The latest round of economic indicators of can’t be reassuring to market bulls.  Significant improvements in housing affordability and mortgage rates below 5 percent are not yet helping home prices in the face of continuing foreclosures and job losses.  Retail sales data from the US Dept. of Commerce also disappointed.  Not only were April numbers down by .4%, but March numbers were also revised lower to -1.3% from a previous estimate of -1.1%

Bloomberg reports on the latest housing market data:

May 12 (Bloomberg) — Home prices in the U.S. dropped the most on record in the first quarter from a year earlier, led by California and Florida, as banks sold foreclosed properties.

The median price fell 14 percent to $169,000, the National Association of Realtors said today. Prices dropped in 134 of 152 metropolitan areas, with the deepest declines in Cape Coral and Ft. Myers, Florida, followed by San Francisco and San Jose.

Distressed sales increased transactions in 17 states from the fourth quarter as speculators and first-time buyers purchased bank-owned properties. Such homes typically sold for 20 percent less than others, the NAR said today. The inventory of previously owned homes on the market dropped to 3.7 million in March from 3.8 million a month earlier, according to NAR data. The number of new homes for sale fell to 311,000, the lowest since January 2002, according to the Commerce Department.

“There are a lot of forces pushing the market in different directions,” said Brian Bethune, economist at IHS Global Insight in Lexington, Massachusetts. “We’ve seen huge improvements in affordability, not only in prices but also in terms of mortgage rates below 5 percent, but what’s pushing down those prices is foreclosures and job losses.”

Total existing home sales fell 6.8 percent from a year earlier to a seasonally adjusted annual rate of 4.59 million units, the NAR said today. Sales were down 3.2 percent from the fourth quarter. The figures include single-family homes, condominiums and co-ops.

‘Bifurcated Market’

“We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other,” Lawrence Yun, the NAR’s chief economist, said in a statement.

Some areas showed “dramatic” drops in home prices, Yun said.

“In areas with the biggest price declines, we also see much higher levels of distressed sales which are distorting the data,” he said.

The steepest price decline was in Cape Coral-Fort Myers, down 59 percent from a year ago, followed by Saginaw, Michigan, with a 54 percent drop. The next biggest decreases were Akron, Ohio, with a 48 percent decline; San Francisco, down 43 percent; and San Jose, California, with a 42 percent drop.

The largest sales gain from a year ago was in Nevada, up 117 percent; followed by California which rose 81 percent; Arizona up 50 percent; and Florida with a 25 percent increase.

Those four states accounted for the 26 highest foreclosure rates in the first quarter among U.S. cities with a population of 200,000 or more, according to RealtyTrac Inc., an Irvine, California-based seller of real estate data.

Slowing Declines

While the quarterly drop in prices set a record, the declines slowed in each of the three months. The U.S. median home price dropped 12 percent in March compared with a year earlier, according to NAR. That was slower than the 14 percent decline in February and the 18 percent slide in January.

“I do think we have some early signs that the market overall is stabilizing,” Housing and Urban Development Secretary Shaun Donovan said today in a speech at an NAR conference in Washington. “Since January we’ve seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate.”

Bank-Owned Homes

Donovan said the government will allow first-time homebuyers to use the $8,000 tax credit approved by Congress in February as a down payment on mortgages guaranteed by the Federal Housing Administration. To qualify for the credit, purchases must be completed before Dec. 1.

U.S. banks held $26.6 billion of repossessed real estate at the end of 2008, more than double than a year earlier, according to the Federal Deposit Insurance Corp. in Washington. The banking industry lost $26.2 billion in the fourth quarter, the largest loss in FDIC records.

The average U.S. rate for a 30-year fixed mortgage was 4.84 percent last week, down from 6.05 percent a year earlier, according to mortgage buyer Freddie Mac. The rate fell to a record low of 4.78 percent last month.

On an annual basis, the fixed rate will probably average 5 percent this year and 5.3 percent in 2010, according to a forecast posted on NAR’s Web site. Last year, the rate was 6.1 percent.

Sales of existing homes likely will reach 4.97 million in 2009, up from 4.91 million last year, according to the Realtors’ forecast.

This article via the NYT shows retail sales dropped more than analyst expectations in April:

By THE ASSOCIATED PRESS

Published: May 13, 2009

Wall Street is down sharply in early trading after the government reported weaker-than-expected retail sales in April.

The market has put on hold a two-month rally amid concern that an economic recovery won’t be as fast as once hoped. The disappointing retail sales report has added to the week’s drop.

The Commerce Department said retail sales fell 0.4 percent in April. Economists had forecast sales would be flat for the month.

March sales figures were revised lower as well, to a decline of 1.3 percent from a previous estimate of a decline of 1.1 percent.

In the opening minutes, the Dow Jones industrial average is down 154 points or 1.8 percent. The Standard & Poor’s 500 index is down 1.8 percent, while the Nasdaq composite index is down 1.4 percnet.

In Europe, the FTSE 100 index in London was down 1.4 percent and Germany’s DAX fell 2 percent. The CAC-40 in France was 1.4 percent.

Europe’s main markets had opened higher in the wake of solid gains earlier in Asia and a late rally on Wall Street on Tuesday, which helped the Dow Jones industrial average end 50 points higher at 8,469.11.

The markets had expected retail sales to drop a modest 0.1 percent in April from the previous month, compared with the big 1.2 percent decline reported in March. Excluding auto sales, retail sales are expected to be flat.

Investors are looking to see if the retail sales news will help provide some direction after relatively flat trading through the early part of the week.

The main talking point in the markets though is whether the two-month rally seen in stocks around the world represents a bear market rally or whether it is something more.

Advocates of the bear market hypothesis point to historical precedents, such as false dawns in the stock markets during the Great Depression of the 1930s. While acknowledging some improved economic signals around the world, they think the optimism has been overdone — especially as banks could still encounter more problems.

Those arguing that the recent hefty stock market gains represent a turning point in the global economic crisis reckon that the forward-looking indicators have pointed to a resumption of growth possibly by the end of this year — stock markets usually start rallying between 6-9 months before an actual economic recovery emerges.

“We have greater sympathy with the bear market line of attack, but while we are dubious about the ability of this bull market in equities to continue we also do not believe that we are likely to see a rerun of that 1930s dramatic leg lower.” an analyst at Calyon Credit Agricole, Daragh Maher, said. “Our hesitancy simply reflects the fact that the optimism has swung so far so quickly,” Mr. Maher added.

Stocks have rallied strongly over the last few weeks — with some major indexes now in positive territory for the year — prompting some investors to claim the markets are over the worst. Many markets ended last week more than 5 percent higher.

The trigger for the gains has been better than expected economic news, particularly in the United States, the world’s largest economy. Mounting hopes that the global economy may recover before the year’s end has fueled an increased appetite for risk. Stock markets usually start recovering between 6-9 months before an actual economic recovery emerges.

Markets have also been buoyed by indications that the banks are now in much better health to deal with any potential losses associated with the recession after raising significant amounts of cash.

Earlier, in Asia, Japan’s Nikkei 225 stock average rose 41.88 points, or 0.5 percent, to 9,340.49, while Hong Kong’s Hang Seng dipped 94.02, or 0.6 percent, to 17059.62.

In the oil markets, an unexpected drop in American crude inventories propelled oil prices to near $60 Wednesday on indications that demand may be picking up.

Still, forecasts were less than rosy. OPEC, in its monthly report, said it expected oil demand for next year to grow less than in its previous estimate because of continued clouds over the world economy.

Benchmark crude for June delivery was up 87 cents to $59.72 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract rose to a six-month high of $60.08 a barrel before settling at $58.85, up 35 cents.

The American Petroleum Institute said oil stocks fell 3.13 million barrels to 370.7 million last week. Analysts had expected a gain of 1.4 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Companies.