Existing-home sales rise 2% in May

Resales of U.S. houses and condos rose 2% to a seasonally adjusted annualized rate of 4.99 million in May from 4.89 million in April. It's the highest sales pace since February.

No kidding, it's spring selling season. Resales are down 15.9% in the past year.

About a third of total sales are distressed sales, such as foreclosures or short sales, said Paul Bishop, senior economist for the real estate trade group. Many sales of foreclosed homes wouldn't be counted in the realtors' survey because they do not go through the multiple listing service.

The median sales price in May was $208,600, down 6.3% compared with a year ago.

BTW, it seems like NAR is releasing the press release only to MSM and delaying the release on their website. Looks like they are using MSM to hide the negatives that bloggers would provide.

At the same time, mortgage rates rose slightly last week. The 30-year fixed mortgage rose to 6.45% from 6.42% last week. That is the highest rate since Aug 23, 2007. Yes that is the start of the fed's rate cuts. So it seems like the rate cuts are not helping mortgage rate and probably hurting them as the low rates are creating higher inflation. I can't think of anytime when the NAR and CEOs of companies like Dow Chemical are asking to raise rates to fight inflation (In case of NAR, it said to be careful cutting rate when the rate was at 2.25%). Has fed lost all the credibility?

http://www.marketwatch.com/news/story/existing-home-sales-rise-2-may/story.aspx?guid=%7BEE1CF54C%2D536D%2D4DC0%2D9B67%2DE9D23A1632AC%7D&dist=msr_2

Q1 GDP Revised at 1%

The Q1 GDP was revised to 1% from .9%.

"Upward revisions to exports, to consumer spending, and to business fixed investment were partly offset by an upward revision to imports and a downward revision to inventory investment," the Commerce Department said.

Inflation gauges for personal consumption expenditures, chain-weighted prices and domestic purchases were all revised slightly higher, according to Thursday's GDP report. The price index for personal consumption expenditures excluding food and energy rose 2.3%, at an annual rate, which is above the Fed's preferred range of around 1.5% to 2% for that index.

2.3% inflation? I wonder if anyone really believes that inflation is 2.3%. With inflation numbers like this, we probably will never go into a recession "officially".

In other news, weekly jobless claims were unchanged at 384,000. The four-week moving average rose to 378,250, the highest since Oct 2005.

In other news, weekly jobless claims were unchanged at 384,000. The four-week moving average rose to 378,250, the highest since Oct 2005.

The Fed has kept the rate at 2%.

The Fed has kept the rate at 2%.

The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.

Moderate? Looks like the fed is out of touch. They have created this high inflation situation and now they are ignoring it.

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

At least they are talking like they care about inflation! For anyone that thinks the fed will raise anytime soon, they are just deluding themselves. This is a dovish fed and they are not going to do anything until at least after the election.

Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.

I vote Fisher for FOMC chairman.

New Home Sales Fall 40.3 percent!

No it is not a typo! Sales of new home in May 2008 fell 40.3 percent from May 2007. It is down 2.5% from April 2007. Spring season is MIA.

The inventory is at 10.9 months at the current rate.

I wonder if we will see any clowns calling for a housing bottom anytime soon.

UPS lowers earnings outlook on weak economy, oil price

Just like FedEx, UPS, another economic bellwether slashed its second-quarter earnings outlook. They lowered the target to 83-88 cents from 97- $1.04.

Confirming FedEx, UPS blamed higher oil prices, and slow growth for lower-than-expected US Package volume and an accelerating decline in the use of premium air products. Can anyone say Stagflation?

More Job Cuts on the Way

According to WSJ, Citigroup is reportedly cutting 10% of it's Investment Bank workforce.

The New York bank, which has suffered $15 billion in losses over the past two quarters and is likely to rack up billions of dollars in additional write-downs in the second quarter, this week will dismiss thousands of investment-banking employees world-wide as part of a plan to cut the roughly 65,000-employee group by 10%, the people said. Pink slips are likely to be handed out Monday.

Goldman Sachs is also reportedly cutting 10% of investment banking division.

As we have said in the past, the job market and mortgage rate will determine how deep the housing slump will be. The rates have been rising steadily and now the job market is getting worse.

Unemployment & Philadelphia Fed

Unemployment & Philadelphia Fed

The jobless claims fell by 5,000 to 381,000. Analysts were forecasting for 375,000 new claims. While these numbers are not as bad as the last recession, when the claims averaged 416K, they are slowly creeping upwards.

Remember the last recession was a business led recession where this recession is a consumer (and credit) led recession.

But as we have said before, the job market and interest rates are the key to housing. Interest rates have started creeping up as expectations for inflations are going higher (despite what the fed and the numbers might tell you). It could get even uglier if the job market worsens or interest rates start creeping even higher. And if both hit at the same time? Well, let's not even go there.

In other news, the Philadalphia Fed said it's factory activity index was at -17.1 in June vs. 15.6 in May. The Leading Economic Indicators Index, rose .1 percent.

FedEx's Weak Outlook

FedEx reported loss for fiscal fourth quarter due to rising costs and FedEx Kinko's Unit.

FedEx predicted a "very difficult" environment and lowered earnings forecast.

FedEx's fuel surcharge is 28 percent (up from 18.5% in March). The surcharge has led customers to downgrade to cheaper options. If this is not a classic definition of stagflation, I don't know what is. Of course, according to the government, the 28% surcharge is not inflation because it is not part of the price. But as time goes on, does the surcharge become part of price? If it does, we've got hyperinflation.

http://www.bloomberg.com/apps/news?pid=20601087&sid=amhH8zD3Dhz0&refer=home