Tuesday December 23, 2008
Navivest

New home sales for November on an annualized basis, fell to the lowest number since 1997. With forecasters looking for 415,000 annualized, new home sales came in at 407,000, a 13% decline year over year.

Existing home sales fared slightly better, with just an 8.6% year over year drop to 4.49 million units annualized. Forecasters had been looking for 4.93 million units.

Median home prices fell 13.2%, the largest on record, to just over $181,000.

While the drop could be welcomed for those looking to buy a house, the unfortunate fact is that home prices have been declining every month of late, with the declining on a percentage basis, growing with each passing month. That creates a situation where by potential buyers might sit on the sidelines since they can reasonably expect prices to fall further in the future.

Tags: Home Sales  Existing Home Sales  New Home Sales

After a precipitous fall yesterday on continued credit concerns, stock market futures are indicating that the markets will rebound and open higher today. However, traders need to make sure they do not get caught in a bear trap by buying on a fake rally.

Any gains we get in early trading might all evaporate by 10 AM, as news from the economic front kicks in. At that time, we will be getting both the August Consumer Confidence numbers from the Conference Board, which gives us an insight into the mindset of the American consumer as well New Home Sales from The Commerce Department’s Census Bureau. We will also be getting the minutes from the last Federal Open Market Committee meeting on August 5. Unfortunately however, that’s not until 2 PM.

Its not likely that the consumer’s confidence is increasing and with regards to home sales, even though existing home sales for July, which were reported yesterday rose 3.1% against a forecasted 1.6% rise, we don’t expect New Home Sales to fare as well. The strong rise in existing home sales was due to the continued fall in home prices and the desperation of home sellers.

While homebuilders are also having a tough time, new homes do not have as much leeway in pricing as do existing homes, so the numbers should continue mirroring the weakness we are experiencing in the housing markets. So all things considered, the markets should move to the downside after the numbers.

Should the indicated gains hold when stocks start trading, traders might want to take the opportunity to lock in any gains if any on their existing short-term trades, or look for stocks to short among those that might shoot up in early trading.

We are in a bear market and we need to be constantly cognizant of that fact. You can buy on dips, but be sure to take profits when presented with the opportunity. For instance, with the drop in stocks yesterday, towards the close of the day, we sent out an alert to subscribers of our Options Capitalist trading advisory service, to buy the Apple September 175 calls. We expect to be out of those by next Monday at a nice profit. Apple was down $4.24 from Friday’s close and the decline was a good buying opportunity.

After climbing just $0.52 yesterday in regular trading, oil is down in early trading today – off $1.76 to $113.35 on a strengthening dollar, and that could provide impetus for a bullish day in stocks, but wait for the economic calendar to play out and if getting into the market, tread carefully and remember to lock in profits when you get them.

tags: new home sales FOMC minutes oil prices