Money and Investing Thoughts

I noted with interest the year over year price changes for the three California cities on the Case-Shiller price data list. Here are the one year price changes through February of 2010.

• Los Angeles: +5.31%
• San Diego:   +7.56%
• San Francisco: +11.86%

The California market bottomed price-wise in April of 2009, so these numbers should continue to improve for the next two months.  By then we will be in the summer buying season. Will perception become reality and the public start to believe California home values are rising?

There are numerous economic factors that should be holding back California real estate. But the trend tends to be self sustaining. How much will and upward price trend start to change the attitudes in California? Time will tell.

The following is reprinted with permission from oilprice.com

Oil Market Summary for 04/12/2010 to 04/16/2010

Oil prices plunged on Friday after the U.S. Securities and Exchange Commission charged Goldman Sachs with fraud in its marketing of certain subprime mortgage securities, amid a general sell-off in financial and commodity markets.

The allegations against one of the biggest market makers in virtually every markets dampened speculation heading into the weekend. Much like the volcanic eruption in Iceland spewed a cloud of dust over northern Europe that grounded all air travel, the SEC charge cast a pall over financial markets.

The May contract for West Texas Intermediate, which expires next week, settled down $2.27 or 2.7% at $83.24 after briefly dipping below $83 in the wake of the SEC announcement. The benchmark contract settled at $84.92 a week earlier.

Goldman Sachs had no immediate comment. Prices had been drifting lower in equities and other markets prior to the announcement, but fell sharply afterwards, led by a plunge of more than 10% in Goldman shares.

Some analysts speculated that prices could rebound on Monday once the dust has settled, but market participants remained uncertain about the long-term impact of the SEC charge on Goldman’s business and on that of other major banks.

In the past, Goldman has rejected charges of misleading investors when it sold securities that it subsequently shorted in its own trading, asserting that that is the role of a market maker. Goldman is one of the biggest participants in the energy futures markets.

Oil prices started the week soft, but firmed up after Wednesday’s inventory report from the U.S. Energy Information Administration, which showed a small decline in crude inventories after 10 successive weeks of increases.

An unexpected decline in April consumer sentiment reported on Friday, however, led to new doubts about the strength of the economic recovery and depressed prices. The market had been expecting a reading of 75 after 73.6 in the previous month, but instead the index came in at 69.5.

The inventory report on Wednesday pushed oil prices up 2.1%, to $85.84. But the monthly outlook from OPEC released the same day actually revised its forecast for 2010 demand for OPEC oil downward by 135,000 barrels a day from the previous month, to 28.8 million barrels a day. The group’s expectation for the overall growth in oil consumption also trails that of other analysts.

By. Darrell Delamaide for Oilprice.com who offer detailed analysis on Crude oil, Geopolitics, Gold and most other commodities.  They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com

This video is a little old but I found the content interesting. Especially the last minute. If these REIT companies can get their hands on distressed bank held commercial properties, they appear to be able to make some nice returns. One would assume that the banks see the same potential if they can hold on to the property and maybe squeeze some more cash out of the borrower before they go belly up.

Note: This article is reprinted here with permission from oilprice.com. Tim

Oil Market Summary 03/08/2010 to 03/12/2010

Crude oil prices tread water for the week as uncertainty about demand continued to weigh on the market. Prices were down slightly on the week, with the benchmark West Texas Intermediate settling on Friday at $81.24 a barrel, compared with $81.50 a week ago.

Not even relatively bullish forecasts for oil demand, such as the International Energy Agency’s report on Friday raising its forecast by 70,000 barrels a day for 2010, or the decline in the dollar could propel oil prices forward.

One analyst even predicted crude oil prices dipping below $60 a barrel in the second half of the year. Ronald-Peter Stöferle, a raw materials analyst at Austria’s Erste Bank, said that oil is relatively expensive by historical standards, and current prices are not justified by demand.

Moreover, Stöferle notes, OPEC seems to prefer a price between $70 and $80 a barrel to keep unconventional sources such as shale oil and oil sands, or alternative energy sources like solar and wind, from becoming economically competitive.

In any case, this analyst expects oil prices could rise further in the first half of this year, even hitting $100 a barrel, but will average only $72 a barrel over the second half due to weak demand and other factors. In particular, he thinks too many hopes are pinned on growth in China’s economy. “We are critical of the blind trust in the Chinese economy as recovery and growth engine,” Stöferle said, adding that China cannot be a “messiah for the global economy.”

The IEA’s forecast for an increase of 1.6 million barrels a day in crude oil demand this year to 86.6 million barrels a day was quickly eclipsed by another report on Friday. The University of Michigan consumer sentiment index, which declined in March to 72.5 from 73.6 in February, indicated that consumers remain uncertain about the future. Analysts had expected a small increase for the month.

The euro gained ground against the dollar, rising above $1.37. The dollar, already weak, declined further after reports that San Francisco Federal Reserve Bank president Janet Yellen, considered a “dove” on interest rates, will be nominated as vice chairman of the Fed. This would increase the likelihood of U.S. rates remaining low.

By: Darrell Delamaide of OilPrice.com
Source: http://www.oilprice.com/article-crude-prices-stagnate-amid-doubts-about-global-demand.html

Southland home sales up; median levels off.

The California real estate market continues to exist under the dark clouds of increasing foreclosure, bank phantom inventory and growing unemployment. In spite of these factors, the state managed to produce some very positive results in the larger markets. Way back in the dark ages of 2008, pundits and their hosts of commenters were adamant that the real estate market would be have reached a bottom until year over year price gains were experienced. Check out these results:

Southern California

SoCal finished 2009 strong with the median December price was 4% higher than in December 2008, the first year-over-year gain since August 2007, when prices were nearing the recent peak. December was the 8th straight month of monthly price increases. The number of December sales was 12% higher than a year earlier.

The increase in meidian price can be attributed to more sales in higher priced areas and less emphasis on the inland, repo market. 20.2% of th 22,338 December sales were for prices greater than $500,000.

Almost 25% of the purchases in December were for cash. Buyers with real money are very interested in homes at these price levels. The average mortgage payment for those who financed was $1,231 per month, 54% below the 2007 peak.

San Francisco Bay Area

According to DataQuick, the Bay area finished 2009 well ahead of 2008, price-wise. The median purchase price of $380.000 was 15% higher than in December of 2008 and 35% above the median low set in March 2009. Real estate experts are starting to believe that history will soon show Spring of 2009 as the market bottom.

According to the records, 22.7% of the homes sold in December 2009 were purchased for cash. The number of sales in the area was 13.6% higher in December 2009 than in the previous December. This market is still skewed towards lower priced homes with most of the sales going at FHA qualifying levels.

Sacramento Region

In the Sacrament region and especially in Sacramento County, foreclosures continue to hold back value gains. Sacramento County finished 2009 with the median price 0.6% above December 2008. Pricing was stronger during the last half of the year and the median foreclosure sale value increased by 4% in December over November. Mike Lyon, the owner of the largest real estate broker in the region had this comment:

…..prices for homes under $300,000 continue to appreciate at rates seen before the 2005 real estate market crash. “We do not see this slowing in the near future until interest rates rise by midyear”, said Michael Lyon, CEO of Lyon Real Estate.

2010

Foreclosures yet to hit the market continue to be the wild card for California prices. In the Sacramento area foreclosures hitting the market wer 22% higher than in December 2008 and 2010 the number is expected to exceed the 2009 levels by 15%.