U.S. Economic/Financial News
News Reports Covered Up Another Housing Plunge in March
Extremely misleading reports in the U.S. press covered up another severe drop in housing starts nationally in March, which occurred along with another upward lurch in foreclosures, estimated at 25% above February levels.
New U.S. housing starts fell to an annualized level of 1.518 million homes in March 2007, from a level of 1.972 million in March 2006, a fall of 23% year to year, the Commerce Department announced April 17. These figures are "seasonally adjusted"although the same month is compared for each year; when unadjusted figures are compared, the drop from March 2006 is about 25%. Simultaneously, for March of this year compared to March of a year earlier, the level of U.S. building permits for homes fell by 26%.
Emergency Meeting on Housing Crash
Industry movers and shakers, including banks, lenders, heads of Fannie Mae, the FDIC, Freddie Mac, and consumer groups held a "seven hour closed door meeting" at FDIC headquarters April 16, according to the Washington Post. A statement said they "agreed on a goal of keeping deserving borrowers with high-risk mortgages in their homes," according to FDIC head Sheila Bair. EIR is investigating this and other indications that a major LTCM-type bailout of the mortgage market is underway.
Inland Empire Latest Victim of Housing Bubble Collapse
The Inland Empire of Southern California is being walloped by the housing bubble implosion. For those willing to commute to jobs in the Los Angeles Basin, it long provided housing cheap enough for even the lower middle class to buy. However, for many who jumped on the bandwagon during the recent expansion of the housing bubble, relying on such instruments as sub-prime mortgages, the future looks grim.
The Inland Empire encompasses a vast area east of Los Angeles in the San Bernardino and Riverside Counties, and is centered on the cities of Riverside, San Bernardino, and Ontario. According to a manager with the Neighborhood Housing Service of the Inland Empire, a group that promotes home ownership, calls regarding foreclosures have jumped from one per month, to 50 per month in recent months. Mortgage defaults for the first quarter of 2007 are up 168% over last year's first quarter figures. The price of property in some Inland Empire towns has doubled in the last five years.
According to Dr. Christopher Cagan, director of research and analytics at First American Real Estate Solutions (as quoted in the Financial Times April 21), "Anything can turn that has doubled in five years.... What we have is an explosion of building and an explosion of generous lending. There was no single villain." The growth of the Inland Empire bedroom communities has been going on for 30 years, but the acceleration, spurred by initially cheap land and liberal building statutes, and fueled by increasingly lenient mortgages, has trapped many of the working poor and lower middle class in an untenable situation: Now, with a housing glut, and plummeting prices, they own houses they can't afford to keep, and can't sell except at a huge loss.
NYMEX Announces New Uranium Futures Contract
The New York Mercantile Exchange (NYMEX) announced April 16 that it will introduce, beginning May 6, a cash-settled uranium futures contract that would be traded on its electronic platform (the CME Globex and NYMEX Clear Port). The International Herald Tribune reported April 16 that such a contract, "would provide [speculators] a forum to bet directly on gains and falls in the price of uranium, rather than speculating on the fortunes of miners," i.e., mining companies. Hedge funds could buy and sell uranium yellowcake contracts, without ever having to provide or take physical delivery of the ore.
Numerous reports indicate that during the past year, hedge funds have been significant players in speculative buying of physical uranium on the "spot" market. As a result, by Monday morning, April 16, the price of uranium had been bid up to $113 per pound, with a record $18 per pound increase alone during the previous week, and an approximate tripling of its price since Spring 2006.
With Russia, China, and several Asian nations planning ambitious programs of nuclear power plant construction in the immediate future, the speculative bidding up of uranium prices would have a negative effect on such plans.