NAHB: Builder Confidence at Record Low
Submitted by
CalculatedRisk on Mon, 08/18/2008 - 9:20am (75 comments)
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Feist!
Well I spoke to some people I know in the house building industry and must admit I was shocked. The people I know are always upbeat and their view of the near term anything but. Guess it supports the numbers we are seeing.
Still amazed at how many homeowners, even with this news, continue to feel that "their property / neighborhood is different."
DQNews is out:
Southland home sales post annual gain -- prices drop again
Southland home sales still ultra-low; median price slips again
The median price paid for a Southland home was $348,000 last month, down 2.0 percent from $355,000 in June and down 31.1 percent from $505,000 for July 2007. That peak of $505,000 was reached in March, April, May and July of last year.
The article says builder confidence in the West fell two points to 11.
I see the beginnings of an 'L' shape just as well as I can see a 'V'. What is the reasoning for believing the steady flow of record low activity into an L shape? Why couldn't this simply go lower and shoot back up?
I don't believe in the L shape seeing as starts and stops go hand in hand. It seems to me you are either going down or up, not stagnant.
Anticipating positive impacts of newly enacted housing stimulus legislation, single-family home builders registered some improvement in their outlook for home sales in the next six months...
So it's a positive thing that the government is taking more steps to ensure that houses are traded for paper instead of the products of real effort, insight, and resourcefulness?
It's a positive thing to have markets based on exchanging fictions of wealth between sedentary unproductive actors rather than markets where real wealth is exchanged by hard-working and genuinely wealthy participants?
If/When FNM and FRE go bust this number will drop to zero...
ac- that has been the economy since Reagan took over...28 years of stupidity!
FNM broke through its previous low...
K Student
An 'L' because we are just coming off a huge bubble in credit, financing, prices and spending on houses. A bubble doesn't 'come back' It bursts and things fall. They may overshoot, but when they come back, it will be to a sustainable level, not to an abnormal one. The abnormalities of the bubble are charted in stats like price-to-income ratio, price-to-rent, etc.
So now that builder confidence has been destroyed, when are they going to stop building?????
LOL
"What is the reasoning for believing the steady flow of record low activity into an L shape? Why couldn't this simply go lower and shoot back up?"
Massive oversupply leads to collapse of starts which is followed by a mass BK of homebuilders. Fewer homebuilders continue building minimal homes at razor thin margins until the oversupply is burned off and profitable margins return in about 5 to 7 years. This is an L shape. Really pretty simple.
It's a positive thing to have markets based on exchanging fictions of wealth between sedentary unproductive actors rather than markets where real wealth is exchanged by hard-working and genuinely wealthy participants?
As long as the spread sheet models show growth everthing is supposed to be peachy. At least that's the current thinking.
Who needs actual output when you have "spread sheet wealth"?????
K student,
I'm confused why you think that the near-term trend line must have either a positive or a negative slope for; a slope of 0 simply means that you are building or selling no more and no less than you were the month/quarter/year before.
Currently, I think the extended L-shaped curve is the most likely case scenario going forward, because demand has clearly been borrowed from the future, especially at the margins. So if there were to be a V-shaped curve in the near term, the nadir of that V would have to be exceptionally low to be able to entice the willing (and more importantly, able) players back into the game.
Our current forecast shows stabilization of sales during the second half of this year, followed by solid recovery in 2009 and beyond.
Dajavu from 2007. They'll say the same thing next year and perhaps even the one after that.
If/When FNM and FRE go bust this number will drop to zero...
Hanky Panky is having to do a little denial trick of a backstop to try and find some cheap shells for his bazooka. Let fear chase them into treasuries and then lower the boom on them. Common will be wiped out regardless these clowns are over 70:1 leverage which is increasing fast.
Good to see that satirist David Sedaris is now chief economist at NAHB- we certainly appreciate his humorous and satiric statement that the bottom is near. What, that's not him? That statement wasn't an ironic tongue in cheek jab at all the bottom-callers? He was serious? Now, THAT'S funny.
Don't underestimate survivor's bias. That "16" is reported from a survey of only the builders left standing and not coincidentally also willing to report for the survey.
OT - Does anybody know what will happen to Money Market Funds that are heavily invested in "agency paper"? Such as many of Fidelity's.
Will these MM funds start breaking the buck if Fannie and Freddie are "saved" by the taxpapers.
18-Aug: 01:39PM, *DJ SageCrest Hedge Fund Files Chapter 11 Bankruptcy
I wonder what the hedgie index is?
@mp - what time is the CB communique scheduled for?
Realtor.com list 125 homes at $1 million or more in my zip: 75230 and 203 homes in zip 75225 south of me. Many of these homes are newly built on tear down lots costing 1/2 million or more. There are several more North Dallas zips like these two examples and they exclude the suburbs where new and used million dollar mansions common.
ZIP 75230
75230 real estate & 75230 homes for sale | Single family homes - REALTOR.com®
ZIP 75225
75225 real estate & 75225 homes for sale | Single family homes - REALTOR.com®
"Still amazed at how many homeowners, even with this news, continue to feel that "their property / neighborhood is different.""
We will know we have hit the bottom when those people, stop believing that "their property is different"
Here is Home Builder Implode O Meter...their front page says "Since late 2006 41 major builders have imploded
(plus 31 additional tiny implosions)...there should be quite a few more go out of business IMHO.
Maybe it will look like one of those zig-zag Tetris pieces.
Anticipating positive impacts of newly enacted housing stimulus legislation...
Who is going to pay for that, I wonder?
...
Oh.
Our current forecast shows stabilization of sales during the second half of this year, followed by solid recovery in 2009 and beyond. David Seiders then took another long pull off his bong, and coughed slightly as he exhaled.
He continued, "Our current forecast for the World Series is Washington over Seattle in 6 games. And of course we continue to forecast that Michael Phelps will win no more than 7 Gold Medals."
Cheers,
You may all already know this, but Centex is pulling out of the Denver market. It plans to finish all homes already sold, but will not build any new homes not yet started and not yet sold in Denver. This was announced a week/week and a half ago? We went up to the Centex community up the street yesterday that is half built. I asked the sales person what was going to happen to the neighborhood now with the builder exiting the Denver market. He said he just didn't know. The streets, plumbing, etc. for the unbuilt homes are already in.
doom, they won't break the buck, after all agency paper has just been proven equivalent to fed paper.
In other words, it's all paper, back by the US gov't printing press.
Now that is not a problem for keeping a buck in the money market fund.
Keeping the value of the of buck is another problem:
Expired
How about double digit inflation?
Time to buy back the gold and silver so thoughtfully put on sale this month.
Nothing like that Kmart blue light special from hedgefund closeout land!
Now back to our regularly scheduled report on the decline and disappearance of the national homebuilder.
I am simply amazed that so many homebuilders still have equity on wall street, in spite of evidence to the contrary from main street.
Someday this war's gonna end...
He said he just didn't know. The streets, plumbing, etc. for the unbuilt homes are already in.
I lived by a partly-built abandon neighborhood in Texas for a while. I would go out there running and it was a lot of fun because not only weren't there cars on the road but deep in the neighborhood you got the sense of complete immersion in a post-apocalyptic landscape.
It was great practice for what's coming.
This just in... "Generalissimo Homebuilder is still valiantly holding on in his fight to remain dead."
Kung Fu,
Thanks for the link. Anon, if Denver is suppose to be one of the relatively better markets that didn't experience hyper appreiciation post 2000, why would Centex pull out of the market? (Of course, this question is purely rhetorical)
Bye. Gotta go read Clusterfuck Nation's Monday stuff for inspiration...
Land investors investing during this bust, who don't understand housing supply and demand, and who only understand land in a purely general form, will get crushed. Kind of like an average high school tennis team player taking on a professional player. Oh, the humanity.
Whew! I'm inspired...
August 18, 2008
Reality Bites Again
"The American banking system may not need a shove from Russia to fall on its face. It's effectively dead now, just lurching around zombie-like from one loan "window" to the next pretending to "borrow" capital -- while handing over shreds of its moldy clothing as "collateral" to the Federal Reserve. The entire US, beyond the banks, is becoming a land of the walking dead. Business is dying, home-ownership has become a death dance, whole regions are turning into wastelands of "for sale" signs, empty parking lots, vacant buildings, and dashed hopes. And all this beats a path directly to a failure of collective national imagination. We really don't know what's going on.
The fantasy that we can sustain our influence nine thousand miles away, when we can't even get our act together in Ohio is just a dark joke. One might state categorically that it would be a salubrious thing for America to knock off all its vaunted "dreaming" and just wake the fuck up."
James Howard Kunstler
Difficult market BS: "Homebuilder Centex is pulling out of the Denver area. Centex says it will end operations by the spring of 2009. The builder promises to finish all homes that have been sold but not yet started and says it will continue to work on existing homes. 'Clearly, market conditions remain difficult, and we expect the housing industry correction to continue this year. We're proud of the homes we've built here, but unfortunately it does not fit our long-term strategic objectives,' said Julie Callahan with Centex Corporate Communications. The company has 10 developments from Castle Rock to Fort Collins.
It seems interesting timing with the passage of the Hope for Homeowners legislation and the end of DAP's.
I see the beginnings of an 'L' shape just as well as I can see a 'V'. What is the reasoning for believing the steady flow of record low activity into an L shape?
Fannie,
Freddie,
Housing overhang,
Recession / (Depression if you believe NR)
Consumer overspending for the last 10 years,
Housing unaffordability (still)
There must be a half dozen more too....
Anyone calling a bottom now is suicidal...
.................
The article says builder confidence in the West fell two points to 11.
It goes to 11?
-Jaso
When the need for new housing is non-existent and every new home represents additional loss and risk for homebuilders, they have to (1) stop building and cease to operate or (2) they just build until they go BK. It appears that most just want to built until they go BK and lose everything. Unfortunately, the results of this option prolong the healing process.
Jason,
It is the limbo. It will go as low as the margins. (Which, incidentally, will require a backhoe.)
I have never, ever used leverage in my investments. But with the recent move up in homebuilders, retailers and casino stocks.....I'm very tempted to pull a Fannie/Freddie/Bear and lever up to my eyeballs (on shorts for these doomed industries)!!
You need to look at a 20-year price history of the homebuilders to see how far they still have to fall. This waiting around for a recovery, and expecting the survivors to pay off big, is hilarious!
FFDIC - that inspiring alright.
But rapper Young Jeezy provides the antidote this situation requires...
Blue Lamborghinis.
The opening track on his new album is...wait for it...
"The Recession".
Leverage is only a good idea to enhance low risk investments.
Applying it to an environment like the one we are currently in is lunacy.
On a side note.
Looks like our V shaped recession could use some Viagra.
Shorting post election has much less risk. Courage can be a double edged sword during these manipulated times.
heyya, what's the prob, guys? Fanny and Freddie are doing fine, being well capitalized and all. They are only down 16.5% and 18.5% today!
The problem with these zombie banks is that they do not eat brains (that's NOT a problem??? Logic sux), but they eat capital. And return nothing for it. Leaving capital for real investment. And the US just ain't producing much new capital these days.
Cheers,
Anonymous,
As my name implies, I would not dare use leverage in shorting the markets. I just said I was tempted because of the insanity of homebuilder/retailer valuations, and given their earnings outlook.
Of course, if I was playing with OPM, that would be an entirely different matter! I'd be much more courageous!
Whoops, spoke too soon: Fanny 17.5% and Freddie 19.0% down.
JimPortlandOR,
"Whoops, spoke too soon: Fanny 17.5% and Freddie 19.0% down."
And some asshat analyst on Bloom TV this morning about 5 am was saying that fanny and freddie were already priced in. I almost laughed coffee out my nose when he said that.
Cheers,
Short Courage-
We also sell courage, in convenient plastic bottles. Stop by.
Mish is now being reported at yahoo news...When did he become part of the MSM??
As someone recently said on this blog: "Conquer your fear and you'll soon die in a paragliding accident."
http://www.youtube.com/watch?v=9CCAz_DbCRM"
OT, but there should be some interesting margin calls today.
Trying again: Paraglider crash
Just so everyone understands. Kunstler is entertainment not analysis. As an analyst his record is of successfully predicting at least two dozen of the last zero collapses of Western Civilization.
Excerpts:
Business is dying,
No, huge sectors are facing massive changes. The US is still a mfg powerhouse. That position can actually improve as we take care of long neglected infrastructure and energy issues.
home-ownership has become a death dance,
Silly. First there never was anything magical about homeownership itself. The magic was from forced savings, stable community, revealed preference, etc. The recent homeownership rate declines have nothing to do with those desireable traits.
whole regions are turning into wastelands of "for sale" signs, empty parking lots, vacant buildings, and dashed hopes.
Kunstler lives in Upper New York State, a region that's been putrifying for generations. Forgive him his myopic hyperbole.
And all this beats a path directly to a failure of collective national imagination. We really don't know what's going on.
By "we" Kunstler means everybody but him. Kunstler is a weird amalgam old style proto-urbanist and anti-corporatist.
JHK is a great wordsmith too bad he wastes his skills on rose colored bucolic times that never were.
Whoops, spoke too soon: Fanny 17.5% and Freddie 19.0% down.
When they get to penny stock, the Fed will pull the trigger. More shares for the dollar!
Lefty, thanks.
I think in the environment we're entering, you'd do a better business selling something other than courage.... Opium perhaps?
Mr. Beach,
I'll take credit for that.
The problem with these zombie banks is that they do not eat brains.
Plus there's no brains to eat anyhow.
=<
ac,
LOL.
Cheers,
Lefty, the thread one down needs your attention.
Gottem on Speed Dial.
Elvis: Very, very funny.
We fired our cannon till the barrel melted down
So we grabbed an alligator and we fought another round
We filled his head with cannonballs 'n' powdered his behind
And when we touched the powder off, the gator lost his mind
We fired our guns and the British kept a'comin'
There wasn't nigh as many as there was a while ago
We fired once more and they began to runnin'
On down the Mississippi to the Gulf of Mexico
OT: What's the significance of the 1277 level for S&P 500? It keeps getting stuck there.
I see dead money entering market , and buying like crazy
Mr. market is twitching like a crack addict.
Kunstler lives in Upper New York State, a region that's been putrifying for generations. Forgive him his myopic hyperbole.
As opposed to California, which is only just now getting around to putrifying.
-25% in one day... That's a lot of retirements gone.
Who thinks the Russians did it?
So will the market rocket up when FNM and FRE get bailed out? At some point bad news becomes bad news...right?!?
wally writes: A bubble doesn't 'come back' It bursts and things fall. They may overshoot, but when they come back, it will be to a sustainable level, not to an abnormal one.
They'll need to stop building a lot more so they'll have room to 'come back' to a 'sustainable level'. Like the old song says, "How can I miss you when you won't go away?"
Wally and Elvis
I understand this concept clearly. I'm not believing prices will return to anywhere close to where they were yrs 04-06, but looking at the Index, I see very few periods where this stabilization occurs to make this L shape from here. And, if stabilization of the index does occur, this low point does not seem to be it.
Yes, the bubble has burst. It seems to me some sort of boost in this index has to occur before stabilization.
The RE industry is a bunch of parasites off of the taxpayers with all their subsidies. It's time to direct these subsisdies to a real industry that can make our economy more productive. These greedy bastards have gained the systme for long enough. It is time to let them run free standing away from all the handouts.
HBerts with scummy just a few years ago using illegal workersa and churning out shacks that were a total misallocation of capital.
RE IS OVERRATED AS AN ECONOMIC DRIVER.
I have given up on shorting the homebuilders, I have to believe that they are even bigger fibbers than the banks, and since there is no FDIC or OCC breathing down their neck, the SEC is all they have to worry about.
They do have a similar problem to the banks. Either go into run-off mode or continue to vaporize cash. Officers can't loot the firm as long in run-off mode though.