 Apr 30 02:20 PM