Housing Update

The DOW had its first down week in sometime. This is primarily due to the effects of the housing and sub prime markets. Lowe's stock is down due to lower earnings, Home Depot's stock is down due to lower earnings, and the companies such as Morgan Stanley and Lehmen are down. Those are companies that, for lack of better words, funded many of these sub prime companies.

New home construction have dropped approximately 40% since the same time last year. Knowing that, there is still a huge overhang of inventory of existing homes and new homes. The talking heads on CNBC and such have finally been forced to acknowledge these things, although they still try and spin it. They have said much of the cool off in the stock market is because of Bernarke's comments regarding inflation and the higher than expected CPI results. This may hold some truth, but definitely the majority of this slump is due to the wreck that is housing and sub prime lending.

Remember, there are $800 billion dollars of ARM mortgages to reset higher this year. I expect this to bring more pressure on the prime and sub prime markets. This thing should continue to unravel bringing with it strong economic troubles.