Resales of U.S. homes and condos fell 7.2% in January to a seasonally adjusted annual rate of 5.05 million, the lowest in seven months, the National Association of Realtors reported Friday. Sales of existing homes have fallen two consecutive months after rising steadily through the fall on the back of a federal subsidy for first-time home buyers. “It’s not good news,” said Lawrence Yun, chief economist for the real estate industry lobbying group. “There is rising concern about the strength of the housing recovery.” Inventories of unsold homes fell 0.5% to 3.265 million, or 7.8 months of supply at the current sales pace.

Source/Full Story: MarketWatch

It’s not the signal it used to be.

When employers hire temporary staff after a recession, it’s long been seen as a sign they’ll soon hire permanent workers.

Not these days.

Companies have hired more temps for four straight months. Yet they remain reluctant to make permanent hires because of doubts about the recovery’s durability.

Even companies that are boosting production seem inclined to get by with their existing workers, plus temporary staff if necessary.

“I think temporary hiring is less useful a signal than it used to be,” says John Silvia, chief economist at Wells Fargo. “Companies aren’t testing the waters by turning to temporary firms. They just want part-time workers.”

Source/Full Story: msnbc.com

China’s economy is overheating as asset bubbles and inflation pressures build, posing a “major risk” to global growth, the World Economic Forum said.

A drop in momentum in the world’s fastest-growing major economy “could adversely affect global capital and commodity markets,” the group said in a report issued before this year’s Jan. 27-31 annual meeting in Davos, Switzerland.

“Growth below 6 percent in China is a red alert in 2010,” Daniel Hofmann, group chief economist at Zurich Financial Services, told reporters today in London. “A hard-landing in China is a major risk.”

China’s property prices rose at the fastest pace in 18 months in December, highlighting the government’s struggle to rein in speculation while maintaining economic growth, data showed today. The nation’s authorities this week raised the proportion of deposits that banks must set aside as reserves in a bid to cool the economy.

“The Chinese economy is in the process of overheating,” Hofmann said. “Large cities like Shanghai and Beijing saw housing prices increase more than 60 percent in 2009,” and “we still saw negative inflation rates in China. Food price inflation, typically the leading edge of inflation anywhere in developing countries, was 20 percent in China by November.”

Source/Full Story: Bloomberg.com

Jeff Rubin, the former CIBC World Markets Inc. chief economist who accurately predicted oil’s surge in the decade just ended, expects crude to reach $90 a barrel this quarter and $100 by the year’s end.

Accelerating demand in Asia and the Middle East will force consumers to rely on costlier non-conventional energy sources such as oil sands, said Rubin, who spent 20 years with the Toronto-based bank and last year published a book on energy economics, “Why Your World is About to Get a Whole Lot Smaller.” Rubin correctly forecast in 2007 that crude would reach $100.

“It’s safe to say that we’ll see triple-digit oil prices by the fourth quarter of this year,” Rubin said in a telephone interview yesterday. “I would expect prices to move pretty close to that level, and be in the $90 range probably by the end of March.”

Source/Full Story:  Bloomberg.com

Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, said in an interview with Reuters home prices will resume their decline by early next year as foreclosure sales pick up again.

“The housing crash is not over,” he said.

The U.S. housing market has suffered the worst downturn since the Great Depression, and its impact has rippled through the recession-hit economy as well as the rest of the world.

A setback for the hard-hit housing market could portend problems for the U.S. economy.

Home prices, as measured by the Standard & Poor’s/Case-Shiller U.S. National Home Price Index, will trough in the third quarter of 2010 after declining 38 percent, Zandi said.

The index peaked in the second quarter of 2006 and hit a trough in the first quarter of 2009, a drop of about 32 percent.

Source/Full Story: Zandi | Reuters

The default rate for commercial mortgages in the US climbed to a fresh 16-year high in the third quarter of this year, as the property market continued to struggle under the weight of tight credit and falling rents.

During the third quarter the commercial default rate rose from 2.88 per cent to 3.4 per cent, the highest level since 1993, according to figures set to be released on Tuesday by Real Estate Econometrics, a property research firm. The quarterly increase was the third-highest since 2003 and the default rate has more than doubled in the last year.

“The dramatic decline in real economic activity and labour markets since last September has undercut property fundamentals, increasing the number of recently originated loans that are at risk for delinquency and default because of cash flows falling short of principal and interest obligations,” said Sam Chandan, chief economist at Real Estate Econometrics.

The rising default rate is bad news for banks, which hold more than 80 per cent of maturities on commercial real estate debt over the next two years. According to Real Estate Econometrics, during the latest quarter the total balance of delinquent and defaulted commercial mortgages jumped by 14 per cent to $50.3bn.

Source/Full Story: FT.com

The British economy is in its longest recession on record, as figures out this morning showed a shock 0.4% drop in gross domestic product (GDP) in the third quarter of the year.
…
TUC general secretary Brendan Barber said he hoped today’s figures would “head off the growing signs of complacency” on an economy which remains “extremely fragile”.

“Even if we had achieved a technical recovery today, it would not feel like a recovery to the thousands losing their jobs or afraid that they will join the dole queue in the months ahead when unemployment will continue rising. It takes more than a statistical read out and the return of big bank bonuses for a real recovery,” he said.

Philip Shaw, chief economist at Investec bank, said: “We thought there was a chance that the economy could contract, but not by this much … the numbers do come as a big shock.”

Peter Dixon, economist at Commerzbank in London said the figures made it more likely the Bank of England would next month extend its policy of flooding the economy with money, known as “quantitative easing”.

Source/Full Story: guardian.co.uk

U.S. regulators are set to buttress their defenses this week against a slew of sick banks still facing closure and the risks to the dwindling fund that protects depositors.

The Federal Deposit Insurance Corp has been looking at expanding the pool of potential bidders for distressed banks, providing some capital relief for troubled assets that will soon be brought back onto banks’ books, and charging further industry premiums to replenish the insurance fund.

All of these moves are geared to get the banking industry, and the agency charged with ensuring the industry’s safety, through a financial crunch that is coming to a head.

“We’re working through this problem. We’re not at the beginning, we’re not at the end,” said James Chessen, chief economist for the American Bankers Association. “We’re in the middle and it’s painful.”

Regulators have shuttered 81 banks so far this year, compared with 25 last year, and three in 2007. Analysts say the wave of failures is far from over. Richard Bove of Rochdale Securities said on Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, which started with a dramatic fall in housing prices that sent the economy into a recession and caused many borrowers to default on their loans.

Bove said the continuing failures will force the FDIC to turn increasingly to non-U.S. banks and private equity funds to shore up the banking system.

Source/Full Story: Reuters

The value of U.S. homes fell by 12.1 percent in the second quarter from a year earlier, but the rate of decline shrank for the first time since prices began to fall in 2007, real estate website Zillow.com said on Tuesday.

Even so, stabilization of the hard-hit housing market, which is seen as key to an economic recovery in the United States, is not yet in view, with mounting foreclosures and a high level of “underwater” mortgages still posing threats, Zillow said.

U.S. home values posted their 10th consecutive quarterly decline, falling to $186,500 on the Zillow Home Value Index, according to the second-quarter Zillow Real Estate Market Reports.

The report encompass 161 metropolitan areas and covers value changes in all homes, not just those that have recently sold.

Home values in the first quarter had fallen by 12.4 percent from the prior-year period.

But distress signals tracked by Zillow remain high, suggesting that for most U.S. metropolitan areas housing prices have not yet hit bottom.

“While we are encouraged by the increasing sales in many markets and the overall improvement in the rate of decline of the Zillow Home Value Index, I hesitate to be overly optimistic for the near future,” Stan Humphries, Zillow’s chief economist, said in a statement.

Source/Full Story: Reuters

The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.

Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.

In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.

But the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an “oil crunch” within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said.

In a stark warning to Britain and the other Western powers, Dr Birol said that the market power of the very few oil-producing countries that hold substantial reserves of oil – mostly in the Middle East – would increase rapidly as the oil crisis begins to grip after 2010.

“One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day,” Dr Birol said. “The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously,” he said.

“The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future,” he said.

Source/Full Story: The Independent

The survival of CIT Group Inc, a key source of financing for thousands of small and medium-sized companies, became ensnared in disagreements between regulators in Washington on Monday.

The Federal Deposit Insurance Corp, which insures deposits at U.S. banks, opposed an attempt by the Treasury Department and Federal Reserve to rescue the lender by granting it access to a government debt-guarantee program, according to a source familiar with the matter.

The prices of CIT shares and bonds tumbled as investors worried the commercial lender would not be able to meet its obligations to bondholders, perhaps pushing the company into bankruptcy and disrupting the financing on which its corporate customers depend.

CIT’s difficulties are “going to make funding more expensive all around,” said Dan Brown, chief economist for Euler Hermes, a unit of insurer Allianz SE.

The lender’s failure would be the biggest collapse of a financial firm since regulators seized Washington Mutual Inc in September.

It is not the first time in recent months that there has been a disagreement between the FDIC and the Treasury and Federal Reserve. FDIC Chairman Sheila Bair, who is well-liked by key congressional leaders, and Treasury Secretary Timothy Geithner have battled over policy and turf, according to numerous reports.

Source/Full Story: Reuters

The Federal Deposit Insurance Corp. is gearing up to handle a large number of bank failures expected as a result of bad mortgages, both in residential and commercial real estate, an economist says.

“They know they’re going to take down a large number of banks and they can’t do it until they’re staffed up,” said Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M University, at a real estate conference in Tampa, Fla., Tuesday.

Dotzour expects federal regulators to establish an agency, similar to the Resolution Trust Corp. that disposed of assets belonging to insolvent S&Ls in the late 1980s and early 1990s.

“Once they start to sell [foreclosed real estate], we’ll find out what the market really is,” Dotzour said.

Dotzour blamed federal intervention for the lack of commercial real estate investment activity in recent months, as well as the failure of businesses to make major decisions.

“Nobody knows what to do so they’re doing nothing,” Dotzour said.

Government, in its quest to help the economy, is causing harm by propping up failing companies and regularly changing rules, he said.

“People are frozen. It’s not that they don’t want to invest in the future, the rules are unclear,” he said.

Source/Full Story: Baltimore Business Journal

Sales of previously owned U.S. homes rose for a second straight month in May but were weaker than expected, adding to growing fears of an anemic economic recovery from a deep recession.

The chief economist of the National Association of Realtors, which released the data on Tuesday, said sales in some areas appeared to be slowing and warned of the danger of a “delayed” housing market recovery.

The Realtors’ group said sales climbed 2.4 percent last month to an annual rate of 4.77 million units. While that pace was below market forecasts it was the second straight month sales had risen, for the first back-to-back gain since September 2005.

Despite signs the market is stabilizing, NAR said the median national home price fell 16.8 percent in May from a year earlier, the third-largest drop on record.

A separate government report on Tuesday showed home prices fell 6.8 percent year-on-year in April after dropping 7.3 percent the previous month.

U.S. stocks fell amid disappointment with the data, which fed the view the economy’s recovery from its longest recession since the Great Depression would be tepid. Yet another postponement by Boeing Co of the inaugural flight of its long-delayed 787 Dreamliner plane also pressured stocks.

Source/Full Story: Reuters

California’s unemployment rate climbed to 11.5 percent in May, the highest in modern record-keeping, the California Employment Development Department reported today. Sacramento County unemployment was at 11.1 percent in May, up from April’s 10.8 percent.

Nonfarm payrolls numbers statewide dropped by another 68,900 for the month. That’s roughly the same rate of job losses as in March and April, suggesting that California hasn’t yet turned the corner to economic recovery.

“We were hoping that these numbers would be dropping,” said Howard Roth, chief economist at the state Department of Finance.

The rate at which jobs are being lost nationally dropped in May, making California’s continued losses particularly disappointing, Roth said.

Source/Full Story: sacbee.com

Sales at U.S. retailers unexpectedly fell in March after two months of increases, a government report showed on Tuesday, dimming hopes the recession was close to hitting bottom.

However, Federal Reserve Chairman Ben Bernanke stayed upbeat and referenced the hopeful economic signs despite the 16-month long recession.

The Commerce Department said total retail sales dropped 1.1 percent after rising 0.3 percent in February. March sales were weighed down by declining purchases for big-ticket items like motor vehicles and electronic goods.

“This throws some cold water on the idea that we’re carving out a bottom. As long as you have initial jobless claims running around 650,000 and getting revised higher week after week, I don’t see a recovery,” Jacob Oubina a currency strategist at Forex.com, Bedminster, New Jersey.

…

“This serves as a reminder that the recession is still here and that rising unemployment, declining income as well as a deep plunge by household net worth will adversely affect retail sales indefinitely,” said John Lonski, chief economist at Moody’s Investors Service.

Excluding motor vehicles and parts, sales fell 0.9 percent in March, compared to a 1 percent gain the prior month. The data highlighted the continuing problems in the U.S. auto industry, with vehicle and parts sales dropping 2.3 percent after a 3 percent decline in February.

Gasoline sales fell 1.6 percent in March after increasing by 3.1 percent the previous month.

Sales of electronic goods tumbled 5.9 percent, versus a 0.7 percent gain in February, while building materials eased 0.6 percent after slipping 0.5 percent.

Source: Reuters