Money and Investing Thoughts

Southland home sales up; median levels off.

Linked above is the DataQuick report for Southern California. The numbers are not as positive as my previous post about SF Bay area sales, but the numbers are turning positive.

This quote pretty much encompasses the tone of the report:

“We appear to be in the early stages of the market gradually tilting back toward a more normal balance of sales across the home price spectrum. As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we’ll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose,” said John Walsh, MDA DataQuick president.

Let us hope this is that start of longer term trends.

The median home price in the San Francisco Bay area (8 counties) increased for the 2nd month in a row, increasing 12.3% in May. The median home price was $341,500 compared to the recent low of $290,000 set in March 2009.

Here are some of the facts leading to the increase in the median selling price:

• Jumbo mortgages ($417k+) accounted for 25.5% of sales, the highest percentage since last October.
• Sales of $800k+ homes rose to 13.2% of resales, up from 9.8% in April.
• 42.1% of sales were foreclosure properties, compared to the peak of 52%.

It appears that the Bay area real estate market is starting to reach some level of normality. The median sales price is still 33.9% below a year earlier. The number of sales in May was 19.8% higher than May 2008.

Source: MDA Dataquick

Why Does GM Stock Still Have Value? – WSJ.com.

Despite the link name, the article linked above is titled “How Traders Killed Value Investing”. The piece is an interesting read on how the big money traders manipulate the prices of securities. A quote:

For the long-term investor, whether you’re investing for retirement or simply betting on a company’s potential success, the payoff is suddenly in play — every stock is a potential target of forces outside of the traditional movers.

Over the last year I have watched a stock market that one day was betting on $200 oil fertilizing the world at $1,000 per ton to, only a few months later, driving the stock prices of good companies down to levels I have not seen in 30 years of stock market interest. My frustration reached such a level that I stopped writing regular posts for this blog. Of course, I stopped just about the same time the market hit its most recent bottom and has rebounded 40% since.

I continue to read articles concerning the current speculative nature of the market. I want to put out information that will help investors make money, this is not a trading site for those trying to make a quick buck. In the continuing evolution of this site, I have decided to focus primarily on dividend paying stocks. It is much harder for the market pushers to manipulate a distribution away from an investor. I also want to pursue ways to give some downside protection to a stock portfolio and look at covered call selling to enhance income.

The website I picked to show model portfolios has not worked out well so I am working an a new portfolio tracking system to help track what I am writing about. I will also be using some of the information from my other site: The Shipping Stocks Blog, to find good, income paying investments.

I plan to get the new portfolio up and running by 1 July. Until then check back in for what I hope will be some interesting and useful investing with a focus on income stocks.

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Reading through the news and blog articles (or usually just the headline!) about yesterday’s release of the housing starts numbers will make someone think that May’s numbers were the signal of something big. I disagree. Linked above is the actual report from the Commerce Department so you can see the raw data for yourself and determine if my analysis in in line.

First, yes new housing starts were calculated to have jumped 17% from April, but a closer look at the numbers shows not a lot of there there. First, the margin of error is 14.4% in either direction. When you read the report you see the number in parentheses after any results. It looks like this: (±14.4%) and shows you how big of a guess  is the reported number. Second, single family home starts were up only 7.5% with an error range of ±14.2%. The big jump was in multi-family starts which went from 70,000 to 124,000, April to May. Please note the multi-family number was 129,000 in March. The changes from April to May are just mostly noise and math error. The biggest thing to note is that homes are being started at a rate of 1/2 million per year and the number of new households formed in the U.S. is on the order of 1.5 million per year.

Until housing starts start clearing 7 figures again, any relative changes in these numbers will have little effect on the overall housing situation in the U.S. Over 800,000 units were completed in May, which is about the number started in September of 2008.  Starts have been in the half million, plus or minus, range for about 6 month now and new permits have been at the same level for about the same amount of time. By early 2010 supply for new homes could be very tight if the economy is picking up and the public starts to feel confident about buying a home. If not then, the gap between future supply and demand will just continue to widen.

The few of you that know me personally know that I spent my early working years bumping around in F-16′s for the U.S. Air Force. This video of the Blue Angels gives a good perspective on flying close formation.

Of course, as combat ready pilots we did not spend very much mission time this close together, but at times it was necessary to be able to fly in tight formation. When I was stationed at Nellis AFB, the Thunderbird pilots would come over and fly with us a couple of times a half to stay current at the bombing range. We always had bets on each bomb and bullet and going to the range with a T-bird pilot was always a good way to win a free lunch.