Week Ahead: Home Is Where the Hurt Is

Last Updated Sep 26, 2011 6:00 AM EDT

The financial melt-down started with a global housing boom, financed by easy credit. This week, U.S. economic data will take us back to where it all started: the housing market, where there's still a world of hurt. New Home Sales and the Case-Schiller Home Price Index are both expected to fall, underscoring what most of us know: the housing recovery has a long way to go.

According to a recent Fannie Mae survey, Americans expect home prices to decline over the next year, and economists agree. When MacroMarkets LLC conducted a survey of 100 economists, the results were sobering: another 2.5 percent drop this year is expected and only 1.1 percent annual growth is projected through 2015. That means that the U.S. housing market is unlikely to recoup the nearly $7 trillion of homeowners' equity that was lost in the housing bust, a fact that will likely negatively impact consumer spending and the economy as a whole.

Speaking of the economy, this week, the government will release the final estimate of second-quarter GDP, which miraculously is expected to show 1.2 percent growth, even if the week's action in stocks made even tiny growth seem like a distant goal.

While "The Twist" earned Chubby Checker a Grammy, it was a bust for the FOMC. Worries about slow economic growth and anxieties about the European debt crisis far overshadowed the Fed's new policy that will swap $400 billion of short-term bonds for long-term ones. Last week, investors dumped stocks, perhaps recognizing that neither central banks nor governments can adequately address what ails the economy and the markets. (For more on the week's action, see "Why Stocks Fell This Week".)

Most market indexes across the globe saw the largest weekly losses since the August swoon and some even dropped as precipitously as the September, 2008 financial crisis. The broad-based selling was not confined to stocks-commodities tumbled as oil and industrial metals tumbled on recession fears and gold lost its luster as investors scrambled to lock in gains and free-up cash.

  • DJIA: 10.771, down 6.4% on week, down 7% YTD (down 15.9% from April peak)
  • S&P 500: 1136, down 6.5% on week, down 9.6% YTD (down 16.7% from April peak)
  • NASDAQ: 2483, down 5.3% on week, down 6.4% YTD (down 13.6% from April peak)
  • November Crude Oil: $79.85, down 9.4% on week
  • December Gold: $1639.80, down 9.6% on the week (down 12.6%, over the last three weeks, still up 15% on the year)
AAA National Average Price for Gallon of Regular Gas: $3.52

Total bank failures for 2011 = 73 (2 new bank failures over weekend)

FACTOIDS OF THE WEEK: How Bad Was that Week?

  • Dow: biggest weekly point and percentage drop since the week ended October 10, 2008 (that was frightening--the Dow lost 1874.19 points, or 18.15%)
  • Dow: sixth largest weekly point drop in its history
  • S&P 500: second largest weekly decline this year
  • NASDAQ: Third largest weekly decline this year
  • UK FTSE100: down 5.62% on week
  • Stoxx Europe 600: down 6% on week
  • MSCI Emerging Markets Index: down 12% on week, to a 14-month low
  • Gold: down over $101 on Friday alone, a 5.85% drop
  • Gold: largest weekly percentage decline since February 25, 1983
  • Gold: largest weekly dollar decline since January 25, 1980
  • Crude Oil: down 8.1% over past three sessions
  • Winner of the week-Treasury Bonds: 30-yr yields dropped to 2.738%, the lowest level since December 2008 and 10-yr yields touched 1.672%, within 1/100th of a point of the low reached in the 1940's
IN THE WEEK AHEAD: Heads up on housing, durable goods and confidence, as European leaders try to come to terms with Greece's debt.

Mon 9/26:
8:30 Chicago Fed National Activity Index

10:00 New Home Sales

Tues 9/27:
9:00 Case-Schiller Home Price Index

10:00 Consumer Confidence

Leaders of Greece and Germany meet in Germany

Weds 9/28:
8:30 Durable Goods

Thurs 9/29:
8:30 Weekly Jobless Claims

8:30 Q2 GDP (final)

German parliament votes on expanding Eurozone bailout fund

Fri 9/30:
8:30 Personal Income and Spending

9:45 Chicago PMI

9:55 Michigan Sentiment

End of Q3 and of the U.S. Fiscal Year

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    Jill Schlesinger, CFP®, is the Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.