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Frisco Foreclosures in May.

Collin County showed a noticeable drop in the numeber of may filings. Collin County dropped by 17 percent from the previous month and 9 percent from the same timeframe in 2009. Collin County still has more foreclosed homes on the auction block than the same time period in 2008, representing an increase of 31 percent.

Any good news is just that…Good News. This is only one month’s data so don’t start celebrating yet.

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Frisco Market Report

The SEC is alleging fraud on the part of Goldman Sachs, in relation to their actions surrounding subprime mortgages and Collateralized Debt Obligations. Here’s an analogy of how the SEC sees Goldman’s actions: Imagine that you asked a builder to construct a house with materials that you know will eventually cause the house to light on fire and burn to the ground. In the meantime, you place a bet that the house will burn down, and also take out fire insurance on the house for when it does burn down. The house is built – which you then sell to an unsuspecting buyer. Sooner or later, sure enough, the house burns down. You make multiple profits…but it’s just not right.
 
The SEC is saying that Goldman acted similarly with subprime mortgages and other risky debts, profiting enormously from the failure of financial instruments that they knew were designed and destined to fail. How the story will play out remains to be seen – but the stunning allegations caused Stocks in the US and abroad to plunge lower. Stocks had been on a nice run higher based on a reasonably good kick off to earnings season, but as money flowed out of Stocks on the news, it was parked in Bonds – helping home loan rates improve.
 
In other news, the National Bureau of Economic Research (NBER) said that it would be “premature” to give an end date to the recession based on the economic data seen so far. And while some of the statistics may show that the economy has improved in many areas – the labor market continues to be very weak. It also remains to be seen how housing will fare without stimulus, and additionally, while corporate earnings seem to be on the rise, it is not yet known whether that is from improving business and higher revenues, or rather due to cost-cutting measures.
 
There was some good news last week on the housing front. Housing Starts for March came in higher than estimated and at the highest level since November 2008. Building Permits – an indication of future construction – also came in higher.
 
Keep in mind, however, that Housing Starts can be a double edged sword…as seeing more new construction of homes could be representative of builders’ sentiment and speculation rather than actual purchases. Hopefully the new construction happening will be bought up, and not eventually become a drag on housing by adding to the already heavy load of inventory.
 
The Goldman Sachs story will continue to unfold…and it will be very interesting to follow, as well as monitor the market reactions as more details and information become made known.
 
More housing news follows this week, with Thursday’s Existing Home Sales Report followed by New Home Sales on Friday…and hopefully both of these reports will bring positive news on the real estate market. Less than two weeks remain for homebuyers to get in on the Tax Credit – purchase contracts need to be signed by April 30th to qualify!
 
There will also be more inflation news this week with Thursday’s Producer Price Index (PPI), which measures inflation at the wholesale level. Last week it was reported that the Consumer Price Index for March met expectations, and while the report might give the Fed more ammunition to jawbone about inflation being low; there are many reasons to question whether inflation is really as low as being reported. The Feds will try to continue to make this case – as it helps keep borrowing costs for the US low, in the face of pumping out massive amounts of new debt.
 
Also on Thursday, we’ll have another Initial Jobless Claims Report, and these days it’s important to review every report about the labor market. Rounding out the week is Friday’s Durable Goods Report, which gives us an update on consumer and business buying behavior on big ticket items that last for an extended period of time.
 
Along with the Goldman Sachs story potentially continuing to shake up Stocks, remember this rule of thumb: weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

It’s been a volatile few weeks for Bonds and home loan rates since the Fed buying support ended. While Bonds and home loan rates ended last week on an improving note…with earnings season continuing, the Goldman Sachs drama ensuing, and a full slate of economic reports ahead…the volatility is likely to continue!

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