March U.S. new home sales plunge 8.5% to 17-year low

Filed under: Bad news, Economic data, Housing, Recession

U.S. new home sales fell to a seasonally-adjusted, annualized pace of 526,000 in March 2008 - - a 17-year low, the U.S. Commerce Department announced Thursday. (pdf)

Economists surveyed by Bloomberg News had expected March 2008 new home sales to register a 580,000 annualized rate.

Sales have now declined for five consecutive months, and are down 36.6% in the last 12 months.

Meanwhile, inventories surged to an 11-month supply at the March 2008 sales rate, up from a 9.8-month supply in February. Inventories are at their highest level since 1981. A healthy housing market typically has a 3-4 month supply.

Also, February 2008 sales were revised down slightly, to 575,000 from the earlier released 590,000.

In addition, the median sales price of new houses sold in March 2008 was $227,600; the average sales price was $292,200. The median sales price has now decreased 13.3% in the past 12 months.

Sales fell in every U.S. region: declining 19.4% in the Northeast, 12.9% in the West, 12.5% in the Midwest, and 4.6% in the South.

‘Scary’ housing stats

Economist Peter Dawson called the March 2008 housing statistics, “scary.”

“These are scary numbers. With an 11-month supply of houses, you’re looking at a housing market that won’t begin to recover until well into 2009, at best, which will be a major drag on the economy,” Dawson said. “It also obviously places more pressure on the Fed to cut interest rates.”

Dawson said equally troubling is the U.S. median sales prices decline. “A 10% decline nationally over the past year says there’s a remarkable amount of weakness in the housing sector,” Dawson said. “The last time it dropped more than 10% in one year nationally, I believe it was the Depression era [1930s]. Clearly, we’re going to need all hands on deck to turn this housing sector around. This is the worst housing slump I’ve ever experienced.”

Many economists and analysts expect new home sales to continue to decline through 2008, as home builders reduce construction, due to anemic U.S. economic growth, sluggish new household formation, and more-rigorous mortgage approval requirements.

Some analysts also argue that the U.S. new home sector may incur a corrective period as long as two to three years - - lasting through perhaps the end of 2009 - - to compensate for speculative overbuilding in selected regions of the country during the housing boom.

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Filed under: Before the bell, Earnings reports, Google (GOOG), Caterpillar (CAT), Citigroup Inc. (C), Honeywell Intl (HON)

U.S. futures are up this morning despite news of another bad quarter from Citigroup (NYSE: C). The financial services giant this morning reported a Q1 loss of $5 billion, or $1.02 per share, following $12 billion in write-downs on mortgage-related securities and leveraged buyout loans. Analysts had expected superior figures but the market apparently took heart that they weren’t worse.

There were some good earnings reports for the bulls this morning. Dow 30 component Caterpillar Inc. (NYSE: CAT) earned $1.45 per share on revenues of $11.8 billion in the first quarter, beating estimates of $1.33, and projected strong full-year revenues and earnings. The company did foresee continuing weakness in the U.S. economy but remains somewhat upbeat on prospects for the global economy.

Honeywell International Inc (NYSE: HON) stated its Q1 earnings rose more than 22% on strong demand from the aviation and commercial construction sectors. Honeywell earned $643 million, or 85 cents per diluted share, compared with $526 million, or 66 cents a share, a year ago. Xerox is also due to report before the markets open.

Google (NASDAQ: GOOG) reported a 30% increase in Q1 profit after the close Thursday, beating expectations by more than 30 cents a share. Its revenues were up 42%, to $5.19 billion, over the same period last year. Google’s shares soared 17% in an after-hours “relief rally.”

Thursday markets were flat on a day of blended earnings reports, with Merrill Lynch disappointing, but IBM beating estimates. The Dow Jones industrial average rose 1.22 points or 0.01%; the S&P 500 was up 0.85 point or 0.06%; and the Nasdaq Composite lost 8.28 points or 0.35%.

No economic data are expected this day.

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Filed under: Good news, Launches, Industry, Consumer experience, Apple Inc (AAPL), Nokia Corp. (NOK), Sony Corp ADR (SNE)

Nokia Corporation (NYSE: NOK) will soon begin to offer music from artists at Sony BMG (a 50/50 joint venture between Sony Corporation (NYSE: SNE) and privately-held Bertelsmann AG) on the company’s music phones, reports Reuters. The addition of the second largest music company to top label Universal Music Group gives listeners and phone buyers access to tracks and the ability to keep those tracks even if they don’t renew the program (or, if Nokia and the labels do not renew the agreements). “Comes with Music” will launch later this year on a number of different Nokia devices in choose markets, and the phone company expects all labels to come on board before it is unveiled properly.

Reuters also commented that “such unlimited download models could offer a shot in the arm to the music industry, which is struggling to find ways to make up for falling CD sales.” In a market where Apple Inc. (NASDAQ: AAPL)’s iTunes Store is the top online retailer for music and other media, a free program with download abilities would not be a very welcome addition. With the developments in the industry over the past year or so, a move to complete digital access for listeners is quite revolutionary and a very different model for the labels to be embracing. The only shame to it all is that it took as long as it did for the labels to realize how they could readjust marketing and sales platforms in order that listeners, artists and the labels would all profit.

There are conflicting reports out there as well that Nokia was forced to give $35 million to Universal in order for the label to join up with the “Comes with Music” program, but no such details have emerged about the deal with Sony BMG. Regardless, if these types of reports are true, I wouldn’t be so surprised if the music industry expected, or demanded, large sums of cash in order to make tracks available in the type of program.

Nokia is certainly out to get music to consumers, but one has to wonder how much these phones will cost. If they are in the range of mp3 players like iPods or the iPhone then the price may be attacked just as readily as the newest generation of those models was. It would not be surprising, regardless of the phone price, if the program adds a small fee or requires some kind of plan straight through Nokia on top of existing phone plans. This is all speculation though, but the good news remains the extent to which the music industry is going to get its product to the consumers at hopefully lower costs and better availability.

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Filed under: Deals, Venture capital industry, Investments

OLX, a CraigsList look-alike, has secured some $13.5 million in second round funding according to a report from PEHub.com. Backers are listed as General Catalyst Partners, Bessemer Venture Partners, Founders Fund and DN Capital.

This is one we’ve looked into before when doing comparisons. It is of those on the internet portal and classifieds destinations that has sprouted up on the web last year (although it states founded 2006). The focus on this one seems to be more of an international focus rather than US-dominated, even though many listings are in the U.S.

OLX states that it means free local classifieds on a global level, which grants users to meet others, express themselves, trade products, find jobs, apartments, offer services, and more. According to its own site, the company is privately held and was founded in 2006. The service does state it will send an accept PayPal payments.

The company site lists the following as its target markets: Algeria, Argentina, Australia, Belarus, Belgium, Brazil, Canada, Chile, Colombia, Ecuador, France, Germany, Hong Kong, India, Indonesia, Ireland, Italy, Malaysia, Mexico, Morocco, New Zealand, Pakistan, Paraguay, Peru, Philippines, Poland, Portugal, Russia, Singapore, South Africa, Spain, Switzerland, Taiwan, Thailand, Tunisia, Ukraine, United Arab Emirates, United Kingdom, United Says, and Venezuela.

Interestingly enough, it also says users can be assured of a spam-free experience. Did they figure out a way to keep the Indian IT shops from sending you spam email for an IT request that you specify as on-site and local only with the request of no foreign firms sending emails (and they still do!)? While it is a Craigslist look-alike, the number of postings and the offerings seem a small fraction in comparison.

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Filed under: Deals

Take-Two Interactive (NASDAQ: TTWO) has insisted it would not negotiate a possible acquisition of the video game company with Electronic Arts (NASDAQ: ERTS) or anyone else until after release of its blockbuster Grand Theft Auto IV title on April 29. No wonder.

In a research note, UBS analyst Benjamin Schachter on Monday says that pre-release reviews of the game are “overwhelmingly positive,” with one reviewer describing it as “even superior than the hype suggests.” If GTA IV is as good as expected, Schachter estimates that it could sell six million-plus units in the U.S. in 2008, which would amount to $360 million in retail sales, and seven million to eight million units in the U.S. if the reviews are stellar, or $420 million to $480 million in retail dollars.

Yet while the presumed success of GTA will help Take Two in negotiating a superior deal with EA, which has made a tender offer to acquire the company for $26, or $1.9 billion, “at the end of the day we continue to believe that Electronic Arts will be able to purchase Take-Two in the $26-$28 range,” the analyst writes.

Continue reading at TechConfidential.com.

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Filed under: Major movement, Earnings reports, Good news, Industry, American Express (AXP), Options, Technical Analysis

Visa Inc. (NYSE: V) shares are rising this day after competitor American Express (NYSE: AXP) posted a first-quarter profit of $991 million, or 85 cents a share, ahead of analysts’ estimates of 81 cents per share. AXP’s international customer base nearly tripled in the quarter, which could be a good sign for V. If you think that the stock won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on V.

After opening trading at $55.00 on March 19, the stock has hit a new high today. V opened this morning at $76.00. So far this day the stock has hit a low of $73.91 and a high of $76.08. As of 12:25, V is trading at $74.67, up $2.37 (3.2%). The chart for V looks bullish and steady.

For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $60 range. A bull-put credit spread is an options position that combines the buy and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we’ll make a 6.4% return in just two months as long as V is above $60 at June expiration. Visa would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.

V hasn’t been below $60 since just after its IPO and has shown support around $70 recently. This trade could be risky if the company’s earnings (due out on Monday) disappoint, but even if that happens, this position could be protected by the support the stock might find between $60 and $65, where it made intermediate bottoms over the past two months.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in V or AXP.

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Filed under: The Blackstone Group, Raising money, Management fees

There was an interesting communication from The Blackstone Group, L.P. (NYSE: BX) this morning and the news is out.

Blackstone announced the closing of Blackstone Real Estate Partners VI. Its total capital commitments are listed as $10.9 billion, and it noted that this now makes nine different real estate funds since inception and this is creating the largest real estate opportunity fund ever raised.

Blackstone shares are nearly 3% higher today at $16.33 in mid-day trading. While this is still a busted IPO of large proportions, Blackstone shares are more than 20% north of recent lows ($13.40).

For more on buyouts and IPOs, go to 24/7 Wall St.

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Filed under: International markets, Bad news, Housing

Royal Bank of Scotland said it will sell 12 billion pounds or $23.9 billion worth of new shares to boost capital, Bloomberg News reported Tuesday.

RBS (NYSE: RBS) has suffered from capital depletion following loan and related credit mark-downs, and as a result of its $114 billion purchase with Banco Santander (NYSE: SAN) and Fortis of ABN Amro.

Shares of RBS fell 30 cents to $7.19 on the news in Tuesday morning trading. Shares have declined more than 45% since October 2007.

RBS said it expects a huge increase in the expected losses it faces on its portfolio of poorly performing loans and assets, including U.S. subprime mortgages and leveraged loans to private equity deals, The Financial Times reported Tuesday. The bank stated these additional writedowns would reach about $11.8 billion — three times the losses the bank has already recorded.

Worst not behind banks?