Why buy a house when you can rent?

This is the mentality of many Americans.  Unfortunately, this isn’t helping home prices, which continue look for a bottom.

Low mortgage rates and federal assistance are not getting Americans to buy homes in a material way either, writes economist Gary Shilling in a piece for Bloomberg.

And he doesn’t think things will improve anytime soon.  From his piece:

The collapse in housing and the 33 percent plunge in house prices since 2006 are favoring renting over homeownership. This trend will dominate the housing market for the next four or five years, and put additional pressure on a weak economy.

While the home price-to-rent ratio continues to come down, they are still above the long-run average, which also doesn’t bode well for prices.

Despite the collapse in prices, homeownership is still expensive relative to rentals, even as apartment rental rates rise and vacancies decline. Moody’s Analytics Inc. calculates a ratio of home prices to yearly rents at 11.3, down from the bubble peak of 18.5, but still higher than the 1989-2003 average of 10. You’d expect house prices to be lower than average in relation to rents, not higher, now that prices are falling.

Earlier this year, Shilling said he expected home prices to fall another 20 percent before bottoming.

Read more at Bloomberg.com >

SEE ALSO: TO RENT OR BUY: A Quick Price Guide To America’s 20 Hottest Real Estate Markets >

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See Also:

• ED YARDENI: This Chart Debunks The ‘New Normal’
• University Of Texas Researchers Find No Direct Link Between Fracking And Contaminated Groundwater
• 29 Fresh Insights That Changed What We Knew About Markets And The Economy

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Why buy a house when you can rent?

This is the mentality of many Americans.  Unfortunately, this isn’t helping home prices, which continue look for a bottom.

Low mortgage rates and federal assistance are not getting Americans to buy homes in a material way either, writes economist Gary Shilling in a piece for Bloomberg.

And he doesn’t think things will improve anytime soon.  From his piece:

The collapse in housing and the 33 percent plunge in house prices since 2006 are favoring renting over homeownership. This trend will dominate the housing market for the next four or five years, and put additional pressure on a weak economy.

While the home price-to-rent ratio continues to come down, they are still above the long-run average, which also doesn’t bode well for prices.

Despite the collapse in prices, homeownership is still expensive relative to rentals, even as apartment rental rates rise and vacancies decline. Moody’s Analytics Inc. calculates a ratio of home prices to yearly rents at 11.3, down from the bubble peak of 18.5, but still higher than the 1989-2003 average of 10. You’d expect house prices to be lower than average in relation to rents, not higher, now that prices are falling.

Earlier this year, Shilling said he expected home prices to fall another 20 percent before bottoming.

Read more at Bloomberg.com >

SEE ALSO: TO RENT OR BUY: A Quick Price Guide To America’s 20 Hottest Real Estate Markets >

Please follow Money Game on Twitter and Facebook.

Join the conversation about this story »

See Also:

• ED YARDENI: This Chart Debunks The ‘New Normal’
• University Of Texas Researchers Find No Direct Link Between Fracking And Contaminated Groundwater
• 29 Fresh Insights That Changed What We Knew About Markets And The Economy

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Thursday continues a busy week, with more than two dozen major earnings announcements. At the same time, a series of economic releases will keep markets moving, including initial claims in the U.S.

Here’s what you need to know.

• Australia starts the day off early with worker wages at 7:30 p.m. EST on Wednesday evening. Economists predict average weekly wages will increase by 1.0 percent in the November quarter.
• At 12:00 a.m. EST on Thursday morning, Singapore consumer prices are seen advancing 0.8 percent.
• Taiwan industrial production will be announced at 3:00 a.m. EST, with expectations for the key metric to fall 15.3 percent year-on-year.
• Fifteen minutes later, Swedish consumer confidence is set for release. Economists polled by Bloomberg forecast a reading of 0, which indicates neither pessimism or optimism.
• At 3:30 a.m. EST, Hong Kong will announce January exports and imports.  Exports are seen declining 7.0 percent year-on-year in January, while imports fall 4.5 percent. 
• Attention shifts back to Europe at 4:00 a.m. EST, when the Ifo Institute announces a reading on the German business climate. The index is seen expanding slightly to 108.8, with the expectation sub-index gaining 110 basis points to 102. 
• At the same time, Italian consumer confidence will be announced, with economists predicting a February reading of 92. That’s up from the 91.6 reading in January.
• Poland’s unemployment rate also follows at 4:00 a.m. EST, with estimates for it to jump to 13.3 percent in January, from 12.5 percent in December. 
• At 6:00 a.m. EST, the Confederation of British Industry will announce trend orders, which measures expectations of manufacturers in the U.K. The forecast is for an improvement to -13 from -16 for February. A reading below zero indicates expectations for declining orders. Also at 6:00 a.m. EST, Ireland will release consumer prices. 
• At 8:30 a.m. EST, initial jobless claims will be announced in the U.S., with consensus for 355,000 new claims, up from 348,000 last week. Continuing claims are anticipated to come in at 3.455 million.
• U.S. home prices will be released at 10:00 a.m. EST. Economists polled by Bloomberg forecast the index to advance 0.1 percent month-on-month in December.
• The Kansas City Federal Reserve will announce activity in its region at 11:00 a.m. EST, with expectations for the index to improve to 9 in February, from 7 a month earlier.
• Closing out the day at 4:00 p.m. EST is the release of Colombian industrial production. December production is seen increasing 5.6 percent year-on-year.

Below, a roundup of tomorrow’s big announcers. 

InterDigital (IDCC): $0.46
Omnicare (OCR): $0.57
Target (TGT): $1.39
Plains Exploration & Production (PXP): $0.37
Kohl’s (KSS): $1.80
American Tower (AMT): $0.72
Gap (GPS): $0.40
Crocs (CROX): $0.04
Salesforce.com (CRM): $0.40
Monster Beverage (MNST): $0.37
American International Group (AIG): $0.56
Molycorp (MCP): $0.40
Omnivision Technologies (OVTI): $0.13
TiVo (TIVO): -$0.13
Autodesk (ADSK): $0.45
Denbury Resources (DNR): $0.33
Liberty Media Corp – Liberty Capital (LMCA): $0.33
DISH Network (DISH): $0.61
Sears Holdings (SHLD): 0.69
MetroPCS Communications  (PCS): $0.16
Liberty Interactive (LINTA): $0.37
Deckers Outdoor (DECK): $3.13
KBR (KBR): $0.64
Safeway (SWY): $0.64

Consensus estimates provided by Bloomberg. 

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Join the conversation about this story »

See Also:

• Here Are The Key Market Moving Events For Wednesday, February 15, 2012
• Here Are The Key Market Moving Events For Wednesday, February 22, 2012
• Here Are The Key Market Moving Events For Tuesday, February 14, 2012

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Thursday continues a busy week, with more than two dozen major earnings announcements. At the same time, a series of economic releases will keep markets moving, including initial claims in the U.S.

Here’s what you need to know.

• Australia starts the day off early with worker wages at 7:30 p.m. EST on Wednesday evening. Economists predict average weekly wages will increase by 1.0 percent in the November quarter.
• At 12:00 a.m. EST on Thursday morning, Singapore consumer prices are seen advancing 0.8 percent.
• Taiwan industrial production will be announced at 3:00 a.m. EST, with expectations for the key metric to fall 15.3 percent year-on-year.
• Fifteen minutes later, Swedish consumer confidence is set for release. Economists polled by Bloomberg forecast a reading of 0, which indicates neither pessimism or optimism.
• At 3:30 a.m. EST, Hong Kong will announce January exports and imports.  Exports are seen declining 7.0 percent year-on-year in January, while imports fall 4.5 percent. 
• Attention shifts back to Europe at 4:00 a.m. EST, when the Ifo Institute announces a reading on the German business climate. The index is seen expanding slightly to 108.8, with the expectation sub-index gaining 110 basis points to 102. 
• At the same time, Italian consumer confidence will be announced, with economists predicting a February reading of 92. That’s up from the 91.6 reading in January.
• Poland’s unemployment rate also follows at 4:00 a.m. EST, with estimates for it to jump to 13.3 percent in January, from 12.5 percent in December. 
• At 6:00 a.m. EST, the Confederation of British Industry will announce trend orders, which measures expectations of manufacturers in the U.K. The forecast is for an improvement to -13 from -16 for February. A reading below zero indicates expectations for declining orders. Also at 6:00 a.m. EST, Ireland will release consumer prices. 
• At 8:30 a.m. EST, initial jobless claims will be announced in the U.S., with consensus for 355,000 new claims, up from 348,000 last week. Continuing claims are anticipated to come in at 3.455 million.
• U.S. home prices will be released at 10:00 a.m. EST. Economists polled by Bloomberg forecast the index to advance 0.1 percent month-on-month in December.
• The Kansas City Federal Reserve will announce activity in its region at 11:00 a.m. EST, with expectations for the index to improve to 9 in February, from 7 a month earlier.
• Closing out the day at 4:00 p.m. EST is the release of Colombian industrial production. December production is seen increasing 5.6 percent year-on-year.

Below, a roundup of tomorrow’s big announcers. 

InterDigital (IDCC): $0.46
Omnicare (OCR): $0.57
Target (TGT): $1.39
Plains Exploration & Production (PXP): $0.37
Kohl’s (KSS): $1.80
American Tower (AMT): $0.72
Gap (GPS): $0.40
Crocs (CROX): $0.04
Salesforce.com (CRM): $0.40
Monster Beverage (MNST): $0.37
American International Group (AIG): $0.56
Molycorp (MCP): $0.40
Omnivision Technologies (OVTI): $0.13
TiVo (TIVO): -$0.13
Autodesk (ADSK): $0.45
Denbury Resources (DNR): $0.33
Liberty Media Corp – Liberty Capital (LMCA): $0.33
DISH Network (DISH): $0.61
Sears Holdings (SHLD): 0.69
MetroPCS Communications  (PCS): $0.16
Liberty Interactive (LINTA): $0.37
Deckers Outdoor (DECK): $3.13
KBR (KBR): $0.64
Safeway (SWY): $0.64

Consensus estimates provided by Bloomberg. 

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Join the conversation about this story »

See Also:

• Here Are The Key Market Moving Events For Wednesday, February 15, 2012
• Here Are The Key Market Moving Events For Wednesday, February 22, 2012
• Here Are The Key Market Moving Events For Tuesday, February 14, 2012

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Small business owners are looking to spend in 2012.

That’s according to the just-released Wells Fargo/Gallup Small Business Index, which surveyed 600 small business owners in January 2012. It found that that 28 percent of U.S. small business owners plan to increase their company’s capital spending in the next 12 months.

That’s in line with our own — smaller — survey conducted earlier this month with members of CNBC.com’s Small Business Council. When asked if they were planning on spending in 2012, we heard a resounding yes.

Among the planned spending, most of it already in the works: a restaurant renovation; the purchase of a new building for a retail outlet, a delivery van; and, for several of the respondents, new manufacturing equipment that will each company between $100,000 to $250,000.

The Wells Fargo/Gallup survey brings more positive news: The 28 percent who say they will spend is the highest percentage the Index has recorded since January 2008.

One reason business owners may be considering spending: They believe it will be easier to get a loan in 2012. According to the Wells Fargo/Gallup index, 25 percent say credit was somewhat or very easy to get over the past 12 months, the highest percentage since April 2009. Looking ahead, 27 percent say it will be somewhat or very easy to get credit over the next 12 months; again, the highest since April 2009, and up from 22 percent in October 2011.

While a hefty 38 percent expect it will remain difficult to obtain credit, that number is down from 43 percent in October.

The report notes that despite the positive trends, economic realities still hover over most business owners’ spreadsheets. Rising gas prices and fragile consumer confidence levels could drag down the economy, it notes.

And if consumers aren’t spending, neither is the most optimistic business owner.

This post originally appeared at CNBC. 

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See Also:

• Unless We Get Our Economy Humming Again, All Of America Will Look Like Detroit
• HSBC Chief Economist: Austerity ‘Does Not Deliver’
• The Manufacturing Industry Is Never Going To Solve Our Jobs Problem

COLUMBUS, Ohio (AP) — Limited Brands Inc., the parent of Victoria’s Secret, said Wednesday its fourth-quarter profit fell 21 percent as it took a hefty restructuring charge for an asset write-down and some store closures.

The company’s earnings adjusted for special items topped Wall Street expectations for the recently concluded quarter. But its outlook for earnings in the current quarter was below expectations and Limited Brands’ shares fell in extended trading.

Net income for the three months ended Jan. 28 was $359.4 million, or $1.17 per share, down from $452.3 million, or $1.36 per share, a year earlier.

The results for the latest quarter included a pre-tax charge of $256.1 million, or 74 cents per share, related to intangible asset impairment and restructuring charges, including store closures, at its smaller La Senza lingerie chain. They also included a pre-tax gain of $110.8 million, or 32 cents per share, related to the sale of the company’s third-party apparel-sourcing business.

Excluding one-time items, the company said adjusted earnings were $1.50 per share in the latest quarter, up 19 percent from a year earlier.

Revenue was $3.52 billion, up from $3.46 billion at the company that also runs Bath & Body Works and Henri Bendel stores.

Analysts surveyed by FactSet had estimated earnings of $1.46 per share on revenue of $3.52 billion.

Revenue at stores open at least a year was 7 percent higher in the fourth quarter than in the same period a year earlier.

For the full year, Limited Brands said it had net income of $850.1 million, or $2.70 per share, up from $804.8 million, or $2.42 per share, in fiscal 2010. Revenue was $10.4 billion, up 8 percent from $9.6 billion.

The company said it expects earnings per share between 35 cents and 40 cents a share in the first quarter. Analysts had been expecting 44 cents a share.

Shares in the company fell $1.53, or 3.4 percent, to $43.95 in after-hours trading. During the regular session, they decline 19 cents to $45.48.

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See Also:

• Visa’s Q1 US Credit Card Use Jumps 10% Thanks To Affluent Consumers
• HUGE Job Cuts At Pepsi, As Firm Plans To Slash 3% Of Workforce
• Here Are The Key Market Moving Events For Friday, February 10, 2012

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In keeping with his attempts to ensure transparency, austerity, and better fiscal practices, Italian Prime Minister Mario Monti has asked that his government makes ministers’ previous tax records available on the government website in a move dubbed ‘Operation Transparency’. 

And it seems like not everyone has been affected by the long-running fiscal crisis and austerity measures in Europe, especially in Italy.

Italians were shocked to learn how many of their ministers owned villas, town houses, and expensive cars and yachts, to say nothing of the amount of money they used to make before being sworn into the cabinet (all ministers now get 200,000 euros, or $265,000 on an average every year). So much so, that the site temporarily crashed because of increased traffic, The Telegraph reports.

However, the ministers themselves were unfazed by the attention. ”The most important thing is explaining that those who earn and pay their taxes must be judged positively, while those who generate off-the-books income must be judged negatively,” Justice Minister Severino told reporters, according to Italymag.

Paola Severino di Benedetto

Position: Justice Minister

Former profession: Lawyer and professor

Income in 2010: 7 million euros ($9.3 million)

Other assets: Properties in Rome and Cortina d’Ampezzo, and a leased 55 feet-long ‘Acqua 54′ yacht

(Source)

Corrado Passera

Position: Minister for Economic Development, Infrastructure, and Transportation

Former profession: Head of Italian bank Intesa San Paolo

Income in 2010: 3.5 million euros ($4.6 million)

Other assets: Properties in Casale Marittimo and Parigi

(Source)

Mario Monti

Position: Prime Minister, Minister for Economy and Finance

Former profession: President of Bocconi University

Income in 2010: 1 million euros ($1.3 million)

Other assets: Sixteen properties, including apartments in Milan and Varese, and a 50 percent share in a flat in Brussels

(Source)

See the rest of the story at Business Insider

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See Also:

• A Must-Read On The Societal Disaster That’s Happening In Greece
• More And More Spanish Villages Are Ditching The Euro For The Peseta
• A Swiss Billionaire And A Belgian Baron Have Been Sentenced To 16 Years In Prison For Thousands Of Asbestos Deaths

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It’s too early to be freaking out.  But some PMI data could’ve been better.

First, the scoreboard:

Dow: 12,938.6, -27.0, -0.2%
S&P 500: 1,357.6, -4.5, -0.3%
NASDAQ: 2,933.1, -15.4, -0.5%

And now, the top stories:

• For once, we’re not talking about Greece.  But some new global economic data appears to have the markets rattled.  During the Asian trading session, we learned that China’s HSBC Flash manufacturing PMI number climbed to 49.7, up from 48.8 in January.  However, this was also the fourth straight reading below 50, and a reading below 50 signals contraction.
• The eurozone manufacturing PMI number inched up to just 49.5 from 48.8 a month ago.  This fell short of economists’ expectation for 49.5.  Particularly worrisome was Germany, the largest and arguably most financially stable country in the eurozone, which reported a PMI reading of 50.1 versus expectations of 51.5.
• Actually, there was some news related to Greece.  Fitch lowered Greece’s credit rating to C from CCC, putting it deeper into junk territory.  “[D]efault is highly likely in the near term,” wrote the credit ratings agency.  However, this surprised no one and seemed to be brushed off as a non-event.
• Existing home sales jumped 4.3 percent to 4.57 million in January.  The increase outpaced economists’ expectations for 1.1 percent growth.  However, due to sharp downward revisions to the December data, the annualized pace of home sales fell short of the expectation for 4.66 million.  Here Are The Best And Worst Economists Of 2011 >
• In other housing news, luxury homebuilder Toll Brothers unexpectedly reported a net loss of 2 cents per share.  Competitor KB Home also fell.
• Today’s modest sell-off also benefited Treasuries and the dollar.  The 10-year yield declined to 2.01 percent.  The ascent of the dollar was mirrored by the descent of the euro
• Last night, Dell disappointed its shareholders when it announced its Q4 financial results.  Non-GAAP EPS came in at $0.51, missing analysts’ estimates by a penny.  Management blamed supply disruptions tied to the tragic floods in Thailand. They also expect Q1 revenue to fall 7 percent.
• Hewlett-Packard announces quarterly earnings after the closing bell today.  Follow the release live on Business Insider.
• Don’t Miss: Citi Presents 20 Great Stocks That The Rest Of Wall Street Hates >

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See Also:

• STOCKS MAKE HUGE COMEBACK AND SURGE: Here’s What You Need To Know
• GREECE GETS BAILOUT, DOW STALLS AFTER BRIEFLY HITTING 13,000: Here’s What You Need To Know
• POLL: What’s The #1 Thing You Fear For The US Economy Right Now?

This post originally appeared at CBS Moneywatch. 

The White House is proposing to cut corporate income taxes from 35 percent to 28 percent. President Obama also recommends that manufacturers get a further cut, to 25 percent, and he wants to impose a minimum rate on foreign earnings to discourage the use of tax shelters. There would be other less substantive changes as well under his plan. 

The cut in the statutory tax rate, however, may not have as large an effect on the corporate sector as many anticipate. The reason is that this is intended as a revenue neutral change in taxes. To accomplish revenue neutrality, the cut in the tax rate will be accompanied by closing loopholes, i.e. a broadening of the base. Thus, every company receiving a tax break will be matched somewhere else by companies experiencing a tax increase. Thus, while some firms will benefit, others will get hit harder by these taxes and the net effect overall should be roughly a wash.

Another way you think about this, as noted by Jared Bernstein, is to consider the difference between the statutory tax rate — the rate on the books — and the effective tax rate, the rate after all deductions, loopholes, etc. have been exploited.

Read the rest of the story at CBS Moneywatch >

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See Also:

• 11 Stunning Revelations From Larry Summers’ Secret Economics Memo To Barack Obama
• Has The Small-Cap Premium Disappeared?
• The American Debt Problem Goes Way Back

The Japanese yen continued its recent tumble today, as the dollar edged to a seven-month high of ¥80.3175 this afternoon.

The currency had not crossed above the ¥80 mark against the dollar since July 11, data provided by Bloomberg shows.

Traders may be tying the depreciation to concerns that the Japanese government could lose its ability to fund debt locally, causing a surge in yields, and the recently reported trade deficit in the nation.

“So far, Japan has funded 95% of its public sector debt issuance domestically, which has allowed JGB yields to stay low,” Morgan Stanley’s Hans Redeker and Ronald Leven wrote in a report this week. “Japan’s financial sector has used 24% of its balance sheet on government bonds, and should bond yields rise without a simultaneous economic rebound, the banking sector could face its ‘Italian moment’.”

Japan’s trade deficit has also emerged as a key fear.

“There is a widespread perception that this external deficit is another way in which Japan is becoming dependent on foreign investors to provide savings,” the two say. “But, as with the internal funding situation, we think the situation is less serious than generally perceived.”

Other currencies also traded lower against the dollar today, with Great Britain’s pound and Canada’s dollar falling to $1.5679 and $1.0006, respectively.

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See Also:

• CHART OF THE DAY: This Crazy Drop In The Euro Has Sent Everyone Reeling
• Goldman’s Jim O’Neill: Here Are The 2 Absolute Best Currency Trades For 2012
• WHOA: What Just Happened To The Euro?!