why we can’t have a sustained economic recovery
TRANSCRIPT
By- Michael Lombardi
• I’ll get right to the point, my dear reader. We cannot have a sustained economic recovery without a recovery in the real estate market (see Without This Fixed, the Economy Cannot Recover). Job growth in the U.S. will not happen unless the construction industry, housing industry and real estate market in general come back. And, from all sides, we can see that the housing market is far from a recovery.
• Consider these facts about the real estate market:• The median price of a new U.S. home fell 10% in September 2011 from
September 2010, the biggest drop in two years.• The median price of a resale home, which makes up 94% of the real estate
market, fell 3.5% in September 2011 from September 2010.• Cash deals account for 30% of all home resale transactions in the U.S.• The Dow Jones U.S. Home Construction Index, an index comprised of the
largest U.S. homebuilder stocks and a great leading indicator of the real estate market, is still down 80% from its 2007 high—the worst performance of all Dow Jones sub-indices
• Where the Market Stands; Where it’s Headed:
• Last trading day of the month and it looks like October is going to go out with a bang! What a difference a month makes. We started out October close to 10,400 on the Dow Jones Industrial Average. We are closing the month around the 12,000 level. But, despite the market’s recent run-up, pessimism still reigns with stock advisors, investors, and consumers.
• We are in Phase II of a secular bear market. This phase of the bear market will move stock prices higher, as the bear convinces investors that stocks are a safe investment again. Phase II of bear market rallies can last three to four years. This bear market rally has lasted 32 months thus far and shows no signs of abating.
• What He Said:• “A Stock Market’s Obituary: It is with great sadness that we announce the passing of the
Dow Jones Industrial Average. After a strong and courageous battle, the Dow Jones fell victim to a credit crisis and finally succumbed on Friday, October 3, 2008, when it fell decisively below the mid-point between its 2002 low and its 2007 high.
