A real estate group says sales of existing homes plummeted far more than expected last month as buyers reeled from October’s big plunge on Wall Street. The median sales price fell by the largest amount on record. The National Association of Realtors said that sales of existing homes fell 8.6 per cent to an annual rate of 4.49 million in November, from a downwardly revised pace of 4.91 million in October. Sales had been expected to fall to a pace of 4.9 million units, according to Thomson Reuters. The median sales price plunged 13.2 per cent in November to $181,300, from $208,000 a year ago. That was the lowest price since February 2004 and the biggest year-over-year drop on records going back to 1968.
Federal and state regulators announced a revised pact to reshape the home appraisal industry as part of a settlement with mortgage finance companies Fannie Mae and Freddie Mac. Widespread complaints of problems with the appraisal process and its impact on the nation’s housing market led New York Attorney General Cuomo to reach an agreement in March with Fannie and Freddie on a new plan to reform the troubled industry. The original settlement, however, brought complaints from bank regulators, who said it violated federal law and could have an unintended negative impact on the mortgage industry. The new agreement is effective May 1st and requires appraisers to abide by a six-page code of conduct.
The economy was shrinking in the summer and corporate profits were falling even before the financial crisis struck with full force. Analysts are forecasting that those small declines will be followed by much larger decreases this quarter as the longest recession in a quarter century gains intensity. The Commerce Department reported that the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 per cent in the July-September quarter, while corporate profits fell 1.2 per cent. The fall in GDP was unchanged from an estimate made a month ago. The decline in corporate profits was slightly larger than the 0.9 per cent fall estimated a month ago. Some economists believe the economy’s decline in the October-December period could be as large as six per cent. If so, that would be the worst quarterly drop since 1982. Many economists think this quarter could mark the low point of the recession, which is already the longest in a quarter century, said to have begun in December 2007.
Holiday sales may drop as much as two per cent, according to the International Council of Shopping Centers, making it the worst Christmas sales season since at least 1969, when the New York-based trade group started tracking data. Steep markdowns by retailers could erode profit margins in the fourth quarter. Last weekend had the lowest U.S. shopper turnout in at least six years, according to a survey by Americas Research Group.
There’s last minute shopping, and then there’s really last minute shopping. More and more stores are extending hours to the point that some won’t close for a single minute between now and Christmas. It’s part of a growing trend designed to help shoppers with less and less time to get out and spend. Macy’s is keeping about a dozen stores open until about the time Santa comes. But at a store near Chicago earlier this morning, the only lines were the ones at the in-store Starbucks. Store executives admit there are always going to be shoppers who procrastinate. And with sales down, their hope is that some of those last-minute shoppers will take advantage of the extended hours.
The National Retail Federation is asking President-elect Obama to add national sales tax holidays to the upcoming economic stimulus legislation. The group says it would help restore consumer confidence. Sort-term gains from spending and long-term growth from job creation, the NRF says, are needed to achieve economic recovery. The federation proposes tax holidays in March, July and October–each lasting ten days.
Vice President-elect Joe Biden says a new economic stimulus package will not be “politics as usual.” Be says he wants the American taxpayer to know the measure won’t include lawmakers’ pet projects or special-interest spending. Biden spoke at the start of a meeting of President-elect Barack Obama’s top economic staff. The goal has been for the incoming White House and the Democratic-controlled Congress to devise the broad outlines of a plan for lawmakers to consider in early January. Biden says details are still being worked out, including the amount of spending the measure will involve. It’s expected to range between $650 billion and $850 billion.
The Treasury Department says it has provided an additional $4.7 billion to 92 banks as part of the government’s $700 billion rescue of the financial system. The department released a list of 49 banks that got final approval last Friday to receive $2.8 billion. It said an additional 43 banks received final approval Tuesday, but those names will not be released until Monday. The money is being disbursed as part of the government’s effort to buy stock in banks, to bolster their balance sheets and spur them to step up lending to fight the worst financial crisis to hit the country in seven decades. But critics contend that many banks are not using the government funds for the purpose congress intended.
The rich are also feeling the squeeze of a struggling economy. A data service called SpendingPulse says luxury sales during the first week of December fell 34.5 per cent compared to a year ago. And they were down 23 per cent in the five weeks ending December 6th. A luxury consultant says it’s the “reality of where people’s bank accounts and investment portfolios are.” But don’t expect to see the rich bargain-hunting with you at Wal-Mart. They may be spending less, but they still want the best. Instead of buying six pairs of $700 shoes, they’ll buy two. Luxury brands are responding by cutting their inventory, changing the assortment of products they offer, and tweaking their ads. The diamond company De Beers has a new ad suggesting “fewer, better things.”
American Express says it received preliminary approval to receive $3.39 billion in capital as part of the government’s $700 billion bank investment program. American Express became eligible for the program last month after changing its structure to a bank holding company. The new cash gives American express a stronger capital base amid the ongoing credit crisis, and as funding options have dwindled in recent months. In return for the capital, American Express will issue the Treasury Department preferred stock and warrants to purchase common stock.
The Texas Restaurant Association says Texas is expected to lead the country in restaurant sales growth in 2009. The sector is expected to grow four per cent over the next year. National restaurant industry sales are expected to increase by 2.5 per cent in 2009. The group says a million Texans are employed by restaurants, and that’s expected to grow 23.4 per cent by 2019.
Pride International plans to spin off it’s $134-million shallow-water operations, according to the Houston Chronicle. The spinoff next year is contingent on a ruling by the IRS that shareholders won’t be taxed on the transaction.
Grey Wolf shareholders have approved the acquisition by Precision Drilling Trust of Canada. The $2 billion acquisition of Houston-based Grey Wolf means the absorption of Grey Wolf’s U.S. operations and its 3,000 employees.
A subsidiary of ExxonMobil has agreed to plead guilty to a criminal charge and pay $6.1 million for a 15,000 gallon diesel fuel spill at an Everett oil terminal in January 2006. Prosecutors said that ExxonMobil Pipeline, based in Houston, was charged with a criminal violation of the Federal Clean Water Act in connection with the spill into the Mystic River. Under the plea agreement, the Everett terminal also will be overseen by a court-appointed monitor. The plea agreement is subject to court approval.
Gasoline prices in Texas slipped by one cent to reach an average $1.54 a gallon during the holiday week. AAA Texas reported that retail gasoline prices appear to continue declining, but at a slower rate. Nationwide gasoline prices averaged $1.65, compared to $1.67 last Thursday–the end of the previous weekly reporting period by the association. El Paso had the state’s highest gasoline price this week, at $1.57. Houston for the second straight week had the least expensive price at the pumps, at $1.49. AAA spokeswoman Sarah Schimmer says prices may have remained relatively firm due to increased demand for gasoline from holiday shoppers and travelers. She also notes people in several parts of the nation are making preparations for winter storms.
About 1.4 million passengers will pass through Houston’s airports between December 15th through the 28th, according to the Houston Airport System. The agency expects the busiest days to be December 23rd and 26th. But AAA projects a 2.1 per cent drop in the number of Texans traveling during the two-week holiday period.
Despite a drop in fuel prices, airlines are still charging checked-baggage fees. The reason is simple: airlines are losing money, though now that’s mostly due to the recession rather than the cost of fuel. Passengers are having to pay, on average, $15 for the first bag and $25 for the second. Airlines are not expected to waive the fee even when the economy rebounds. They’re finding the fees to be a reliable source of revenue. The industry is expected to lose $4 billion in 2008. Some travelers bypass the fees by packing less. Airlines also typically waive fees for passengers who have elite status in their frequent flier clubs, first-class passengers, and travelers on international flights.
Southwest Airliness has taken another regulatory step as it seeks to implement a codeshare agreement with Canadian carrier WestJet. Southwest late Monday said it had submitted an application to the U.S. Department of Transportation to acquire the required international route authority. The application for a certificate to provide foreign air transportation is needed before Dallas-based Southwest Airlines can fully implement the previously announced codeshare deal. Codesharing allows airlines to sell seats on each other’s flights. Southwest has formed a similar alliance with Volaris in Mexico. Southwest says it hopes to receive the route authority in the first quarter of 2009 and announce codeshare flight schedules with WestJet a few months later. The certificate would also allow Southwest to operate flights to Canada with its own aircraft, but the carrier says it has no plans to do so at this time.
Iraq’s oil ministry says it will open its second licensing round for developing Iraqi oil and gas fields on December 31st. A ministry statement says Oil Minster Hussein al-Shahristani will open the bidding round at a conference in Baghdad. The Tuesday statement didn’t divulge the number of fields. Iraq recently opened a first round of bidding for contracts to develop six major oil fields and two gas fields, choosing 34 of 120 companies that applied to participate. These contracts are expected to be signed in mid-2009. Iraq sits on more than 115 billion barrels of oil, but decades of war, U.N. sanctions, violence and sabotage have battered its oil industry.
Nigeria has created a new ministry charged with pacifying the southern region of Africa’s largest oil producing country. President Umaru Yar’adua named former federal government secretary Ufot Ekaette as Niger Delta Affairs Minister. Militants stage regular attacks on the Nigeria’s oil industry in hopes that the chaos will force the government to send more oil-industry funds to the impoverished region where crude is pumped. Yar’adua has pledged to solve the long-simmering crisis but little progress has been made since he took office 19 months ago. Ekaette is from the oil-producing state of Akwa-Ibom.