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Tuesday, January 06, 2009
Pending Home Sales Plunge 4% to Record Low
Ken Sweet
FOXBusiness
The housing market continued to deteriorate in the last months of 2008, a housing industry organization said Tuesday, as the credit crisis and falling stock market continued to provide little reason for buyers to sign the doted line for a new home.
The National Association of Realtors said its index for pending home sales fell 4% in November to a seasonally-adjusted reading of 82.3. The October reading was also revised downward to 85.7.
The reading was much worse than economists had expected, according to data from Thomson Reuters, who were looking for an index reading of 88.
“Mounting job losses and very weak consumer confidence deterred home buyers from signing contracts in November,” Lawrence Yun, chief economist for NAR said. “December’s housing market activity could be comparably lower due to ongoing problems in the economy.”
In the Northeast, home sales dropped 7.2% in November, while in the Midwest the index fell 6.7 %, the South declined 2.2%, and in the West, the index was down 2.4% from a month ago.
Factory Orders
The U.S. Commerce Department reported factory orders fell 4.6% during the month of November, much more than what economists had expected.
Durable good orders, which are for products expected to longer than three years, fell 1.5% in November while non-durable orders, which includes petroleum products, fell by 7.4%.
Economists, on average, were looking for factory orders to decline by 2.2%. The drop in factory orders was the fourth-straight drop for that economic indicator.
Unfilled orders, which are viewed as a sign of future demand for goods, were 0.6% lower in November.
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Not everyone has the financial ability to own and rent out multiple houses for extra income. And even fewer people want to deal with late night calls from tenants crying about their broken oil burner. Well, thanks to real estate investment trusts, or REITs, you don't have to deal with the stresses of being a landlord to make money off of the real estate market.
A REIT is any entity that pools money from a group of investors to buy different kinds of real estate or real-estate-related assets, such as buildings or mortgages on buildings. It uses the income from rent and loan interest to pay out a steady monthly dividend to its investors.
There are three types of REITs. The most common one is an equity REIT, which simply buys buildings and generates revenue from the rent it charges. Mortgage REITs loan out money to owners of real estate for mortgages or buy existing mortgages to collect interest, which is then paid out to the REIT's investors. Finally, there are hybrid REITs, which are a combination of mortgage and equity REITs.
REITs can be public or private. Public REITs are bought and sold just like stocks and are listed on exchanges, while private REITs can only be bought through direct-participation programs. With private REITs, the investors are actually part owners of the real estate rather than just shareholders of the REIT corporation. They can't sell shares and they typically have to keep their money tied up for eight to 12 years. However, there's the benefit of less volatility since the market can influence public REITs.
One potential drawback to REITs is how they are taxed. While qualifying equity dividends are normally subject to only a maximum of 15%, the dividends from REITs are taxed as regular income, which could be much higher -- depending on how much money you make.
