Today, the U.S. Census Bureau released its latest nominal read of retail sales showing an increase of 1.4% from September 2009 and 1.7% decline from October 2008 on an aggregate of all items including food, fuel and healthcare services.

Discretionary retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales decline 8.19% compared to October 2008.

In October the number of U.S. properties for which a foreclosure filing was received declined for the third month sequentially according to a RealtyTrac report released on Wednesday. The report is a further indication that foreclosures are beginning to subside and that the housing sector is stabilizing.

According to the report, total foreclosure filings in October dropped 3.3% from September.

PRICE TRENDS / WAR OF THE WORLDS (Part 4): Property owners nationwide have lost only one dollar for every four dollars they can ultimately expect to lose on their home.

I have used ProShares Ultra Short S&P 500 (SDS) intermittently to hedge client portfolios. The weightings are always small -- initiating positions at 2-3% of the portfolio.

I prefer using funds covering broad indexes. The daily compounding of the sector products can be very difficult to anticipate and can be very ineffective for hedging purposes. Likewise with the 3X products. The variability along these lines with SDS is, to me, acceptable.

Sales of previously owned homes rose across the country during the third quarter, according to a report released Tuesday by the National Association of Realtors.

Nationally, sales were up 5.9 percent from the third quarter of last year. Previously owned homes changed hands at a seasonally adjusted annual rate of 5.3 million, according to the report. NAR attributed much of the jump to continued affordable prices and a federal income tax credit. Congress and President Obama legislated an extension and expansion of the tax credit program last week.

Against the backdrop of historically low interest rates and government stimulation, participants in property markets in both the United States and the United Kingdom responded with nothing short of jubilance.

Whereas pessimism was the leading dynamic for the majority of 2008, it seems that the Spring of 2009 brought a renewal of housing euphoria, though in a more limited and fragile sense.

Price Trends

The most conservative price data on residential properties predicts that values have fallen from the peak less than half of the way towards their long-term trend.

March 9 may very well go on to become a day that lives in infamy, the point at which the U.S. stock markets bottomed out and the economy turned the corner. To this point, it looks to be the point at which investors finally put the worst recession in a generation behind them and a recovery began. But despite the recent rally, many analysts believe that the current recovery lacks support from fundamentals, pointing to historically high pricing multiples, still rising unemployment rates, dips in consumer confidence, and stimulus programs that have encouraged further indebtedness for many Americans as evidence that we’re not out of the woods yet.

And it’s not only the well-known bears spreading doom and gloom this time around. Jeremy Grantham sees a market that is 25% overvalued, while others see a correction of 40% coming. Analysts at Morgan Stanley recently expressed their belief that asset prices have been boosted by access to “easy money,” and that the current stock market bubble will soon pop. There have been a number of terms coined to describe a potential slip-up in the fragile recovery that is now underway: the more optimistic among us are predicting a “V-shaped” recovery, while those who believe the recent rally in equity markets is unwarranted predict a “W-shaped” or “double dip” recession.

President Obama signed into law today an extension until April 30, 2010 of the home buyers' tax credit. Contracts signed by April 30 must close by June 30 to qualify. The new law has several provisions not in the existing law:

• Income limits have been increased to $125,000 for individuals and $225,000 for couples. These were formerly $75,000 and $150,000, respectively.
• Current home owners who have lived in their home for five of the past eight years are eligible for a tax credit of $6,250.
• Qualifying home prices must not exceed $800,000.
• First time home buyers continue to be eligible for an $8,000 tax credit.

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for September showing a whopping 21.2% year-over-year increase in pending home sales nationally coming largely as a result of the governments historic housing tax gimmick.

Meanwhile, the NARs chief economist Lawrence Yun reports that there has been a “rush” of first-time “buyers” racing for a chance to jump at the governments housing tax carrot… the result… wealth stabilization for middle class families?

The “extra-seasonal” housing price rally brought on by the governments tremendously expensive and poorly targeted housing tax credit gimmick is now thoroughly and completely over.

How many “homebuyers” have jumped at that $8000 carrot only to now find that Uncle Sam was dangling it over an abyss of deflation?

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new investing/diversification ideas. Last week, all global markets and emerging markets especially, took a beating. As such, the short index ETFs were on fire. While going long on a leveraged short ETF is obviously not a sustainable "investment" strategy, for traders anticipating a correction, they were rewarded handsomely. Aside from the 3X short daily balanced ETFs that performed well, I also included some other ETFs that don't employ 3x leverage that at least made money and also have some niche offerings.

Hot List Triple Short Daily Balanced ETFs

Contrary to what many have reported, it’s not a done deal yet.

The most talked about real estate news of the past week seemed to be all about the First Time Homebuyer Tax Credit getting extended.

This August, I released a paper explaining why the mortgage modification programs implemented by the Bush and Obama Administrations were probably increasing foreclosures, rather than reducing them. The paper was based on government explanations of the programs rules, and economic reasoning as to how borrowers and lenders would respond. I said that, absent a federal modification program, lenders would have their own programs that allow more borrowers to be eligible, and thereby more borrowers who would have their mortgage modified rather than being induced to leave their home for the lender.

Recently the Congressional Oversight Panel released a report reviewing the federal modification programs. It noted how some mortgage servicers are included in the program by mandate. Others servicers have the option to participate, although non-participation (ie, modifying mortgages by rules that differ from the federal rules) would cause them to forgo the 20K+ per mortgage subsidy for the entire population of mortgages they might modify. So you can understand why those "voluntary" servicers might follow the federal guidelines even if they thought alternative guidelines made more sense.

This week, the Massachusetts Association of Realtors (MAR) released their Existing Home Sales Report for September showing that single family homes sales jumped 4.6% on a year-over-year basis while condo sales surged 12.2% over the same period.

Single family median home value declined 1.7% on a year-over-year basis to $290,000 while condo median prices increased 1.7% to $259,450.

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for September showing both significant revisions to prior months results as well as a whopping 3.6% month-to-month decline in sales of newly constructed single family dwellings bringing the seasonally adjusted annual sales pace down to 402,000 units or 7.8% below the level seen in September 2008 and remaining 71.06% below the peak level 2005.

Ah... yes… These must be awfully disappointing numbers for many.

The OFHEO index showed a decline from July to August, which may be notable given that construction costs went up. Yet, over the same time frame, the Case-Shiller index increased even more than construction costs, with the ratio of home price index to residential construction PPI reaching its highest level of the year.

Sean MacLeod also informed me that the RPX index was up a bit in August, although the RPX increase was not enough to offset the increase in construction costs.