The Conference Board's index of leading economic indicators rose again for the fifth month in a row, the longest positive stretch for the indicies in five years, adding more weight to the notion that the recession is over, at least technically. According to the New York-based organization, the index--which forecasts the economic outlook for the next three to six months--rose 0.6 percent in August.
Six of the indicators that make up the index improved in August: building permits, durable consumer goods, interest rate spreads, supplier deliveries, consumer expectations and stock prices. Jobless claims, money supply and non-defense capital goods declined, while the workweek was unchanged. Historically, the index moving upward in this way correlates with an increase in GDP, which, unless you're French President Nicholas Sarkozy, means the economy is improving.
Real estate, however, is known to be a lagging indicator. The July Moody's/Real Commercial Property Price Indicies were down 5.1 percent from June. Compared with the same month a year ago, the indicies were down 30.8 percent, and 38.7 percent off the bubble peak, which was in October 2007.
Such declines, however, spell opportunity for some. "The current market uncertainty will create unique opportunities, particularly for those companies with building-by-building knowledge and distinct operating acumen," Richard Brookshire, senior vice president and director of acquisitions and investment management at Monday Properties, an owner/operator specializing in New York City and Washington DC properties. "We're looking forward, and are utilizing our time today to prospect new investments.”
A study by credit bureau Experian and consultancy Oliver Wyman has shined a light on a little-known aspect of residential mortgage defaults--so-called "strategic defaults." The report's data mining of 24 million credit files has found that many homeowners with high credit scores, or those least likely to default according to conventional lending wisdom, are in fact quite willing to walk away from mortgages if the circumstances are completely against them. Such defaults are characterized by borrowers who go from perfect payment histories to no payments. The study estimates that there were 588,000 strategic defaults in 2008, more than twice the total of 2007.
Unsurprisingly, strategic defaults are more common in places that have seen the most dramatic rise and fall of property values during this decade, such as California and Florida. The report posited that these defaulters know what they're doing, and know that their credit rating will be destroyed for a good many years. Yet the opportunity to escape from under a massive negative-equity situation makes defaulting a viable option anyway.
Wall Street had a mildly blue Monday, with the Dow Jones Industrial Average down 41.34 points, or 0.42 percent, and the S&P 500 down 0.34 percent. The Nasdaq, however, tracked higher, led by increases in Perot Systems, which agreed to be bought by Dell. The Nasdaq ended up 0.24 percent.
— Nielsen Business Media