Still wary of a recession, investors are hopeful for a 2008 housing turnaround after the National Association of Realtors reported that existing sales fell less than forecast.
According to the NAR, existing home sales “slipped” in January. But to refer to a 23.4% year over year existing home sales plunge as a “slip” is the understatement of the year. And to get excited because the numbers fell less than forecast is ludicrous.
For one, housing inventories were up 5.5% while housing prices fell 4.6%. For there to be a sign of a bottom, those numbers need to reverse substantially. Other ugliness that must first reverse before there’s a bottom, include:
- The 10.3 month supply glut.
- A 5.1% year over year drop in existing single family home prices
- A 30.2% year over year drop in existing condominium and co-op sales
- A 22.4% year over year drop in single family homes sold.
To call a bottom here or to get excited about a bottom is ridiculous. There’s no bottom. People will still lose their homes. Billions of dollars in ARMs will still reset, forcing many into foreclosure and delinquency problems. Glut will still be an issue. And home prices will continue to drop.
Any realtor or bank that tries to sell you on a housing bottom should be ignored or fired.
Elsewhere… Why it’s time to get load up on Corn.
Running on heavy volume, Agria just announced that Q4 revenues could reach the high end of prior guidance of $31.8 million to $33.8 million, thanks in part to strong corn seed sales. It also sees Q1 revenues up 15% year over year. And, according to Briefing.com, the company has said:
“We are pleased with the success in our business and continue to expect we will achieve annual revenue growth above 25% in 2008 compared to 2007 based on current order forecasts and market expectations. We expect to achieve this growth despite the impact of snow storms in China in the first quarter of 2008. The storms did not materially affect our operation in Shanxi, did not cause any material increase in breeding sheep deaths and should not impact our seedling business. The impact was confined to transportation and shipment problems across China. Overall, the weather is a short-term, macro issue. The opportunities in front of us for revenue and profit growth remain vast.”
Origin Agritech (SEED:NASDAQ) has earnings on Wednesday, February 27.
We expect both to run further as corn futures spike to a 12-year high on expectations that global supply will fall drastically. That follows a US Department of Agriculture projection for a steep drop in U.S. corn ending stocks. The USDA lowered its forecast for 2007-2008 to 1.438 million bushels from 1.797 million.
Plus, genetically modified corn could hit Korea by May. According to JoongAng Daily, “the nation’s starch manufacturers signed a deal to purchase nearly 50,000 tons of GM corn earlier this month…” That’s because natural corn costs $100 more per ton.
Some of our favorite plays are Agria (GRO:NYSE) and Origin Agritech (SEED:NASDAQ), which has earnings on Wednesday.