Investors pulled out a record amount of money from gold bullion-backed exchange-traded funds (ETFs) this past February. A total of $4.1 billion was withdrawn from gold bullion ETFs last month, the largest single-month outflow since January of 2011. (Source: ETF Trends, March 6, 2013.)

Gold investors fled the market on speculation that gold bullion prices will plummet, as the metal’s future looks anything but bright—the theory being the global economy is improving and central banks will need to pull back on their easy monetary policies.

But, as investors sold ETFs in February, central banks around the world added to their gold bullion reserves.

South Korea added another 20 metric tons of gold bullion to its holdings in February—raising its gold reserves by 24% to 104.4 tons. Since June of 2011, South Korea has purchased gold bullion five times. (Source: Bloomberg, March 6, 2013.)

Similarly, central banks from Russia and Kazakhstan have been increasing their gold bullion holdings as the prices go down. According to the International Monetary Fund (IMF), the Russian central bank purchased 12.2 tons of gold bullion in January.

As the World Gold Council cites, central banks across the world ramped up their gold bullion buying; they bought 534.6 tons last year, 17% more than the previous year.

Dear reader, when you have the former biggest sellers of gold bullion, central banks, turning into buyers, it is nothing less than a bullish indicator.

What holds true is that central banks need gold bullion because countries around the world are in an outright war to lower currency values and thus central bank reserves are in danger.

I will turn bearish on gold bullion the day I find central banks have both turned to net sellers and stopped printing paper money out of thin air. Until then, I see the current correction in gold bullion prices as a great opportunity for investors.

Michael’s Personal Notes:

The chart below is the S&P Case-Shiller 20-City Home Price Index.

Chart courtesy of www.StockCharts.com

From the S&P Case-Shiller 20-City Home Price Index, we can see that home prices are still down almost 30% from their peak in early 2007.

As the chart shows, a little change in home prices doesn’t really mean recovery in the housing market. On average, home prices in the U.S. economy will have to go up about 42% for the people presently living with negative equity in their homes to break even. This much of a recovery could be far away for ... Read More

Chart courtesy of www.StockCharts.com

From the S&P Case-Shiller 20-City Home Price Index, we can see that home prices are still down almost 30% from their peak in early 2007.

As the chart shows, a little change in home prices doesn’t really mean recovery in the housing market. On average, home prices in the U.S. economy will have to go up about 42% for the people presently living with negative equity in their homes to break even. This much of a recovery could be far away for the U.S. housing market…

According to RealtyTrac, foreclosures in the U.S. housing market dropped seven percent to 150,864 in January from the previous month. One in every 869 homes in the U.S. housing market was on the verge of foreclosure in January. (Source: RealtyTrac, February 12, 2013.)

And, according to real estate research firm CoreLogic, in October of 2012, foreclosures accounted for 11.5% of total home sales. In the same period of 2011, they accounted for 17.3%. But in the same period when foreclosures declined, short sales climbed from 10.4% to 8.4% of all sales. (Source: Wall Street Journal, March 5, 2013.)

Short sales, where a homeowner sells his/her home for less than the mortgage and the bank takes the loss, have taken up the slack in foreclosures! Add to this the fact that first-time home buyers are not present in the U.S. housing market rebound while institutional investors are buying single-family homes in bulk and renting them, and all of a sudden the U.S. housing market rebound is questionable.

There is no doubt the U.S. housing market is one of the places that can drive the U.S. economy towards economic growth. When Americans buy homes, they spend money to get things needed to run the household; consumer spending increases, businesses sell more, and so on and so forth.

As long as the housing market stays distressed, you can forget about economic growth. There is no doubt prices in the U.S. housing market have increased since 2012, but looking at the bigger picture, I’m skeptical. If the U.S. housing market is any indicator of economic growth, I am certainly not betting that the U.S. economy will do any better.

Where the Market Stands; Where It’s Headed:

I may be the only bear left standing, but that doesn’t bother me.

We have a stock market that has risen simply from an expanding money supply (money printing and artificially low interest rates). Corporate insiders are selling, corporate earnings growth has turned negative, stock advisors are far too bullish, the economy is slowing—all the indicators of a market top.

What ... Read More

The post U.S. housing markets that are projected to see slowest growth in home prices appeared first on CEOWORLD Magazine.

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After two consecutive monthly declines, real disposable personal income in the U.S. (removes taxes and inflation from income to provide a better gauge of a consumer’s real purchasing power) increased by a mere 0.2% last month.

So, if consumer spending makes up 70% of U.S. GDP, and there has been no real growth in personal income, how did GDP grow 2.2% in the first quarter of this year? The answer: Consumers dipped into their savings, sending the savings rate to the lowest level since before the crisis, in 2007.

There was no strong income growth to justify consumer confidence and GDP growth; consumers dipped into their savings. I doubt consumers can keep tapping their savings for the remainder of the year to keep GDP growing.

The news gets worse. Business investment in infrastructure spending actually declined in the first quarter. So we have the consumer getting into more debt and the job creation engine of business not investing in infrastructure, which means little chance of job creation in future quarters.

“Everything’s fine with the U.S. economy and GDP growth,” is what one would believe reading the mainstream media. Be very careful, dear reader.

A total of 0.6% of the 2.2% GDP growth in the first quarter came from inventory building. This number was surprisingly high considering how inventory build-up made the fourth-quarter GDP growth numbers look stronger than they actually were.

The shelves are full of inventory, but consumers are very indebted and real disposable income is declining, which means consumer confidence will not materialize. The only hope was to create more jobs, but business investment fell in the first quarter.

Obviously, U.S. GDP growth in the first quarter outperformed that of many countries around the world, especially considering the fact that the U.K. and many countries in Europe are already back in recession. However, once the U.S. GDP growth figures are looked at closely, there really is nothing to smile or cheer about.

We are far from out of the woods with the U.S. economy. Again, many European countries are back in recession. China’s economy is slowing quickly. It will not take much for the U.S.’s already weak GDP numbers to collapse…putting us back into recession much …

U.S. homeownership fell to 65.4% in the first quarter of 2012 (source: Bloomberg, April 30, 2012). Homeownership of 65.4% means that of all the occupied housing units in the U.S. housing market, 65.4% were occupied by the actual owner. This is down from the record 69.2%, which was set at the height of the housing market bubble in 2004.

The 65.4% U.S. homeownership level is also the lowest seen in 15 years!

I believe the homeownership rate will continue to drop in the coming years. As I’ve written in these pages, more people are deciding to rent instead of buy in the U.S. housing market.

The main reasons for renting are that banks are not lending out to people. Mortgages are hard to get. Secondly, real disposable incomes are not rising at all for people to justify entering the housing market—the average American is not feeling wealthy; they feel they are just getting by. A third reason is that the record $1.0-trillion in student loans will restrict many first-time home buyers from getting a mortgage, because they already have too much debt.

Another good reason people are deciding to rent: like the stock market, after people have been burned or have family members and friends that have been burned by stocks, one tends to stay away from the stock market in general. The housing market is no different, especially after the horrible collapse of 2007 and the lingering pain many are still feeling today.

The Mortgage Bankers Association (MBA) released its latest housing market report for the fourth quarter of 2011. Its survey covers almost 44 million homes in the U.S. housing market (33% of all homes in the U.S., which is why I believe it is a dependable survey).

The MBA rated all mortgages in the U.S. for delinquency, which means that payments from homeowners are at least 30 days past due. The delinquency rate in the housing market fell to 7.6%, well below the highest level reached in 2010, 10.2%. But these numbers are still dangerously high. After recessions and in an economic recovery, this figure should be half that.

The foreclosures rate in the U.S. still remains very high, as confirmed by RealtyTrac, which estimates the numbers of homes in foreclosure at 5.6 million. As I’ve been writing in these pages, home foreclosures should continue to rise in 2012.

This means that more empty homes will enter the housing market, further putting pressure on home prices. CoreLogic released its “Real House Price” Index for February 2012, which adjusts for inflation. Home prices in February of 2012 are now back to levels last seen …

Student loan debt is now larger than the country’s total credit-card debt (source: Consumer Bankers Association). So much for encouraging consumer spending.

The Federal Reserve Bank of New York recently reported that roughly 27% of student loans were more than 30 days past due. Don’t expect that 27% to increase consumer spending. (Also see: U.S. Student Loan Crisis Developing.)

The reason for this distress in paying student debt is the weak economy that is not producing enough quality jobs with good salaries, placing great strains on consumer spending. The Bureau of Labor Statistics estimates that the current unemployment rate for those aged 20-24 is close to 14%, while the unemployment rate for those aged 25-34 is 8.7%.

While the Bureau of Labor Statistics estimates the unemployment rate among these age groups, it doesn’t capture the underemployed—workers taking lower paying jobs or part-time work or work that doesn’t reflect their skill set—accurately, but just last month, the Pew Research Center released its latest study on the situation.

It finds that the unemployment rate among the young is double the national average, placing more strain on consumer spending. It also finds that, although all age groups were hit hard during this latest recession that began in 2007, those aged 18-24 were hit the hardest, as evidenced by the unemployment rate. This certainly affects consumer spending.

Those who are lucky enough to get jobs are likely to experience pay that is 10%-15% lower than those with experience (consumer spending increase?). This 10%-15% discrepancy is expected to last at least a decade before they finally catch up in higher salaries. Of course, the debt and interest on the student loan debt doesn’t wait for the newly employed to “catch up,” which will affect consumer spending as well.

PNC Financial Group released a study that revealed that 60% of those aged 20-29 are stressed about their debt. Although mostly burdened by student debt, the debt burden is increased by credit-card debt and car loans. The average debt amount for those aged 28-29 was $78,000, according to the study. Don’t expect increases in consumer spending by this group.

Only six percent of those surveyed were saving for retirement. Can you say “crisis,” dear reader?

What does this all mean? First, with younger people who are a huge part of the economy being so highly indebted, don’t expect drastic increases in consumer spending. Also, it is no wonder they are not participating in the real estate market at record low levels—they don’t have the financial means …

The National Association of Realtors reported last week that home resales in February were 7.7% higher than February of last year. The U.S. Commerce Department reports that February new home sales are up 11.4% from last February. Both sets of numbers bode well for the U.S. housing market.

The year-over-year strong jump in U.S. home resales of 7.7% and of new home sales of 11.4% can be explained by the unusual warm weather in the northeast, which caused some buyers to venture out home-shopping earlier this year, as the northeast really experienced no winter.

But the important thing to note in the U.S. housing market data is that resales and new home sales month-over-month are actually trending downwards.

As a matter of fact, the number of new single family homes sold in the U.S. is at an historic low, dating back 50 years. Yes, it is bouncing a bit from 2009 levels, but not nearly enough to move it past historically low levels.

The other issue with the U.S. housing market is the inventory of homes on the market.

The inventory of homes in the U.S. housing market rose to 2.43 million homes in February. Realty Trac is reporting that foreclosures are set to rise at least 15% this year over last year’s levels, as the courts manage to work through the improper paperwork submitted by the banks last year.

In 2012 alone—to the end of February—there were 410,000 homes in the U.S. housing market that received default notices, which is expected to increase as the year progresses. Add these foreclosures to the amount of unsold homes and one can see continued pressure in the U.S. housing market.

However, there is one statistic that economists are clinging to that may indicate that the U.S. housing market is recovering. Permits to build new homes are at a three-and-a-half year high.

While companies like Lennar Corporation (NYSE/LEN) are forecasting an improvingU.S.housing market for 2012, the nation’s fifth-largest homebuilder, KB Home (NYSE/KBH), posted a wider-than-expected quarterly loss and a steep drop in margins last week.

KB Home said that cancellations of new homes rose to 36% from 29% last year, which was the reason for the miss. Those permits for new homes don’t look like they are translating to homes actually being built, which comes as no surprise considering the glut of unsold properties in the U.S. housing market, high foreclosures in the pipeline, and a consumer that is not experiencing real personal disposable income growth.

So, home resales and new home sales have been dropping off recently in the U.S. housing market, while S&P Case-Shiller Home Price …

The housing market may be on its way up, but prices also need to follow home sales higher. The problem has been the massive inventory of home foreclosures selling at dirt-cheap prices across the nation, especially in the rust belt states and areas such as Nevada, Florida and Arizona that witnessed pricing booms years back and are now struggling to hold on. A quick look at homes in Arizona and Florida shows how far prices have come down.

We are seeing some heavy buying action in the foreclosure housing market that may drive prices higher. There is currently a strategy from investors and institutions who are buying foreclosed homes in order to rent them out in what is a growing rental market.

The U.S. government is looking at a trial project that would see Fannie Mae sell large pools of single-family homes in the distressed housing markets to investors. Fannie and Freddie Mac combined own around 200,000 foreclosed homes and, according to RealtyTrac, about 600,000 foreclosed single-family homes are held by the banks, so there’s quite a lot of inventory to get through. However, once the levels fall, we could see an upward move in prices.

The buying of foreclosed homes will eliminate some of the inventory build-up of the cheap homes and inevitably allow prices to move higher. At least that’s what I hope will happen.

The reality is that the activity in the housing market continues to show improvements, despite ongoing pressures with home prices. The ongoing strength with jobs growth and a downward moving unemployment rate is helping to attract more buyers to the housing market and the hope is that prices will advance higher. For now, home prices continue to struggle and this means reduced wealth for consumers to spend on non-essential goods and services. The Case-Shiller 20-city Index showed an average 4.0% price decline across the top 20 U.S. cities in December after a 3.8% decline in November. The problem has been the high foreclosures and short sales driving sales and placing a downward pressure on home prices, but, perhaps with the inventory declining, prices will stabilize.

Housing starts came in at 698,000 in February, just below the estimate of 705,000 and the revised 706,000 in January. This reading means that builders are seeing higher demand down the road in the housing market and this is positive. Moreover, the key Building Permits reading, which shows how well the building pipeline is doing, is also improving, with 717,000 permits in February, above the 695,000 estimate and the revised 682,000 in January.

The NAHB/Wells Fargo …

The Uneven Impact on the Housing Market

The Uneven Impact on the Housing Market