Saudi warns of $150 oil within three years

By Giulia Segreti and agencies in Rome

Published: May 25 2009 18:59 | Last updated: May 25 2009 18:59

Saudi Arabia warned oil prices could spike to beyond the near $150 record high of 2008 within three years as it joined other energy leaders on Monday to call for more investment to boost production over the long term.

Energy ministers and officials at the Group of Eight energy summit wrapped up the two-day meeting by urging the industry to pump money into projects to expand capacity despite the credit crisis, which has put the brakes on investment.
Saudi Arabian Oil Minister Ali Naimi said the world was heading for a fresh spike after the current phase of faltering demand and lower prices, which he said reflected the economic downturn rather than being an indicator of things to come.

”We are maintaining our long-term focus rather than being swayed by the volatility of short-term conditions,” he said in prepared remarks at the summit.

”However, if others do not begin to invest similarly in new capacity expansion projects, we could see within two-to-three years another price spike similar to or worse than what we witnessed in 200
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Hamptons Home Sales Drop Most on Record, Prices Decline

Hamptons Home Sales Drop Most on Record, Prices Decline
May 22 (Bloomberg) -- Bloomberg's Su Keenan reports on the housing market in the Hamptons of Long Island, New York. Sales have declined the most in the 27 years that broker Town & Country Real Estate has kept records for the Long Island beach towns about 100 miles east of Manhattan. The first-quarter median price fell 23.5 percent from a year earlier to $675,000, according to Miller Samuel.

Housing Hitting Bottom Means Fewest Starts Since 1945

By Kathleen M. Howley

May 26 (Bloomberg) -- The slump in the U.S. housing market that caused the median value of homes to decline 24 percent since 2006 may bottom next month without any prospect of a rebound for another year, according to estimates from chief economists at Fannie Mae and Freddie Mac, the Mortgage Bankers Association and national realtors and homebuilder groups.

Existing home sales probably won’t reach pre-boom levels until the third quarter of 2010 and housing starts won’t surpass 1 million until 2011, a barrier last broken six decades ago, the economists said.

“There are very few V-shaped recoveries in the history of real estate, and this one is likely to be even slower because of the size of the bubble,” said Robert Shiller, the Yale University professor who, with economist Karl Case, created home price indexes in the 1980s now used by Standard & Poor’s.

The rebound will be so anemic that 2009 building starts will total about 496,000 homes, the lowest since the end of World War II in 1945, according to the economists’ forecasts. Foreclosures on pay option adjustable-rate mortgages and a backlog of bank-owned properties will slow any revival and keep housing from playing its traditional role of boosting economic recovery.

Residential construction and home sales led the way out of the previous seven recessions, with housing starts improving an average seven months and resales gaining strength about four months before the economy picked up.

‘Green Shoots’

The world’s largest economy probably will grow 1.9 percent next year, according to the average estimate of 56 analysts surveyed by Bloomberg. After each of the last seven contractions, it expanded more than 3 percent on average in the first year of recovery.

Federal Reserve Bank of Dallas President Richard Fisher said earlier this month that the U.S. is on the verge of rebounding with “healthy signs -- the stirrings of what I call green shoots.” So did former Fed Chairman Alan Greenspan, who cited “seeds of a bottoming” in housing during a May 12 speech at a National Association of Realtors conference in Washington.

“If you are looking at prices relative to income and rents, you could argue that we are at the bottom, and I’m cautiously optimistic that we may be,” said Thomas Lawler, a former Fannie Mae economist in Leesburg, Virginia. “It’s possible, however, that we could have a second wave of foreclosures and the very small amount of support the economy might have gotten will turn into the reverse.”

Prices Fall

Data released today showed foreclosures are still weighing on the housing market. Home prices in 20 major metropolitan areas fell 18.7 percent in March from a year earlier as foreclosures rose, according to the S&P/Case-Shiller index. Economists forecast the index would drop 18.3 percent.

The recession started after U.S. banks and Wall Street firms securitized mortgage loans made to the riskiest borrowers to earn fees only to see homeowners default, prices fall and the value of the bonds dwindle.

Three of the biggest investment banks were brought down by home loan-related investments. The U.S. government committed $29 billion to engineer the takeover of Bear Stearns Cos. in March 2008 by New York-based JPMorgan Chase & Co. Six months later, Lehman Brothers Holdings Inc. filed the largest bankruptcy in U.S. history after becoming the biggest underwriter of mortgage- backed securities as real estate prices peaked.

Subprime Losses

Bank of America Corp. of Charlotte, North Carolina, bought Merrill Lynch & Co. in January after Merrill recorded more than $50 billion in losses and write downs tied to subprime home loans.

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