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Home prices stay flat, tech bubble could burst

Juli Niemann Apr 24, 2012

Jeremy Hobson: U.S. home prices stayed basically flat in February according to the S&P Case-Shiller Index. Without adjusting for seasonal fluctuations, prices actually dropped 0.8 percent to reach the lowest level since 2002.

And that’s where we’ll start now with Juli Niemann, analyst with Smith Moore and Company. She’s with us live as always from St. Louis. Good morning.

Juli Niemann: Morning Jeremy.

Hobson: Juli, I keep thinking when this monthly report comes out that eventually it’s going to show some good news — that home prices actually started to rebound. When is that going to happen?

Niemann: Well,  February was ugly — but nobody moves unless you have to. You’ve got high inventory to go right now; more foreclosures and homeowners who bought from 2005 on are underwater. But why? The banks are finally moving their inventory into the market now, and that’s why you’re seeing distressed prices even further. It looks like a used car lot at a lot of the banks, and that puts pressure on prices and they’re finally doing quick sales.

So the good news: Spring/summer selling season is here; interest rates are still staying very low. Jobs market is improving; confidence isn’t getting too much worse; and new housing construction is improving. So I think we’re at the bottoming process. Now, it’s not all areas — Chicago, Atlanta are still really in the ditch. But the Sand States — that’s where the bargain buying is — is really looking better: Arizona, Nevada, Florida and California. So the bottom line is, the price is right and there’s a buyer out there.

Hobson: Juli, quickly, let’s switch gears. I just want to get your thoughts on Apple, which is going to report its earnings later today. A lot of people think that the tech bubble may be bursting. What do you think?

Niemann: Well it’s a tech-as-entertainment bubble. You’re not seeing this big correction in Microsoft, Intel, Oracle. You’re getting a lot of suspicion on things like the Facebook IPO — they did an amended filing. You had Groupon — total disaster. Accounting controls at Groupon were exposed.

But you have to remember: every company that’s been a U.S. darling on the cover of ever magazine always has hype pushing the price. And, when a fearless leader leaves — like Jack Welch at GE, Steve Jobs at Apple — investors want another rock star. There’s not one coming.

It was also a one space kind of thing: you must have this in your portfolio — like Amazon. Well, as soon as the institutional investors start seeing that there are other alternatives — and competition always produces alternatives — the prices get knocked down. You’re seeing a correction in entertainment and technology combinations.

Hobson: Juli Niemann, analyst with Smith Moore and Company.

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