New-home sales sink 8.5% to 17-year low U.S. home builders have slashed their prices by a record amount, but sales still plunged by 8.5% to a 17-year low in March, the Commerce Department estimated Thursday. The decline in new-home sales to a seasonally adjusted annual rate of 526,000 was much weaker than the 577,000 pace expected by economists surveyed by MarketWatch. The report gives little hope that the housing market is near a bottom. February's sales pace was revised lower to 575,000 from 590,000. New-home sales are down 36.6% compared with a year ago and are down 62% from the peak in July 2007. The figures likely overstate the number of sales because they don't account for canceled sales, which have ballooned. The report is based on contracts signed, not sales closed.
Moody’s says Homebuilders at the Mercy of their Banks Several lower-rated homebuilders survived 2007 merely because of the leniency of their lending groups. As 2008 unfolds, these same homebuilding companies will once again find themselves at the mercy of their banks, according to Moody’s.But now the banks are facing increasing pressure to 1) take a harder line on covenants, 2) reduce their homebuilding exposure, which has not provided them with the same level of fees as in the past, and 3) deal with their own balance sheet issues. As a result, Moody’s expects to see a rising number of defaults amid this confluence of negative factors. "As banks harden the line in 2008, we expect a number of homebuilders to face growing resistance when requesting covenant waivers or amendments, which could lead to a forced acceleration of debt repayment and consequent bankruptcy filings.
Durable-goods orders fall for third straight month Hurt by a strike in the auto industry, orders for U.S.-built durable goods slipped 0.3% in March compared to February, marking the third monthly decline in a row, the Commerce Department estimated Thursday. It's the first time orders had fallen for three months in a row since early 2001, during the last recession. Through the first three months of the year, new orders are up 1.5% compared with the same period a year ago. The month-to-month decline was as expected by economists, following an upwardly revised 0.9% decline in February. Orders plunged 4.4% in January. Inventories of durable goods at the factory jumped 1.1% in March -- a troublesome sign that could spell further layoffs and production cutbacks if demand doesn't rebound.
As loans dry up, so will economy Those who say that the worst banking news is already out are more wishful than watchful. Take a look at what happens when businesses can't borrow what they need. If you've been feeling pretty good about the prospects for the economy as the stock market has climbed off the mat, I suggest you forget the Dow industrials for a minute and look toward Yakima, Wash. That's where Western Recreational Vehicles, a four-decade-old company employing 220 people, closed its doors last week. The family-owned maker of Alpenlite-brand motor coaches and campers had survived every bad economy and spike in oil prices since 1971, but it had to shut down when banks yanked its credit. Without the ability to borrow to buy parts and maintain payrolls during a period of seasonally soft sales, as it has always done, a wonderful small business went poof.
Two retail chains impose rice rationing Shades of World War II: Two warehouse-type retail chains in the United States are rationing rice as anxious customers stock up because of a worldwide shortage. It's the most startling sign that the world food crisis is making itself felt in the United States. But, despite rising food prices here, we've still got it good compared with some developing countries, where food shortages and price hikes have sparked deadly riots. "Based on a very rough analysis, we estimate that a doubling of food prices over the last three years could potentially push 100 million people in low-income countries deeper into poverty," World Bank president Robert B. Zoellick said recently. He has called for a "New Deal for Global Food Policy." Likely because of customer hoarding, Sam's Club has imposed a limit on bulk purchases of rice.
Credit Suisse writes off $5.3 billion Credit Suisse Group on Thursday reported a first-quarter loss nearly three times worse than analysts had expected as it wrote down $5.3 billion in soured investments. The bank, based in Zurich, reported a net loss of 2.15 billion Swiss francs, or $2.1 billion, in the first three months of 2008, compared with net income of 2.8 billion francs a year earlier. "On balance, I was quite pleased" with the results, said Peter Thorne, an analyst with Helvea in London. "In this market, if an investment bank doesn't report $20 billion of write-downs you tend to be quite relieved." Credit Suisse shares, which have fallen by about 30 percent over the last 12 months, rose 1.4 francs, or 2.7 percent, to 53.95 francs in afternoon trading in Zurich.
This bear growls on So, sunk in a deep armchair with an optimistic bottle of Rioja (Baron De Ley Reserva), I have tried to tot up reasons why the great credit smash-up of 2007-2008 may now be safely over, heralding sunlit uplands once again. 1) Ben Bernanke has carried out the most dramatic rescue since the creation of the US Federal Reserve. His emergency rate cuts - 125 basis points over eight days in January - was a "game changer", as they say in London’s American Quarter, Canary Wharf. By cutting rates from 5.25pc to 2.25pc since September, the Fed has averted 're-set Armaggedon' on the Greenspan mortgages – those floating rate 'teasers' taken out in 2005 to 2007. Payments will barely jump at all for most subprimers. Big difference.
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