CHESSNOID

We have a lot of financial reports to be released this week which will in turn drive the stock market up and down. I am guessing we can predict what type of news it will be. What is challenging is trying to predict how investors will react to the news. According to Bloomberg:

One source of concern for the Fed is the worst housing slump in a quarter century. The National Association of Realtors may report tomorrow that January sales of existing homes fell 1.8 percent to a 4.81 million annual rate, the Bloomberg survey median shows. Existing-home purchases account for 85 percent of the market.

New home sales, which account for the rest of the market, dropped 0.7 percent to an annual pace of 600,000 last month, the third consecutive drop, according to the Bloomberg survey median. The Commerce Department will report the figures Feb. 27.

Sales of new homes are viewed as a leading indicator of the market because they are tabulated when a contract is signed. Existing-home sales reflect contract closings, which typically come a month or two later.

The glut of unsold properties is pushing prices lower. The S&P/Case-Shiller home-price index, scheduled for release Feb. 26, may show prices in 20 U.S. metropolitan areas fell 9.8 percent in December from a year earlier. The decrease, the 12th in a row, was the biggest since the group started keeping year- over-year records in 2001.

The other country keeping in step with our housing declines is the United Kingdom.
I wonder why thier country’s economy is mirroring our own economy. In another Bloomberg article:

U.K. house prices dropped for a fifth month in February as banks curbed mortgages and buyers struggled to afford them, a report by Hometrack Ltd. showed.

The average cost of a home in England and Wales fell by 0.2 percent to 174,400 pounds ($343,000), the London-based research company said today. House prices increased an annual 1.4 percent, the least since April 2006.

I don’t think the interest rate cuts are the solution to the current housing bust problems we are experiencing. That is again one of the reasons why we got into this bubble mess. This week Congress will examine a new bill that would allow bankruptcy courts to make decisions that would make the banks upset. I would like to know more of the details. This is what I read from Yahoo:

A bill likely to be debated on the Senate floor Tuesday includes a proposed revision to the U.S. bankruptcy code that would allow judges to cut interest rates and reduce what’s owed on troubled borrowers’ mortgages. Currently, mortgage lenders can foreclose against a homeowner in default on a primary residence 90 days after a bankruptcy filing, and judges have no authority to order changes in mortgage terms.

“This week we have an opportunity to pass a housing bill that will help the economy recover, help American families stay in their homes and change the law so this never happens again,” said Sen. Richard Durbin of Illinois, the Senate’s second-ranking Democrat and author of the proposal to ease bankruptcy rules.

The bankruptcy measure, a similar version of which has cleared a House committee, is fiercely opposed by lenders and many Republicans.