I thought that the home building stocks might really take off, but so far they bounced and then fell back to even or below. Financials are having a hard time today.
With strong numbers for both durable goods and housing, and with the employment numbers holding up, the chance for a Fed rate cut in September has gone down. On the other hand, we should start guessing on the August housing sales. Anyone for down 20-30% due to the mortgage shakedown?
Yal said: "So I am sure now Sebastian and DC1000 are sure we already hit bottom...."
All I go by is what the data says. If applications are up, new home sales are up, median prices are up, residential construction jobs aren't down as much as they're "supposed" to be, and durable goods orders are up, I don't go looking for arcane reasons why all that data is "wrong."
Thinking like that is the kind of irrational behavior that winds us up in trouble. Been there, done that, won't be fooled again.
its all about interest cuts for Wall St and Cramer. they could care less about the real economy as long as they can get their hands on more of our money to continue to speculate on the financial economy.
Yeah but Marketwatch says all is well: Gains built on housing data
Latest monthly report on U.S. new-home sales improves the early mood on Wall Street, pulling the main stock indexes into positive territory.
All, how many times during the bust have we seen a bounce in New home sales, only to see it revised away? Many times.
I'd rate the numbers this month as weak. But, as Bob_in_MA noted, this probably lowers the chances of a rate cut. I'm convinced the Fed will not cut until there is clear evidence of a slowdown away from housing. The durable goods report this AM was very strong, and the Fed will look through any one month of the employment report. So my guess is a rate cut in September is very unlikely now.
Sebastian carefully left off the key info that cancellations are also up: way, way up. In fact, Bob Toll said that cancellations are the highest that he's seen in 20+ years of being a public company.
Selective information retention is a common malady of the delusional.
Yal, ah, uggh, that was really sad. It happens a lot though. That's why I see red when couples try to buy before they are ready and are encouraged to do so at really high DTI ratios. It's not worth it. It's not only a financial mistake but generally a huge toxic curse on the marriage.
I think the Fed will cut rates. Currently, the Fed Fund Rate future probabilities point to a cut, and the Fed usually falls in line with those probabilities.
If the Fed was not planning on cutting, they'd have to put out a lot stronger language than what they're currently saying.
I don't think just fear of inflation motivates the Fed. I think they will try to make the discount window and the rate more divergent. That is, each has a purpose and there is no reason to move them in unison - liquidity guarantee is one thing, rates are another.
Look for the Fed to not be so one-dimensional as in past years.
Due to widespread protest from readers and apparent hostility of the lead girl of this outpost, I denounce the name "Tantra" from now on. I will contiue to post with the new name "Lost in translation".
It's existing home sales and the impact of the credit squeeze on consumer spending that will drive the necessity for rate cuts. New home sales data, a gnat on a flea's ass. Too volatile, too much margin of error. This report was before any credit crunch so these numbers will be coming down. If the Fed does not cut, look out below. The commercial paper market has seized up and unless they get it moving again, the economy will slow down fast. The irony, rate cuts won't matter as they won't fix the underlying rot.
New home sales increasing in July is actually very bad news for builders. A significant number of contracts will not close, thus leaving the builders with additional unwanted existing inventory. When buyers contract and then cancel while demand is simultaneously falling drastically, the builder are stuck with huge liabilities that they will have to dump at lower and lower prices.
My take on the numbers, cross posted from Zacks.com
Wow, we just got a bunch of much stronger than expected data. The news on both durable goods and housing was very good and much better than expected. Given that housing is at the epicenter of the current difficulties in the market, it is probably the more significant of the two and I will address it first. Later today I will post a note on the durable goods report.
New home sales jumped to a seasonally adjusted annual rate of 870k, up 2.8% from 846k in June, but still down 10.8% from 969k in July of 2006. The June figures were also revised significantly higher; they were originally reported at 834k. The consensus expectation for July was 825k. Much of the improvement was due to the seasonal adjustment, in terms of actual houses sold in July, there were 74k versus 77k in June and 83k a year ago. However, housing sales are a very seasonal item, and so the seasonal adjusted figures are the better way of looking at the data. There was significant regional variation in this months report. The West lead the way with sales jumping to a seasonally adjusted rate of 213k from 174k in June, a 22.4% improvement, although still down 19.6% from a year ago. The super important South region was up only slightly (492k vs. 489k, or up 0.6%) and only down 3.0% from a year ago. The Midwest was also basically unchanged, down 0.9% for the month, but still down 18.2% year over year. Only the Northeast was really slammed this month, down 24.3% for the month and 11.7% year over year. However, at an annual rate of 53k, it is only about 10% of the South region. When it comes to the national housing market numbers, the South, and to a lesser extent the West, is what is really important.
There was also a little bit of improvement on the inventory front, with 533k new homes on the market, down from 538k in June and 573k a year ago. In terms of months supply, there were 7.5 months of inventory on the market at the July selling rate, down form 7.7 months in June and 7.4 months a year ago. Thats still way too high by historical standards, but starting to move in the right direction. The data on sales by price range and by stage of construction is only presented on an actual monthly sales basis, not on a seasonally adjusted annual basis. With that caveat, it looks like all of the strength was in the high end McMansisons. Sales of houses over $500k were up to 14k from 13k (on the surface that appears to be a 7.7% gain, but the numbers are rounded to the nearest 1000, so it could be much larger or smaller than that). Sales of mid range homes were flat with a month ago at 37k and down from 42k a year ago. Sales of starter houses, below $200k fell to 28k from 32k in June and 30k a year ago. However, some of that variation may be due to the regional patterns. Houses are much more expensive on average in the West than they are in the South or Midwest.
It also appears that most of the improvement was due to orders for houses not yet started, as opposed to those that are already finished or under construction. Orders for houses not started rose to 23k from 21 k in June, but still down from 26k a year ago. Meanwhile, finished house sales were down to 29k from 30k a month ago and 27k a year ago. Sales of houses under construction continued to plummet, falling to 22k from 26k in June and 30K a year ago.
Over all the report is very encouraging. Keep in mind however that the new home sales numbers have very wide confidence intervals around them, especially for the regional numbers. In other words the data is not very good (in this case I mean the quality and reliability of it, not what it is saying about the market) and is subject to large revisions. However, the June revision was up, and up rather significantly. Also, builders have been reporting that cancellation rates are once again on the rise, and the way the figures are calculated, that tends to overstate sales. Keep in mind that this report reflects what was happening before the latest wave of instability in the mortgage market hit. It is still to early to declare a bottom to the housing market, but this report is extremely encouraging. It is way too early to wade back into the homebuilders such as D.R. Horton (DHI) but it is probably to late to short any but the financially weakest of the group (i.e. Beazer Homes (BZH) or Hovanian (HOV). I would want to see at least another two months of rising new home sales before I called the slump in the housing market over, and I doubt we are going to get that. Then again I sure wasnt expecting this report to be anywhere near this strong.
Yal, thanks for the link, very interesting. My wife and I have a baby on the way and she's been pushing for us to buy. I think she has finally come to the conclusion that it will be awhile before the market comes down to affordable territory. Now she's pushing to get our apartment recarpeted and painted before the baby arrives.
Thanks, I forwarded that as a warning to my wife, we don't want to make that mistake.
BONZAI!
This really made me sad:
Suzanne Researched This: Part 2 | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.
listen to the whole call, 2nd audio.
"June were revised up to 846 thousand, from 834 thousand. Numbers for April and May were revised down"
So I am sure now Sebastian and DC1000 are sure we already hit bottom....
Please wait another month and another and another - we will have many more "bottoms" to hit.
Damn, now I'd guess unless the job number is under 50k, it will be hard to cut rates in September.
This could slow the cure for homebuilders and financials and yet offer no real relief.
I thought that the home building stocks might really take off, but so far they bounced and then fell back to even or below. Financials are having a hard time today.
With strong numbers for both durable goods and housing, and with the employment numbers holding up, the chance for a Fed rate cut in September has gone down. On the other hand, we should start guessing on the August housing sales. Anyone for down 20-30% due to the mortgage shakedown?
Yal said: "So I am sure now Sebastian and DC1000 are sure we already hit bottom...."
All I go by is what the data says. If applications are up, new home sales are up, median prices are up, residential construction jobs aren't down as much as they're "supposed" to be, and durable goods orders are up, I don't go looking for arcane reasons why all that data is "wrong."
Thinking like that is the kind of irrational behavior that winds us up in trouble. Been there, done that, won't be fooled again.
Sebastia
Bill
its all about interest cuts for Wall St and Cramer. they could care less about the real economy as long as they can get their hands on more of our money to continue to speculate on the financial economy.
Yal-wow, that was sad. i admire your compassion.
So, if the NHS numbers are up, why all the doom and gloom statements from the Home builders?
So, if the NHS numbers are up, why all the doom and gloom statements from the Home builders?
peter | 08.24.07 - 10:46 am | #
You can't believe anything those permabears like Bob Toll say about a soft market.
Enjoy these relatively decent numbers, builders, cause it's the high water mark for some time to come.
August and September will truly be horrific. Just in time for Halloween ... a builders house-o-horror.
Yeah but Marketwatch says all is well:
Gains built on housing data
Latest monthly report on U.S. new-home sales improves the early mood on Wall Street, pulling the main stock indexes into positive territory.
All, how many times during the bust have we seen a bounce in New home sales, only to see it revised away? Many times.
I'd rate the numbers this month as weak. But, as Bob_in_MA noted, this probably lowers the chances of a rate cut. I'm convinced the Fed will not cut until there is clear evidence of a slowdown away from housing. The durable goods report this AM was very strong, and the Fed will look through any one month of the employment report. So my guess is a rate cut in September is very unlikely now.
Best to all.
Sebastian carefully left off the key info that cancellations are also up: way, way up. In fact, Bob Toll said that cancellations are the highest that he's seen in 20+ years of being a public company.
Selective information retention is a common malady of the delusional.
CR, I think the Fed has maintained an inflated fear of inflation and that is also why they have not lowered rates.
Yal, ah, uggh, that was really sad. It happens a lot though. That's why I see red when couples try to buy before they are ready and are encouraged to do so at really high DTI ratios. It's not worth it. It's not only a financial mistake but generally a huge toxic curse on the marriage.
And yes, women often are the ones pushing for it.
I think the Fed will cut rates. Currently, the Fed Fund Rate future probabilities point to a cut, and the Fed usually falls in line with those probabilities.
If the Fed was not planning on cutting, they'd have to put out a lot stronger language than what they're currently saying.
Does anyone know where you can see charts on the Federal Funds futures? I'm wondering if the market agrees with us?
I don't think just fear of inflation motivates the Fed. I think they will try to make the discount window and the rate more divergent. That is, each has a purpose and there is no reason to move them in unison - liquidity guarantee is one thing, rates are another.
Look for the Fed to not be so one-dimensional as in past years.
The Fed remains inactive as they desire detumescence.
If Fed cuts in the future it will be in coordination with other central banks.
Hello all,
Due to widespread protest from readers and apparent hostility of the lead girl of this outpost, I denounce the name "Tantra" from now on. I will contiue to post with the new name "Lost in translation".
It's existing home sales and the impact of the credit squeeze on consumer spending that will drive the necessity for rate cuts. New home sales data, a gnat on a flea's ass. Too volatile, too much margin of error. This report was before any credit crunch so these numbers will be coming down. If the Fed does not cut, look out below. The commercial paper market has seized up and unless they get it moving again, the economy will slow down fast. The irony, rate cuts won't matter as they won't fix the underlying rot.
Realty Times
As The Foreclosure Cow Gives Banking Snake Indigestion, Fed Debates Ex-Lax Or Pepto...
BS from Blanche - one of the 25 Most Influential People In RE per Realtor Magazine
Realty Times - As The Foreclosure Cow Gives Banking Snake Indigestion, Fed Debates Ex-Lax Or Pepto
Bunny stay calm.
New home sales increasing in July is actually very bad news for builders. A significant number of contracts will not close, thus leaving the builders with additional unwanted existing inventory. When buyers contract and then cancel while demand is simultaneously falling drastically, the builder are stuck with huge liabilities that they will have to dump at lower and lower prices.
All I go by is what the data says.
Your belief in these reports is really touching.
I am blown away by Yal's link to the audio clip. Dr. Laura practices very tough love.
I would fell a lot better about the value of the US Dollar if Dr. Laura were in charge of the Treasury.
Does anyone know where you can see charts on the Federal Funds futures? I'm wondering if the market agrees with us?
Go to
expectation numbers
My take on the numbers, cross posted from Zacks.com
Wow, we just got a bunch of much stronger than expected data. The news on both durable goods and housing was very good and much better than expected. Given that housing is at the epicenter of the current difficulties in the market, it is probably the more significant of the two and I will address it first. Later today I will post a note on the durable goods report.
New home sales jumped to a seasonally adjusted annual rate of 870k, up 2.8% from 846k in June, but still down 10.8% from 969k in July of 2006. The June figures were also revised significantly higher; they were originally reported at 834k. The consensus expectation for July was 825k. Much of the improvement was due to the seasonal adjustment, in terms of actual houses sold in July, there were 74k versus 77k in June and 83k a year ago. However, housing sales are a very seasonal item, and so the seasonal adjusted figures are the better way of looking at the data. There was significant regional variation in this months report. The West lead the way with sales jumping to a seasonally adjusted rate of 213k from 174k in June, a 22.4% improvement, although still down 19.6% from a year ago. The super important South region was up only slightly (492k vs. 489k, or up 0.6%) and only down 3.0% from a year ago. The Midwest was also basically unchanged, down 0.9% for the month, but still down 18.2% year over year. Only the Northeast was really slammed this month, down 24.3% for the month and 11.7% year over year. However, at an annual rate of 53k, it is only about 10% of the South region. When it comes to the national housing market numbers, the South, and to a lesser extent the West, is what is really important.
There was also a little bit of improvement on the inventory front, with 533k new homes on the market, down from 538k in June and 573k a year ago. In terms of months supply, there were 7.5 months of inventory on the market at the July selling rate, down form 7.7 months in June and 7.4 months a year ago. Thats still way too high by historical standards, but starting to move in the right direction. The data on sales by price range and by stage of construction is only presented on an actual monthly sales basis, not on a seasonally adjusted annual basis. With that caveat, it looks like all of the strength was in the high end McMansisons. Sales of houses over $500k were up to 14k from 13k (on the surface that appears to be a 7.7% gain, but the numbers are rounded to the nearest 1000, so it could be much larger or smaller than that). Sales of mid range homes were flat with a month ago at 37k and down from 42k a year ago. Sales of starter houses, below $200k fell to 28k from 32k in June and 30k a year ago. However, some of that variation may be due to the regional patterns. Houses are much more expensive on average in the West than they are in the South or Midwest.
my take continued:
It also appears that most of the improvement was due to orders for houses not yet started, as opposed to those that are already finished or under construction. Orders for houses not started rose to 23k from 21 k in June, but still down from 26k a year ago. Meanwhile, finished house sales were down to 29k from 30k a month ago and 27k a year ago. Sales of houses under construction continued to plummet, falling to 22k from 26k in June and 30K a year ago.
Over all the report is very encouraging. Keep in mind however that the new home sales numbers have very wide confidence intervals around them, especially for the regional numbers. In other words the data is not very good (in this case I mean the quality and reliability of it, not what it is saying about the market) and is subject to large revisions. However, the June revision was up, and up rather significantly. Also, builders have been reporting that cancellation rates are once again on the rise, and the way the figures are calculated, that tends to overstate sales. Keep in mind that this report reflects what was happening before the latest wave of instability in the mortgage market hit. It is still to early to declare a bottom to the housing market, but this report is extremely encouraging. It is way too early to wade back into the homebuilders such as D.R. Horton (DHI) but it is probably to late to short any but the financially weakest of the group (i.e. Beazer Homes (BZH) or Hovanian (HOV). I would want to see at least another two months of rising new home sales before I called the slump in the housing market over, and I doubt we are going to get that. Then again I sure wasnt expecting this report to be anywhere near this strong.
Yal- I listened to the audio, didn't find it too sad. They'll lose money but probably be a happier family.
Am I the only one who finds it a bit funny that the headlines read something like...
"New home sales jumped to a seasonally adjusted annual rate of 870k, up 2.8% from 846k in June"
...when the underlying "actual" data is...
June (R) 77
July 74
Note: please spare me the lectures on Seasonal Adjustment factors etc., I understand about them - but somehow the data just makes me laugh.
Sales are up! We're saved!
Yal, thanks for the link, very interesting. My wife and I have a baby on the way and she's been pushing for us to buy. I think she has finally come to the conclusion that it will be awhile before the market comes down to affordable territory. Now she's pushing to get our apartment recarpeted and painted before the baby arrives.
Thanks, I forwarded that as a warning to my wife, we don't want to make that mistake.