Home Sales & Construction
Research for Online Investors

by John Dalt

7/26/11

The Case-Shiller Home Price index was released this morning.  It showed the second straight month of softening prices in the housing market.  Home prices in 20 cities fell 4.5% in the year ended in May.  Detroit, Las Vegas and Tampa were down over April and Phoenix was unchanged.  April’s numbers were revised to show a 4.2% year-over-year decline.

Minneapolis had the largest year-over-year decline in home prices at 12%  The one statistic that doesn’t surprise me, Washington D.C. recorded the ONLY increase in housing costs at 1.3%  Government is growing; employees and lobbyists need a place to live!

The U.S. Commerce Department released their New Home sales report for June and showed a rise in price accompanied by lower volume.  This was interpreted as a lower inventory squeezing prices higher.  Commerce reports a record low inventory of new homes for sale of 164 thousand units.  New home sales are being held back by the glut of foreclosures on the resale market.  There were 3.77 million homes listed for sale in June.  Median price for new homes sold last month rose to $235,000.  That was an increase of 5.8% over May, and a 7.2% increase over year ago levels.

Existing home sales still look soft, but new home sales look to have stabilized at a level that may allow the housing construction industry to build from.

Subscriber D.H. sent a resource article on Greece this morning.  Some highlights;  Greece was not allowed to join the eurozone in 1999 because their national budgeting didn’t adhere to austerity standards required by the eurozone community.  They were eventually admitted in 2001.  Greece has been in default approximately half the time since the modern state was formed in 1829.  At the end of WW1, during the Paris Peace Conference, Greek representatives falsified reports on their economy because the government did not even collect data.

According to the article, more than 30% of Greece’s economy is “underground” so people don’t have to pay taxes.  Out of a total population of 10 million people, only six reported income in excess of one million euros last year!  Greece has one of Europe’s highest public employment sectors as a percentage of total population.  Female public employees were allowed to retire at 51 years old and males at 58 years of age.  It is illegal to fire a public employee because of poor performance.

Understanding the underlying reasons for the Greek budget mess (spotty tax collection and bloated spending) and thus credit problems makes you wonder why anyone would loan the government money.  Would a bank loan money to a customer that had spent as much time in bankruptcy as not…for the past 180 years?  Of course, Greece wanted to be in the eurozone monetary union, it opened the spigots of cheap money regardless of the country’s history of mismanagement.

Quote:
The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.---Thomas Jefferson

Would there be any benefit to elimination of oil subsidies to big oil companies and letting the Bush tax cuts expire?---subscriber P.S.

John’s reply:  The "subsidies" for oil companies that the democrats bring up all the time are expensing rules for the cost of drilling oil wells and the way they calculate the depletion of an oil field.  I don't have a dog in the fight as I don't have oil wells, but every tax payer should be treated equally.  If you take away these, it should follow to take away any "special" incentives that other companies receive.

These incentives were written into the law in the '70's to encourage oil production.  It should not matter the size of the taxpayer in the tax code, in other worlds if you take away tax incentives it should apply to all.  The end result will be less U.S. oil production, because marginal wells are kept in production now because the tax laws make them economically viable.

I don't mind letting the Bush Tax laws expire...all of them.  Bring back all of the citizens in the lower brackets that had their taxes lowered or eliminated completely.  Again, it doesn't matter the size of the taxpayer, everyone should be treated equally.  I would like to see everyone pay something and eliminate 'earned income tax credits.'  This is sick that some people file taxes and receive a refund larger than their withholding.  This was part of Bush's "Compassionate Conservative" agenda.

A little progressiveness in the tax structure is tolerable, but when people become wards of the state they want more since they do not pay anything to support the programs.

On the tax issue, the other favorite of Obama is corporate jets. What is the difference between jets and locomotives?  Both are capital expenditures made for business.  Why does Obama want to depreciate them differently?  This was from Warren Buffett on CNBC.

Taxpayer’s actions should not be rewarded or punished by the tax code depending on the occupant in the White House.  Our country has hit a new low that this sort of 'populism' has any audience.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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