You have to question the honesty or competency of HBer execs. How was it that they were smart enough to unload Hundreds of millions in stock options, but they could not see this train wreck?
What is interesting is that the homebuilder stocks have stopped going down on negative news (Cramer highlighted this sector as a must buy on Friday...for what it's worth although I think he's a clown). I see the how it's tempting to buy in here but just I'm thinking that the YoY fall in profits is off of a bubble level so it's not an accurate level to base future profits off. Also, all of those stories of free pools and kitchens used to entice buyers rather than cutting the price of the home makes me question how bad it really will get once these "perks" stop and losses on houses sold start to hit the bottom line. The sector is up 15% off its July low. Sucker's rally?
DMan - you don't suppose Berg is an interested party?
Gilchrist Berg, founder of $2 billion Jacksonville, Fla.-based hedge-fund firm Water Street Capital, said in a recent letter to investors that Fannie Mae could lose $22 billion to $29 billion if, as he expects, the housing bubble bursts and foreclosures increase.
[...]
Berg has been shorting Fannie stock since the summer of 2003, when questions emerged about its accounting.
Naw, no interest. Just a casual observation... [/sarcasm].
Berg might be right - but I believe the short-sellers about as much as I do the pump-n-dumpers - i.e. not a lot.
The numbers are this far down and we are just at the begining of the downturn. The last time it was this low it was several years into the bust.
We have a long way down to go.
by my figuring, we peaked in Aug '05. prices are droppping like rocks in some places, inventory through the roof, builder confidence at a low.
how much farther is there to go? bad question to ask I know.
seems to me that this bust cycle could be accelerated by the improved information dissemination brought by the interet? information is what makes real estate move...
Lenny, I've never written anything close to what you suggest. Thanks for the laugh. I do think the housing bust will have significant repercussions on the economy, but I definitely do not have a "doom and gloom" view.
The housing bust is pretty clear - the only questions are how far prices will fall and the duration of the bust. Some areas will probably fall 40% or more in real terms (like the early '90s bust in California), and I expect the existing home bust to last several years.
But the impact on the economy is less clear. Most people want more, and want it sooner (the two pig postulates of economics) - so they will do whatever they can to maintain or improve their lifestyle. And since macro is the sum of all the micro decisions, the economy usually grows. That is why recessions are infrequent - few people ever want less!
BTW, I prefer times like late '94 when I was one of the few bulls around. That was more fun - although I received much more criticism!
winjr, a lot of people are calling for a reversal in the HBs and yep, last month they rallied on just about every piece of negative news.
Here's what I expect tomorrow:
Housing starts come in below expectations: HBs rally because the market judges this to mean they builders are making the necessary adjustments to slow inventory growth.
Housing starts come in adbove expectations: HBs rally because the market judges this to mean that buyers are re-entering the market after a pin-point soft landing.
Ok, so much for the cynical prognostications. Here's what I think will come out and what should happen.
Housing starts come in as expected. HBs sell-off because those who have been paying attention recognize that inventories are now at all-time highs and still growing (grew by 50k just this weekend) and prices have yet to come down significantly. Moreover, recent declines in mortgage rates have had no positive impact on home buying activity.
Of course, there is always option 4, which states that nothing much will happen as the market is fixated (as always) on the next FOMC meeting.
The large homebuilders operate on margins of 40% or so. Since they have their own mortgage companies in-house, would that mitigage the risk for additional high-risk lending?
They might still be better off selling off inventory and taking the chance of having to foreclose.
dry fly my brother,
come on now. how about electronic databases? does that change your tune? in the old days, real estate listings were kept in a book down at the brokerage and to find out info about sales you had to go dig through the recorders office.
now you can find out every property for sale in the country within minutes, see the sales as soon as its recorded, and track each property's price action in real time!!
home builder confidence numbers available to all the second its released! i imagine 20 years ago you had to wait for your trade journal to come out quarterly to find out.
information regarding everything is at your finger tips - so what if you have to dig through some drivel - its better than sitting in home waiting for printed paper product to make its way through the pony express mail system to tell you news thats weeks old.
home builder confidence numbers available to all the second its released! i imagine 20 years ago you had to wait for your trade journal to come out quarterly to find out.
information regarding everything is at your finger tips - so what if you have to dig through some drivel - its better than sitting in home waiting for printed paper product to make its way through the pony express mail system to tell you news thats weeks old.
Builder confidence at '91 recession lows!? This implies that builders are going to stop new construction in the coming months... While prices are still HIGH.. Which slow the overcapacity and price declines.
Maybe this time its different? With all the bubble talk keeping homebuilders on their toes about overcapacity? Oh wait..They sold their stock options last year then let the pony rip at full speed!!
We'll just have to wait and see.
I hate to sound like a disbeliever -- but I dont think inventory levels have that much farther to rise. Where we at now? 7 months? My guess is they going up to 10 months and thats that. By end of this year me thinks the worst in housing should be over ... eh?
Current national inventory is 7.3 months. Pretty unhealthy. A national inventory of 10 months would be a complete disaster. And the worst of this housing mess doesn't come to an end until prices hit bottom, which could be quite some time from now.
Ya I read Mish's post - Morgan is a pretty interesting character.
The rah-rah crowd might think it's all fictional but I have a buddy in Sarasota-Naples, reads Mish & does real estate on the side himself and he says it's EXACTLY like Morgan reports right now.
I hate to sound like a disbeliever -- but I dont think inventory levels have that much farther to rise.
I don't think they'll rise too much more in terms of numbers. But if you look at actual sales figures, they're still high above their historical trend line, even given recent declines. I think this is in part due to the fact that the housing market really has no barrier to entry yet - anybody can get a loan still.
The implication of this is that the Months of Inventory figure may increase substantially.
If things continue to deteriorate and, as more and more economists are now suggesting, we do enter a recession, I think we could see sales drop much further, and maybe see something well in excess of 12 months inventory.
yeah thats the thing at least for now - sales aren't down that too terribly much. sure we're down 15% in terms of gross numbers YOY, but thats not tooooooo terribly bad for all of us involved....
in DC at least, the right properties at the right prices in the right places are still selling like hot cakes - and not to investors.
You have to question the honesty or competency of HBer execs. How was it that they were smart enough to unload Hundreds of millions in stock options, but they could not see this train wreck?
It is getting uglier by the week.
Yes it could get worse...
Fannie Mae could lose $29 bln in housing bust: hedge firm - MarketWatch
What is interesting is that the homebuilder stocks have stopped going down on negative news (Cramer highlighted this sector as a must buy on Friday...for what it's worth although I think he's a clown). I see the how it's tempting to buy in here but just I'm thinking that the YoY fall in profits is off of a bubble level so it's not an accurate level to base future profits off. Also, all of those stories of free pools and kitchens used to entice buyers rather than cutting the price of the home makes me question how bad it really will get once these "perks" stop and losses on houses sold start to hit the bottom line. The sector is up 15% off its July low. Sucker's rally?
If 1991 was a Black Diamond slope, this is looking like a Double Black Diamond run. Buckle your skis tight, and look out below.
And rentfornow, that was a rhetorical question, I presume.
Yes it could get worse...
DMan - you don't suppose Berg is an interested party?
Gilchrist Berg, founder of $2 billion Jacksonville, Fla.-based hedge-fund firm Water Street Capital, said in a recent letter to investors that Fannie Mae could lose $22 billion to $29 billion if, as he expects, the housing bubble bursts and foreclosures increase.
[...]
Berg has been shorting Fannie stock since the summer of 2003, when questions emerged about its accounting.
Naw, no interest. Just a casual observation... [/sarcasm].
Berg might be right - but I believe the short-sellers about as much as I do the pump-n-dumpers - i.e. not a lot.
The numbers are this far down and we are just at the begining of the downturn. The last time it was this low it was several years into the bust.
We have a long way down to go.
Like this shows much. Just that builders expect slower activity over the next few months. Yet, CR thinks it means the end of the world.
by my figuring, we peaked in Aug '05. prices are droppping like rocks in some places, inventory through the roof, builder confidence at a low.
how much farther is there to go? bad question to ask I know.
seems to me that this bust cycle could be accelerated by the improved information dissemination brought by the interet? information is what makes real estate move...
Lenny = troll.
Lloyd, the trend we've seen the last few months (HB stocks going up on bad news) may be reversing.
All of the HB stocks were up this morning, most by a healthy percentage, but almost all did an abrupt U-turn when the NAHB report was released.
Tomorrow will be a good barometer. Last month, when the new starts number was released, the HB stocks rallied aggressively.
Lenny, I've never written anything close to what you suggest. Thanks for the laugh. I do think the housing bust will have significant repercussions on the economy, but I definitely do not have a "doom and gloom" view.
The housing bust is pretty clear - the only questions are how far prices will fall and the duration of the bust. Some areas will probably fall 40% or more in real terms (like the early '90s bust in California), and I expect the existing home bust to last several years.
But the impact on the economy is less clear. Most people want more, and want it sooner (the two pig postulates of economics) - so they will do whatever they can to maintain or improve their lifestyle. And since macro is the sum of all the micro decisions, the economy usually grows. That is why recessions are infrequent - few people ever want less!
BTW, I prefer times like late '94 when I was one of the few bulls around. That was more fun - although I received much more criticism!
Best to all.
winjr, a lot of people are calling for a reversal in the HBs and yep, last month they rallied on just about every piece of negative news.
Here's what I expect tomorrow:
Ok, so much for the cynical prognostications. Here's what I think will come out and what should happen.
Of course, there is always option 4, which states that nothing much will happen as the market is fixated (as always) on the next FOMC meeting.
DC1000
Faster info, but more of it and less reliable.
So in effect you get stuff faster, but you must use a lot more judgement to evaluate it.
The large homebuilders operate on margins of 40% or so. Since they have their own mortgage companies in-house, would that mitigage the risk for additional high-risk lending?
They might still be better off selling off inventory and taking the chance of having to foreclose.
The few trolls should be happy to be on this board where they can insult people to whom they otherwise would have no access.
I second vader's theory...
internet = electronic rumor mill
Millionaire Now!: PEOPLE JUST HAVE TO BE RIGHT ON THE HOUSING BUBBLE!
dry fly my brother,
come on now. how about electronic databases? does that change your tune? in the old days, real estate listings were kept in a book down at the brokerage and to find out info about sales you had to go dig through the recorders office.
now you can find out every property for sale in the country within minutes, see the sales as soon as its recorded, and track each property's price action in real time!!
home builder confidence numbers available to all the second its released! i imagine 20 years ago you had to wait for your trade journal to come out quarterly to find out.
information regarding everything is at your finger tips - so what if you have to dig through some drivel - its better than sitting in home waiting for printed paper product to make its way through the pony express mail system to tell you news thats weeks old.
dry fly!!
home builder confidence numbers available to all the second its released! i imagine 20 years ago you had to wait for your trade journal to come out quarterly to find out.
information regarding everything is at your finger tips - so what if you have to dig through some drivel - its better than sitting in home waiting for printed paper product to make its way through the pony express mail system to tell you news thats weeks old.
dry fly!!
dc maybe pro's like you do that (access databases)... the rest of us 'access craig'... as in 'craig's list'.
Builder confidence at '91 recession lows!? This implies that builders are going to stop new construction in the coming months... While prices are still HIGH.. Which slow the overcapacity and price declines.
Maybe this time its different? With all the bubble talk keeping homebuilders on their toes about overcapacity? Oh wait..They sold their stock options last year then let the pony rip at full speed!!
We'll just have to wait and see.
I hate to sound like a disbeliever -- but I dont think inventory levels have that much farther to rise. Where we at now? 7 months? My guess is they going up to 10 months and thats that. By end of this year me thinks the worst in housing should be over ... eh?
Captain Spaulding:
I'm betting on Option 1.
Sharkbait:
Current national inventory is 7.3 months. Pretty unhealthy. A national inventory of 10 months would be a complete disaster. And the worst of this housing mess doesn't come to an end until prices hit bottom, which could be quite some time from now.
A 'national' turnover of ten months means rural small cities like the one I'm living in goes to 2-3 years.
Could happen... has happened before.
Oh well I have no where exciting to go. Just watch the corn grow then the leaves fall, repeat a few more times. LOL.
Will there be a hard landing? No!
Will there be a crash landing? Absolutely!
So reads mish's blog.
Mish's Global etc.
Ya I read Mish's post - Morgan is a pretty interesting character.
The rah-rah crowd might think it's all fictional but I have a buddy in Sarasota-Naples, reads Mish & does real estate on the side himself and he says it's EXACTLY like Morgan reports right now.
I hate to sound like a disbeliever -- but I dont think inventory levels have that much farther to rise.
I don't think they'll rise too much more in terms of numbers. But if you look at actual sales figures, they're still high above their historical trend line, even given recent declines. I think this is in part due to the fact that the housing market really has no barrier to entry yet - anybody can get a loan still.
The implication of this is that the Months of Inventory figure may increase substantially.
If things continue to deteriorate and, as more and more economists are now suggesting, we do enter a recession, I think we could see sales drop much further, and maybe see something well in excess of 12 months inventory.
yeah thats the thing at least for now - sales aren't down that too terribly much. sure we're down 15% in terms of gross numbers YOY, but thats not tooooooo terribly bad for all of us involved....
in DC at least, the right properties at the right prices in the right places are still selling like hot cakes - and not to investors.
in DC at least, the right properties at the right prices in the right places are still selling like hot cakes - and not to investors.
The right places always sell... its the rest that makes the market.
core cpi drops. uh oh!
And the homebuilders start to fall yet again. Margins and revenue have to come down. Layoffs to follow