Economic Update – More Troubling Indicators

After the stock market’s strong performance on Tuesday, some worrisome economic figures put a damper on the party on Wednesday. The National Association of Realtors has pegged the nation’s unsold housing inventory–including single-family, townhouses and condos–at 3.97 million units in April, or roughly a 10-month supply at the current slow-mo sales pace. Unsold residential inventory hasn’t been that high since last November, noted the organization. Not that sales are down. In April, housing sales were up 2.9 percent from March, according to the NAR, spurred by prices considerably off peak, perhaps even down to 2003 or 2002 levels in some places, depending on who’s doing the estimating. The median U.S. house price was $170,200 in April, a skosh higher than $169,900 in March, but a lot less than the April 2008 median of $201,300. Foreclosures, however, are not slowing down either, and are proving to be a stubborn factor in keeping the housing inventory high. Some 313,000 households nationwide entered foreclosure in the first two months of 2009, and there’s no sign the pace will slow down, as long as the recession has some time to run. Which it likely does. Economist Peter Morici, professor at the Robert H. Smith School of Business of the University of Maryland, posits that the recession does indeed still have some legs, with the prospect of foreclosure for roughly 2 million more households by the end of 2010. So was Tuesday’s optimism a little too soon? “It seems so to me,” Morici told CPN, adding that the next report on U.S. durable goods orders, which will be issued by the U.S. Department of Commerce on Thursday, is expected to show a 0.3 percent drop in April. That important forward-looking indicator of economic health would likely indicate that the recession has some time to run, said Morici. Banks, at least, had a fairly good 1Q09, especially when compared to 4Q08. The Federal Deposit Insurance Corp. reported on Wednesday that U.S. banks and thrifts posted a $7.6 billion profit in the first quarter. That might be about 60 percent less than during 1Q08, but it beats losing money, which banks did to the tune of $32.1 billion during the last quarter of 2008. Not that banks are quite out of the woods. Noncurrent loans increased some 26 percent, or $59.2 billion, during 1Q09 for the nation’s banks, according to the FDIC. Noncurrent commercial real estate loans spiked upward some 40 percent from the fourth quarter ’08 to the first quarter ’09. So feel-good Tuesday was followed by a distinct Wall Street hangover on Wednesday, with the Dow Jones Industrial Average down 173.47 points, or 2.05 percent, while the S&P 500 was down 1.9 percent and the Nasdaq lost 1.11 percent. Perhaps investors got wind of the aforementioned housing supply excess, or the looming bankruptcy of General Motors, or the latest antics of Kim Jong Il, provided he’s still in charge.