Homebuilder Confidence At 11 Year Low
The homebuilders are turning negative. “Rising mortgage rates, deepening affordability issues and the retreat of investors/speculators from the marketplace are prompting single-family home builders to further adjust their perspectives on the new-home market, according to the National Association of Home Builders.”
“The HMI declined six points from an upwardly revised reading in the previous month to hit 45 for the latest report, its lowest mark since mid-1995. All three component indexes declined in May. The index gauging current sales and the index gauging sales expectations for the next six months each fell five points, to 50 and 54, respectively. Meanwhile, the index gauging traffic of prospective buyers declined seven points, to 32.”
“The decline in builder confidence was broad-based and registered in every region this month. The HMI fell three points to 47 in the Northeast, two points to 30 in the Midwest, six points to 51 in the South and eight points to 61 in the West.”
“The index shows more builders say the market is ‘poor’ than say it’s ‘good.’ The index has fallen 23 points in the last seven months. A year ago, the index was at 70.”
“The industry group expects new home sales to fall 12% this year from the record 1.28 million in 2005. They expect housing starts to fall about 7% from 2005’s record 2.07 million.”
“‘Any really further setback (in the index) is just going to continue to reinforce the picture and people will then begin to question how big of a magnitude we’re going to see in terms of a correction,’ said (economist) Glenn Haberbush.”
“‘The days of double-digit price appreciation are over,’ said Greg McBride, senior financial analyst at Bankrate. ‘It is very much a buyer’s market rather than a seller’s market.’”
“On Tuesday, the Commerce Department will report on April housing starts. Economists are looking for a small increased to about 1.97 million annualized starts from 1.96 million in March. It used to be that the builders’ index tracked housing starts quite closely, but the relationship has broken down in this decade. Starts have been much stronger than would be implied by the builders’ index.”
And the Downtown Journal has this on a developer in the Twin Cities. “Jim Stanton was building in the North Loop before most of Downtown’s condos were a glimmer in a developer’s eye. Stanton, says he’s learned a few things over the last 44 years in the development business. And all those years, he’s been churning out projects Downtown and around the metro.”
“‘I’ve never had long-range plans,’ Stanton said. ‘When the opportunity is there, I take it. I think most developers are like that.’”
Thanks to the readers who sent in some of these links. I am posting the Downtown Journal link here in the comments so I can adequately warn readers that this link may crash your computer. It does mine.
WARNING -bad link
http://www.skywaynews.net/articles/
2006/05/15/news/news02.txt
44 years is a good hunt….call in the dogs and pee on the fire…
exotic loans causing havoc in San Diego:
http://www.signonsandiego.com/news/metro/20060515-9999-1n15default.html
This should be its own thread.
The article’s about San Diego but it mentions Hemet too which is in the Inland Empire.
From mine and other poster’s experience once L.A., O.C. or S.D. start their decline watch out for the bedroom communities in the Inland Empire because the air gets knocked out of that housing bubble fast and hard.
Would this not imply that it’s already started to lose air?
When the builders really unravel watch for lot prices to drop precipitously. There will be fire sales a plenty wherever builder frenzy got out of control.
The prices of lots have been the main driver in rising home prices. Materials went up, but not that much. Labor went up, but not that muvch either. Lot prices went up to ridiculous levels. And once that happened, the structures that were built had to get far bigger and fancier to turn a sufficient profit on the huge investment made in the lot.
The rug is about to be pulled out from under the house of cards.
Lot prices as well as home prices are already starting to unravel in the much ballyhooed Hamptons. The following article talks about the hot rental market. What it doesn’t say is apart from Wall Street bonuses (which are currently up), the main reason is nobody is BUYING in the Hamptons anymore. http://www.bloomberg.com/apps/news?pid=10000088&sid=aN6ZafLbB_Gk&refer=culture
These articles - always quoting the same brokers are really sickening. They never paint the full picture. And the media that print them never seem to call them on it,
OT — this is a clip from a Manchester Union LEader article, from Patrick’s list:
“Mortgage rates drop
Rates on 30-year mortgages edged down this week, the first decline after six straight increases, according to a nationwide survey.”
Mortgage giant Freddie Mac reported Thursday that rates on 30-year fixed-rate mortgages averaged 6.58 percent, down from 6.59 percent last week, which had been the highest level in nearly four years.”
It marked the first drop in 30-year rates after six consecutive weekly increases. Analysts attributed the decline to last week’s unemployment report, which showed payrolls grew by just 138,000 in April.”
The rate dropped one-hundredth of one percent and they wasted the time and ink to report that. Grab yer purse, Emma — we’s goin’ out to buy us a house, now that mortgages are down!
why do they keep saying appreciation
dude, prices are down since January EVERYWHERE !
YOY nonsense. Should be looking at successive quarters rather than YOY nonsense. A fraud is being perpetrated on the American public, but the American public is too stupid to realize it.
happens this way with every financial “scandal”. just be glad you’re not the poor phucker who’s about to get his financial head blown off.
Rumor has it that KBH is cutting staff - no percentages in the rumor but sounded material… probably to adjust to the market realities. In general this is a bone thrown to the analysts after a disappointing outlook, to give the appearance that everything is under control and not to worry about the future earnings since the leadership is controlling costs.
I can imagine a pretty grim picture at their earnings report…
rumor cutting staff.
Well its about time. You can’t keep bulding @ 2004-5 pace {2.1 miliion in annual sales} and selling @ 2001 levels..{!.^million}…Just can’t wait for the next monthly Federal unemployment report…
I wonder how many “domestic servent ADDs” it will take this time to keep the numbers positive?
ben, shouldn’t the IMF story be posted here too? the dollar hurting is hurting the foreign holders of MBS. if they don’t buy, rates could go up and help shutdown the mortgage/housing bubble game.
Actually I found it here on the HBB where a reader posted it in the comments. It seems a little more is going on in the background than most people are aware of.
Right. Clues are everywhere that foreigners are pausing and scratching their head while they think. They haven’t been buying as heavily at our Treasury auctions and the dollar is falling. This isn’t a coincidence. Soon foreign central banks have got to decide whether to intervene, but long term we’re a very bad bet. The only thing holding the gamble together is if Big Ben Bernanke keeps raising rates. But that would destroy the housing market wouldn’t it?
This problem is probably going to be the biggest factor that exacerbates the decline. Bernanke will man the pumps when the recession begins and take interest rates to zero eventually. But mortgage rates will decline only grudgingly, if at all, because Asian investors aren’t going to be snapping up our mortgage- backeds. With lots of foreclosures and a falling dollar the appeal just won’t be there.
don’t underestimate the dollar at all. once recession starts here, the whole world will follow and the US will be one of the safest haven left.
I realize that is a factor, but we just aren’t the safe haven we used to be. We are absorbing way too high a fraction of the world’s savings to be able to count on a currency that rises during a recession. The current account deficit is going to come home to roost.
My thinking is that eventually with all this debt outstanding and the inability to refi it, there is going to be a mad scramble for dollars to repay it.
The only question on those traders minds has been the strength of BB’s conviction. Should he stop rates too low, a number of analysts see a 20-30% drop in dollar value.
testing
The builder stocks managed a nice comeback today after being down by over 3%. Gold did not fare quite so well.
I cannot imagine who would want to buy HB stocks these days, except for institutional buyers who do not directly bear the costs of bad investment decisions, or corporate share buybacks, designed to help top managers extract wealth from these companies while they are still somewhat alive. Have I left anyone out?
It seems relatively difficult to get data on the number of homebuilder defaults on lot purchases. This is where the first action will be as builders seek simple solutions. Once they have ditched as many lots as they can, they will face the pain of other, more expensive, cutbacks.
“‘The days of double-digit price appreciation are over,’ said Greg McBride, senior financial analyst at Bankrate. ‘It is very much a buyer’s market rather than a seller’s market.’”
It is not, I repeat, NOT, a buyer’s market when price declines are just beginning to show up in official statistics after a seven-year mania which featured the highest rate of real home price inflation on record. Buyers who care about wealth preservation need to wait until the end of 2007 at least, when foreclosures are really rolling and nobody is still under the delusion that homes are the best possible individual investment, before even thinking about looking for a place to buy. At that point, the downtrend in prices and the uptrend in foreclosures will both be common knowledge, and we will have a better idea of how badly things are going to turn out.
‘Centex Corporation announced that its Board of Directors has authorized the company to repurchase an additional 12 million shares. Since April 1, the beginning of Centex’ fiscal year, the company has repurchased 2.5 million shares in open market transactions, completing its previous repurchase authorization.’
the plundering of America corporations continues!
It strikes me as odd to think of purchasing shares as the price of your company’s stock is plummeting. How do you explain this to your shareholders at the annual meeting? “We tried to support the value of the company through share buybacks, but the media kept saying there was a housing bubble, which hurt the stock price.”
BTW, the trajectory of CTX’s stock price is headed almost vertically down when you look at the “all data” view on marketwatch.com. It doesn’t look like those share buybacks are having much effect…
http://tinyurl.com/fjqcu
i think they will be saying that they are buying their stocks very cheaply. they will sell them when the prices goes up, about 10 years from now.
Beazer’s scheduled annual sale (72 hours - 72 houses)
http://www.beazer.com/72/default.asp
As for this silly woman in that San Diego market, I think we should do a brain autopsy and see what is actually inside of that head to arrive at such stupid conclusions at noted below. What is the name of the genie that is going to come to save her? Or where is Prince Charming when you need him (and a pocketful of $$$). And, FYI, Hemet is one H&LL of a long drive from San Diego (and going through a grueling mountain pass - Cajon Summit everyday). It is 84 miles on a badly conjested freeway which would be at least 90 min on a good day with no traffic. LOL.
For Estella Denise Overstreet, the crisis has arrived.
Overstreet, a longtime San Diego renter, bought a home in Hemet in Riverside County in mid-2004 to take part in the real estate boom. Her 1,760-square-foot home cost $272,500, a bargain by San Diego County standards. To make it affordable, her lender recommended a simultaneous second, or “piggyback,” loan, one of the adjustable-interest lending products introduced to help consumers keep pace with soaring prices.
Starting with a low teaser rate, such loans allow borrowers to achieve 100 percent financing by taking out two loans. Simultaneous seconds work best when the borrower expects a rise in income before higher payments kick in, usually within two to five years.
Overstreet, 47, a health care worker, lost her job in December and began having trouble making her mortgage payments. She said she thought she would be able to make a living as a real estate agent, but she hasn’t sold a home. Her monthly payment of $1,564 will adjust upward in September. Her lender already has asked her to boost it to $2,300 per month to make up for missed payments.
Overstreet has resisted asking relatives for financial help. Instead, she has begun dipping into her retirement savings.
“My mom lives in Clairemont,” she said. “She is elderly. I should be helping her.”
The home was briefly for sale. Despite mounting debt, she says she isn’t ready to sell and give up her dream of homeownership. Although a for-sale sign remains on display, she recently pulled the house off the market. Her plans to make up for missed mortgage payments remain vague. The home went into foreclosure in December.
“I am going to try to stay here,” she said. “I am playing it by ear. Hopefully something will come through.”
And, she doesn’t have the gabanzas that Wendy Heath had to help get her career started. (See thread above this for details).