Every month now, the Case-Shiller home price index is setting a new record for the largest price drop, but some are seeing a silver lining in that cloud. There are a couple cities tracked by the index that appear to be heading in a positive direction. Cleveland and Boston both showed a price increase over the previous month. Cleveland lead the way with a 1.1 percent month-over-month price increase, while Boston barely held positive ground, with a 0.1 percent month-over-month increase. This came on the heels of some other positive news regarding the housing market, which is leading some to say the market rebound is coming.
The other positive news regarding the housing market was that new home sales rose by 2.7 percent in September, beating expectations. In addition, it looks like the Fed is preparing to lower interest rates, and the $700 billion bailout money is starting to get circulated, which many hope will soon jump start lending. Will this all be enough to fix the mess that is the housing market right now? I doubt it.
The real determinate in all of this is whether or not you feel that the U.S. economy is on the right track. If you think that all these fancy bailout measures are going to fix the problems we are facing, then you can probably figure that the housing market is going to rebound as well. On the other hand, if you don’t think that the economy is heading in the right direction, then calling a real estate market rebound is very premature. There is a lot of hope that the measures already in place--along with the fact that the election is next week--will bring stability to the markets. While I certainly think it might, at least for a brief period of time, I just don’t see how it will last. The fundamentals that brought the economy to its knees are still in place, and in some cases are even worse than before. So how can we say that a new president is going to magically make everything better? The answer is that he won’t, but he might make people forget about all the underlying problem--at least for a little bit.
The latest consumer confidence poll from The Conference Board fell to an all-time low of 38 percent, according to the Wall Street Journal; this is down from more 64 percent in last month’s poll. People are extremely fearful and cautious right now, and any glimpse of stability is likely to help somewhat. The election will certainly bring that, but again, the new leader is going to come into an exceptionally difficult situation. Layoffs keep coming and the credit markets still haven’t been opened. The government has written a lot of checks, but so far the only thing they have accomplished is adding to the already astronomical national debt tally. I certainly do not envy the position the new president is going to be put in, and no matter how good they are, I just don’t see how they are going to be able to fix all these problems. It is going to take a lot of time and heartache to get this ship righted. I certainly wish the new president the best, and I hope he does an amazing job, but I’m not holding my breath that he is going to be a miracle worker. It is likely that we will see the markets rally after the election, but investors beware.