CHICAGO, Sep 04, 2008 (BUSINESS WIRE) -- Zacks.com releases the latest Zacks Industry Rank. Stocks featured in
this week's analysis includes Capital One
(NYSE: COF), Fannie Mae (NYSE: FNM), Lehman Brothers
(NYSE: LEH), Pulte Homes (NYSE: PHM) and Toll Brothers
(NYSE: TOL). To see the Zacks Industry Rank and the trend in earnings
estimates revisions for more than 200 industry groups, visit http://at.zacks.com/?id=3154.

Zacks Industry Rank Analysis is written by Charles Rotblut, CFA, Senior
Market Analyst for Zacks.com.

This week: Housing and Financial Problems To Last Into 2009

Key Points:

--
Mortgages are both harder to get and more expensive

--
2009 profit forecasts continue to be cut on homebuilders and financial
companies

My Home Buying Experience

I've been trying to buy a house via a short-sale, and from what I'm
hearing and reading, my experience has been typical of many other
would-be buyers. It also reaffirms my belief that the housing slump will
extend into next year.

Last April, my wife and I made a bid on a house that was selling for
less than what was owed (hence the term "short sale"). The owners used
100% financing to purchase the house and have since been unable to keep
up with the payments.

In a short sale situation, the lender(s) absorb the difference between
the loan amount and the purchase price. Therefore, any purchase offer
must be approved by them. The first lender approved our offer in June.
The second lender asked us late last week to raise our price, just as
the lawyers were proceeding to put the house to auction.

The risk the second lender is taking is that if an agreement is not
reached on a sale price, the house will go to auction. Houses don't
always sell at auction and even when they do, the sale price can be
lower than the offer price previously presented to the bank. In other
words, the second lender is taking a big risk by asking us to raise our
offer in a market where home prices are declining.

We've countered with a price that is above our previous offer, but below
the banks' asking price, which we think is too high. It could be a few
weeks before we hear anything.

Now, multiply our situation by thousands of other would-be buyers and
it's obvious why the housing slump continues.

Too Much Inventory

Most realtors don't like short sales because they take a long time to
close and, at the same time, create competition for other houses. Short
sales are certainly contributing to the glut of unsold homes, though the
overall drop in the number of buyers is the biggest reason for the
rising inventory.

How bad is the inventory problem? Well, last week the overly optimistic
National Association of Realtors admitted that the inventory of homes
continued to rise, reaching 11.2 months. In other words, if no other
homes were put on the market, it would take nearly a year to sell all of
the houses currently listed on the MLS.

More homes for sale means more pricing pressure. It's economics 101.

Therefore, it is not surprising to see brokerage analysts continue to
cut their fiscal 2009 earnings estimates on the likes of Pulte Homes
(NYSE: PHM) and Toll Brothers (NYSE: TOL). The average forecasts
now call for PHM, TOL and other homebuilders to post another year of
losses in 2009; previously, the brokerage analysts had actually
projected profits.

No Money, No Buyers

Even for those who want to buy a house, credit is no longer easy to get.
Many mortgage brokers are asking for credit scores of 720 or higher, far
above the national average.

Interest rates have also risen. Bankrate.com currently shows the
national average for 30-year fixed mortgages at 6.25%.

Even for those of us with good credit, interest rates can vary. Last
week, I was given rates for a 30-year fixed mortgage that ranged between
6% and 6.875%. (My experience has been that rates in Illinois are
typically higher than the national average.) All of the brokers I talked
to blamed the ongoing problems with Fannie Mae (NYSE: FNM) for
the higher rates. (One mortgage broker told me business was so bad, she
decided to take the summer off.)

The problem is not just with GSEs. There is also the risk that the
ongoing implosion within the financial sector will get worse. Consider
the following:

--
The FDIC's list of problem banks grew to 117 in June, up from 90
during the first quarter.

--
The FDIC's insurance fund's reserve ratio dropped so low, 1.01%, that
it is being forced to develop a plan for replenishing the safety net
for depositors.

--
Bloomberg News estimates that banks and securities firms have cut more
than 100,000 jobs this year.

And if that wasn't bad enough, many consumers are struggling with debt:

--
Nearly 1 million petitions for bankruptcy have been filed during the
past 12 months; personal bankruptcies are up 28%.

--
Net charge-off rates for Capital One (NYSE: COF), and probably
several other credit issuers, have been rising for several quarters.

Yet, in the background of this mess, some market observers have actually
advised buying financials. These calls contradict the ongoing reductions
in profit forecasts: financial companies account for nearly 25% of all
negative earnings estimate revisions for 2009.

More importantly, if the problems in the financial sector weren't bad,
than why is Lehman Brothers (NYSE: LEH) going hat-in-hand to the
Korea Development Bank?

Trading the Financials and Homebuilders

I realize that some financial and homebuilding stocks have entered into
trading ranges. Regardless of what the charts show, the risks of owning
these companies continue to outweigh potential rewards.

At some point, the tide will turn. It hasn't yet, however, and investors
would be prudent to be cognizant of this fact.

Despite this analysis, some of you will nonetheless choose to be
contrarians and attempt to find a bottom in financial and homebuilding
stocks. If so, I strongly suggest doing a lot of research and only buy
those firms that are both fundamentally sound and trading at discounts
to their historic earnings. Even then, dollar cost averaging may be
advantageous since a recovery is unlikely to occur until next year, at
the earliest.

The interactive Zacks Industry Rank List allows you to see all of the
companies, and their Zacks Rank, within more than 200 industries. See
the list at http://at.zacks.com/?id=3208.

About Zacks Industry Rank and the Zacks Rank

Zacks Industry Rank is calculated by averaging the Zacks
Rank for all covered companies within a given industry. The Zacks
Rank is assigned to approximately 4400 stocks and ranges from #1 ("Strong
Buy") to #5 ("Strong
Sell"). Both the Zacks Industry Rank and the
Zacks Rank are quantitative indicators designed to cover periods of 1-3
months.

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions
are the most powerful force impacting stock prices." Since inception in
1988, #1 Rank stocks have generated an average annual return of +30%.
During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%,
while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system
has just as many Strong Sell recommendations (Rank #5) as Strong Buy
recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have
underperformed the S&P 500 by 81% annually (+2% versus +11%). Thus, the
Zacks Rank system allows investors to truly manage portfolio trading
effectively.

Zacks "Profit from the Pros"
e-mail newsletter offers continuous coverage of the industries and the
stocks poised to outperform the market. Subscribe to this free
newsletter today by visiting http://at.zacks.com/?id=2564.

Visit http://www.zacks.com/performance
for information about the performance numbers displayed in this press
release.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was
formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he
could find patterns in stock market data that would lead to superior
investment results. Amongst his many accomplishments was the formation
of his proprietary stock picking system; the Zacks Rank, which continues
to outperform the market by nearly a 3:1 margin. The best way to unlock
the profitable stock recommendations and market insights of Zacks
Investment Research is through our free daily email newsletter; Profit
from the Pros. In short, it's your steady flow of Profitable ideas
GUARANTEED to be worth your time! Register for your free subscription to
Profit From the Pros by going to http://at.zacks.com/?id=2565.

Zacks Investment Research is under common control with affiliated
entities (including a broker-dealer and an investment adviser), which
may engage in transactions involving the foregoing securities for the
clients of such affiliates.

Disclaimer: Past performance does not guarantee future results.
Investors should always research companies and securities before making
any investments. Nothing herein should be construed as an offer or
solicitation to buy or sell any security.

SOURCE: Zacks.com

Zacks.com 
Charles Rotblut, CFA 
312-265-9352 
pr@zacks.com 
www.Zacks.com

Copyright Business Wire 2008