KPIG Radio December 22

Stocks moved sharply higher from the open and enter the final hour with modest gains on mixed data. Buyers rushing to beat the expiration of the first time homebuyer tax credit pushed home sales up 7.4% in November, inventory fell to 6.5 months supply while the median price increased .8%to $175,600. Over the next few months the true picture on real estate will emerge as the HAMP program and stimulus effects wane. The initial data isn’t positive real estate prices are expected to fall through late 2010. Housing forecasts are predicated on the idea that the HAMP program will successfully modify 1 million loans, so far just 32 odd thousand have been modified and with a redefault track record running some 50 odd percent for modifications the 1 million figure is going to prove tough to achieve. Add credit bust 2.0 compliments of commercial real estate, Alt-A and Option ARM Loans and it’s a pretty safe bet that another leg down will occur in 2010. While annualized real estate sales and price comparisons paint a rosy picture of an improving market. The Fed’s favorite house price indicator, Loan Performance, from First American CoreLogic fell .7% in October from the previous month, a second consecutive decline as it slipped .2% in September. 3rd quarter GDP came out of the gate hot at +3.5% many heralded this as the end of the recession. Two revisions later and the figure has fallen to +2.2% following lower numbers for business fixed investment, inventories and consumer spending. All of which is consistent with the credit bust script as is a PCE Deflator, an inflation metric, has averaged .575% over the last year. With all the news in the mainstream media about the banks paying back their TARP loans. The part about the deadbeat banks was conveniently forgotten. This list has now reached 55 institutions that failed to pay their dividends to the Treasury in November from the previous months 33.