Housing pluses and minuses

Comments in the earnings reports from homebuilders Toll and HOV
highlight the signs of stability but also still the fragility in
housing. Toll’s ceo said “with interest rates near historic lows and
housing affordability near historic highs, it appears that some buyers
are beginning to re-enter the new home market.” HOV’s ceo echoed
something similar but also laid out his concerns that “the expiration of
the $8,000 federal tax credit in November this year, the depletion of
the state funds allocated for the $10,000 CA state tax credit for new
home buyers and the potential increase in existing home listings due to
another wave of foreclosures as the recent moratoriums on foreclosures
have ended could have a dampening effect on our future contract pace.” I
say add to this, mortgage rates at 4 mo highs. The MBA said refi’s fell
24.1% to a 3 mo low but purchases rose 4.3% to a 2 mo high. ABC
confidence fell 2 pts to a 7 week low. With the bond market over the
past few weeks vehemently questioning the prudence of both monetary and
fiscal policy, Bernanke testifies on the economy at 10am before the
House Budget Committee. May ADP jobs report is expected to fall by 525k.

The ISM services index is expected to come in at 45 vs 43.7 in April.

II: Bulls 42.5 v 40.9 Bears 25.3 v 28.4, bears lowest since early Jan ’08

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