‘Spring-Selling Season Failed To Materialize’
Some Wall Street remarks on the housing sector. “After a pullback in the U.S. housing market sent home-building stocks into a tailspin, some observers believe that the sell-off is overdone and say the shares represent a value opportunity. Yet many bearish analysts caution that the picture is likely to get worse before it gets better.”
“Wall Street analysts covering the sector are divided over whether builder stocks offer bargains or are a value trap for unsuspecting investors. Much of the debate centers on whether the housing market is experiencing a ‘hard’ or ’soft’ landing.”
“Many analysts have been surprised by the magnitude of the downturn and are cutting their earnings estimates for the home builders, after the hoped-for rebound during the spring-selling season failed to materialize. ‘Unfortunately as we feared, the soft-landing scenario does not appear to be unfolding as many had hoped,’ wrote analyst Alex Barron in a recent note. ‘It may not be until next year that the housing market finds a bottom.’”
“With orders falling from last year and an ugly spring largely in the books, many analysts have issued across-the-board downgrades on the sector. With the traditional spring-selling season a ‘much bigger flop than virtually anybody had imaged,’ he commented, the speed of the cooling process ’surprised even the more bearish industry watchers.’”
“Even company managements are growing more cautious, as evidenced by a builder-confidence index in June hitting its lowest mark in more than a decade.”
“Higher interest rates, which increase borrowing costs for the companies as well as mortgage rates for home buyers, are a primary driver behind the pessimism. After 16 straight rate hikes, the Federal Reserve is widely expected to raise its short-term target rate to 5.25% next week with another quarter-percentage point increase.”
“A stumbling housing market ‘coupled with higher mortgage rates (especially on the shorter-term ARM products) prompted significant levels of inventory to enter the market, which in turn, overwhelmed demand,’ wrote Robert Stevenson at Morgan Stanley.”
“With mortgages moving up, housing affordability stretched and an uncertain outlook, many buyers are simply waiting on the sidelines for the housing market to stabilize.”
The Spring Boom That Isn’t:
http://tinyurl.com/hbyaa
David
http://bubblemeter.blogspot.com
I can’t beleive this article I just read at http://www.realestatedecline.com ! Marin, California median price drops $79K month to month
OK. Ben has it posted now. That’s better.
“With the traditional spring-selling season a ‘much bigger flop than virtually anybody had imaged,’ he commented, the speed of the cooling process ’surprised even the more bearish industry watchers.’”
Score: Ben’s blog- 20, overpaid “experts”- 0.
Actually it has been a strong “Spring Selling Season” — plenty of sellers showed up. It’s the “Spring Buying Season” that failed to materialize.
Good point, suze.
a ‘much bigger flop than virtually anybody had imaged,’
Yes and I’ll bet Robert Toll was the most surprised of “anyone”.
http://blog.kiplinger.com/blog/archives/2006/02/when_to_worry_a.html
definitely the time to short Tool Bros.
“A much bigger flop than anybody had imagined”
- Except for those who were paying even a little bit of attention. These guys are unbelievable!
What is unbelievable is that they make huge salaries and are at best reactionary, and are often wrong.
‘…the speed of the cooling process ’surprised even the more bearish industry watchers.’
I guess that makes those of us who have been predicting a Silent Spring for many months now the most bearish of all the industry watchers? Or just the most honest?
We don’t count, we’re just bloggers. Never mind the fact that we’ve been (and will continue to be) right.
Hell, we’re the DDT in this housing Silent Spring. We housing bears will catch mucho crapola in the coming years. But just like DDT we don’t go away easy
Yeah, mostly I skim throught the articles and go straight to the comments where much more interesting and informative things are said.
>
Anybody? I feel so disenfranchised all of a sudden…
No one’s really here we’re all just “virtual anybodys”
Hell, I’m virtually nobody!
I’m the cowardly nobody from the Land of Hoz.
I imagine that later in the summer will great for Phoenix. When the equity vagabonds’ eyebrows catch fire getting off the airplane, no doubt they will buy an air-conditioned house immediately. The same effect should help Las Vegas move some of those McSheds south of McCarren airport. I know that I am always eager to step into a blast furnace to shop for properties.
The analysts are acting surprised. Didn’t they see the 16 interest
rate hikes, or the 5% affordability index?
Will they be surprised again when there is no soft landing?
Apparently, they will be *astonished* by the hard landing.
There’s has got to be some lying going on here. It seems impossible that nobody in the business saw this coming.
Right, don’t I recall that Toll Brother insiders were selling their stock in June 05.
Seattle — there was a LOT of lying going on. It was whistling in the dark. The truth (Ben’s blog) shall set you free and will save you a ton of bucks if you pay close attention, IMO.
yes Toll and other builders sold GOBS & gobs of stock options..back then And the FED stated the housing industry was going to slow and stabilize………….who would listen.? anyone oustide the bubble blogs? NO, any attempts to report such things made you a fool!
Well I will tell you another one.
For the past 5 years + EXECUTIVES in the US and abroad have SOLD AND SOLD & SOLD company stcok and options, while spending corporate assets on it buying back. In one door out the other! heck even the NYSE exchanged their seats after over 100 years to give the public the opportunity to hold the bag.
Can anyone hear the cry “fire”? or was just TOll the only intelligent one? you decide.
Ben’s Blog (too high to count). At least one point for each poster. All other housing bull, and idiot expert (WAY BELOW 0)
These numbers are going up faster than interest in a North Korean Rocket on a launch pad.
mid may was 799,000
6/10/06 was 836,471
6/14/06 was 840,935
6/17/06 was 846,120
6/20/06 was 850,317
6/22/06 today 855,892
http://www.ziprealty.com/maps/index.jsp?usage=search&cKey=74rbwvlk
Stan - I “mentally” cannot get to work since the NK’s announcement. I hope sanity breaks out in assorted governments before this escalates beyond redemption.
You don’t really think that a$$hat is going to launch that missle do you. I think it’s just a ploy to get some attention. He has to know that any hostile action will result in North Korea being turned into a glowing parking lot.
I pray it won’t occur. It has a 5% probability of occurring. That is 1:20; the chances of winning the Wisconsin PowerBall are 1:141,000,000 - People play every week thinking they will win.
Some analyst the other day said their rocket technology and weapon technology are not ready for “prime time.”
He said that when they are, North Korea will have to think about it like this…
That they have a 50% chance, at best, of launching and killing anyone in the United States or Japan. Whether successful or not, the “problem” for them at that point is that they face a 100% chance of retaliation and the complete destruction of the government (at best).
I’m not saying he’s not, but is Kim Jong-il really that dumb?
no he is insane
no he is insane
Crazy like a fox is more like it. NK has no diplomacy cards to play other than the one that says “we’re crazy and you never know when we might do something irrational and extremely dangerous”, and they play it over and over because it has worked so well in the past.
Kim Jong-il loves his palaces, cars, hookers, and other trappings of wealth. He lives the billionaire lifestyle. He’s not going to see all of that turned to rubble. Iran, on the other hand… I don’t think they’re pretending to be nuts.
“Iran, on the other hand… I don’t think they’re pretending to be nuts.”
Yea, I’d agree with that assesment
NK? come one. we have lived with nukular armagidden around the corner for 50 years. It was all a mirage. I think that NK may use it if attacked by a big bully, but that would be total insanity (the action of the big bully I mean)
Hoz — relax, a bit. This is simply extortion, in its most beautiful naked expression — the North Koreans have become very good at it. What you will read soon/next is that someone (some country’s taxpayers, via their stupid electoral votes) has agreed that they will provide: food for the starving; non-hostile nuclear stuff; non-hostile other stuff.
I once read a story that I’ll never forget, about the North Korean mentality. It was written by a person, I think a US soldier, who witnessed a North Korean soldier picking up a live bird chick and ripping its legs out, for simple amusement and with no emotion whatsoever. Try reasoning with that type of mentality, if you can imagine it.
The North Koreans want money, from whomever they can obtain it. To me, the Japanese are the most likely (and thereby foolish) donors. I say, let the NKs fly one of their missiles at a country and then see what happens. Extortion never, in the end, benefits the extortee. IMHO.
Good points Chip, and let’s not forget he has done this before to feed his country.
Robert Stevenson at Morgan Stanley:
“With mortgages moving up, housing affordability stretched and an uncertain outlook, many buyers are simply waiting on the sidelines for the housing market to stabilize.”
stabilize???????
Yeah right Rob nudge nudge wink wink we know what you mean.
implode maybe
They say that the so-called “soft landing” is priced in, which suggests a trading range for the builders for the near term. That leaves “hard landing” and Bob Toll’s Hail-Mary call for
Q4 buying via “pent-up demand” as events/news that will cause dramatic moves one way or the other. I see nothing whatsoever that could cause a manifestation of “pent-up demand” in the foreseeable future. Everything — interest rates, non-stop deliberate ballooning inventory, reining in of rogue lenders and underwriters, foreclosures — pointing toward fewer sales and/or lower prices, so I just gotta stay short for the “surprise” hard landing where the builders gap down a couple of percent one fine day as the start of a two-week 20% drop.
And don’t forget the law suits:
Posted at indexcalls.com:
“” recently called Jack McCabe of McCabe Research & Consulting for an update on Florida housing. McCabe told me he is now bracing for a “Litigation Nightmare” over the next several years in the wake of the housing bust. Following are some of the items we discussed.
Litigation Items
Buyers suing developers for non-performance
Developers suing speculators for flipping properties in violation of contracts
Subcontractors suing developers for non-payment
Subcontractors suing general contractors for non-payment
Class action lawsuits against single family homebuilders and condo developers for faulty roofing, HVAC, electrical, and plumbing systems
Lawsuits against inspectors for not catching code violations
Condo boards and individual homeowners suing developers for shoddy work
Lawsuits against appraisers for inflated values
Lawsuits against banks when project fundings are halted
Lawsuits over completed condo units being substantially different in size, interior finishings, and quality than how they were represented pre-construction
Lawsuits by anyone and everyone against anyone and everyone over various fraud allegations
Of course we can?t forget countersuits by anyone and everyone against anyone and everyone over anything and everything”
This may affect sales because the will all be in court! LOL.
Maybe some of those newly-unemployed realtors could go to law school real quick…
Doesn’t that require more than 20 hours of classroom study? Suzanne researched this!
Ah, yes — the item I posted just a few days ago, regarding the seminar on “How to Deal When Construction Tanks” or some such title. Whichever company is putting on that seminar stands to rake in serious money…!
It’s actually from Mish’s blog
http://globaleconomicanalysis.blogspot.com/
“With orders falling from last year and an ugly spring largely in the books, many analysts have issued across-the-board downgrades on the sector. With the traditional spring-selling season a ‘much bigger flop than virtually anybody had imaged,’ he commented, the speed of the cooling process ’surprised even the more bearish industry watchers.’”
Maybe we’ll get that dead of winter rally in sales this January.
It may not be until 2010-2012 that the housing market finds a bottom. Maybe this guy traveled from 2009.
The way things are going the bottom may show up sooner than expected when the 2 trillion worth of ARMS adjust next year! Burn, baby burn!! All these greedy b*stards need to get what is coming to them! I am so sick of hearing the “soft landing” scenario I could puke! There has NEVER been a “soft landing”! When are these people going to wake up and smell the coffee???
in a year we’ll find our bottom. once we find our bottom we can find the toilet
And I really don’t think Bernake is going to be providing any Charmin for these people! Flush the toilet! We need to get rid of all these parasites who hoped to get rich quick!!
mabey when he finds his bottom he can begin to pull his head out of there!
Realtors won’t be able to find this bottom with both hands!
“Many analysts have been surprised by the magnitude of the downturn…”
Wall Street analysts tend to be clueless, notably so with regard to homebuilders. An analyst adds value and provides insight by having an informed network. Unfortunately most HB analysts’ networks seemed to consist solely of the HB CEO’s. No wonder they were late to the bubble/hard landing party.
This blog is a network mostly of informed market participants. That is its primary value and why we saw it coming way before the analysts.
BTW, this is the reason why Cramer’s show falls flat on its face. He doesn’t tell you that you can read all the 10-K’s in the world, but unless you have developed an informed network you don’t have a prayer of beating the market. Interesting tidbit in today’s WSJ:
From Booyah to Bust?
3:45 p.m.: Jim Cramer, Chief Druid of The Church of What’s Working Now, likes to take his CNBC show “Mad Money” on the road to do live episodes in front of students from the best B-Schools in the country. Turns out some professors are watching, too.
In a paper out of Northwestern University, three pointyheads decided to track the performance of Jimbo’s stock picks in the weeks after he has made a recommendation. They found that “uninformed traders” buy Cramer-recommended stocks, which pop on the advice, but that the picks then underperform over the next two weeks and give the performance back. Shocker, we know. This makes the professors think that the market isn’t as efficient as they thought. We hope you were sitting down when you read this.
–Jesse Eisinger
I said this before — I think there’s a whole cottage industry of traders who are making a fortune shorting Cramer’s picks the day after he calls them out on Mad Money.
LOL - The greatest fade on the floor!
JON FRIEDMAN’S MEDIA WEB
Jim Cramer has become an embarrassment
Commentary: He has crossed the line from harmless entertainer
By Jon Friedman, MarketWatch
Last Update: 12:01 AM ET Jun 16, 2006
“…Within seconds, Cramer was carrying on to the point where an uninitiated viewer might fear that he would have a heart attack on camera. But experienced Cramer-watchers know this is simply cornball Jim doing his thing.
Disconcerting
What I found disconcerting was when Cramer pulled out a box of Uncle Ben’s rice and made a mockery of the Fed — which, natch, was the whole idea. Still, this prop seemed to be way over the line.
Yes, Cramer’s schmaltzy use of bells and whistles and the like is silly and goofy — but, as I see it, ultimately harmless. On a good day, it can seem like good fun. But the bit with the rice box was preening gone amok because he so blatantly exploited Bernanke — as if the Fed chairman existed solely to be a player on Cramer’s show.”…
http://tinyurl.com/q6fgz
From the article: “Cramer has become a household name — a Louis Rukeyser on steroids.”
More like a Louis Rukeyser on a methamphetamine/PCP speedball with an opiate suppository for good measure.
“More like a Louis Rukeyser on a methamphetamine/PCP speedball with an opiate suppository for good measure.”
And that’s just his morning pick-me-up. God knows what goes up that hooter of his around the mid-day hour.
best way to make momey is to use Cramer as contrairian indicator. Soon his show will crash and burn like all MSNBC and CNBC shows
I wonder if the proffo lists Leonard the Wonder Monkey as a co-author. Leonard’s ROI is a little better than Cramer’s over the past six months.
‘They found that “uninformed traders” buy Cramer-recommended stocks, which pop on the advice, but that the picks then underperform over the next two weeks and give the performance back.’
This is what I call the “Buffett effect.” Anyone as famous as Buffett (or, I reluctantly admit, Cramer) whose stock picks are instantly telegraphed by the news media can profit every day of the year from the coat-tail effect created by the mimicry of disciples. It is not too surprising that, at least in the case of Cramer, there is a mean reversion to fundamental value a couple of weeks later.
That’s the urban legend version of the efficient market. In fact, that is more PROOF of an efficient market that contradiction.
“This makes the professors think that the market isn’t as efficient as they thought.”
I think this shows the market is at least somewhat efficient. The market realizes its mistaken trust in Cramer and corrects itself. The problem is the market doesn’t learn so it keeps making the same mistake over and over. Maybe by next year the “Cramer Effect” will have worn off, that is if his show is still on the air. On the other hand that’s what academics said about the “January Effect” but its still going strong.
By the way, some of you may be old enough to remember the movie “Network”. The plot, in a nutshell, is: TV news guy suffers a nervous breakdown and loses touch with reality, begins ranting and raving on TV (”I’m as mad a hell and I’m not going to take this anymore!”), ratings go through the roof as viewers are drawn to his insane antics, network execs give him his own show to milk every dime while the phenomenon lasts, and when the 15 minutes of fame have passed they give him the old heave-ho.
Is Jim Cramer the Howard Beale of 2006?
Good analogy between Cramer and Howard Beale.
“This was the story of Howard Beale, the first known instance of a man who was killed because he had lousy ratings.”
anyone who hasn’t seen Network needs to go to Netflix and watch it NOW. wow its been 30 years
No because Cramer is causing hundreds or thousands of people to invest or spend money at one of his seminars. He is a fraud and sham with arguably the worst track record of any financial advisor. He was still reccomending buying stocks in the NASDAQ during the collapse. His dollar average of Cisco is one of the classic mistakes that naive investors end up doing. Only if you started with 3 Million - then if you followed his advice you would have been a millionaire ! If you would like links to his reccomendations(sp?) - Please ask and I will post. But nobody looking to invest real money should follow him
This makes the professors think that the market isn’t as efficient as they thought.
You idiots. The market is just being efficient at doing something other than you thought.
Parting fools from their money.
This is blog is akin to the 19th century “men’s smoking parlor” where educated and opinionated gentlemen discuss and debate the problems of the day. All in all a most satisfying experience….except for the smoke (cough, cough).
I would love a cigar and some brandy. To bad everybody is spread out all over the country.
“many buyers are simply waiting on the sidelines for the housing market to stabilize.”
No, some of us are waiting to see the biggest MF wreck in history…
MF - manure factory?
I think it supposed to be motherf’ing
mcmansion fetish
lol…too true. It will be painful to see, as some friends loose big. My wife’s ex has been bragging about his “million dollar McMansion”, but in recent weeks strangly the boasting has toned down. That’s one SOB I won’t feel sorry (what did my wife ever see in that guy???)
In the last down turn in my area (1990-1995) I had several friends go BK in a big style. This time I don’t know any developers personally, but I am sure there will be a lot of pain. I have heard of a friend of a friend that is sitting on a huge vacant house by a lake that is eating him alive though….
Home builders: solid, or value trap?
Some point to bargains, others say more pain to come
E-mail | Print | | Disable live quotes By John Spence, MarketWatch
Last Update: 1:49 PM ET Jun 22, 2006
BOSTON (MarketWatch) — After a pullback in the U.S. housing market sent home-building stocks into a tailspin, some observers believe that the sell-off is overdone and say the shares represent a value opportunity.
Yet many bearish analysts caution that the picture is likely to get worse before it gets better.
The headline-grabbing correction in housing has battered the builder stocks and investor sentiment, as the Dow Jones U.S. Home Construction Index (DJ_3728 : DJ_3728
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DJ_37280.00, 0.00, 0.0%) through Monday was down 43% from its high in late July last year.
Several sector bellwethers such as Pulte Homes Inc. (PHM : Pulte Corporation
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PHM28.45, -0.25, -0.9%) , Toll Brothers Inc. (TOL : Toll Brothers, Inc.
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TOL26.45, -0.50, -1.9%) , Ryland Group Inc. (RYL : The Ryland Group, Inc.
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RYL44.23, +0.02, +0.0%) and KB Home (KBH : kb home com
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KBH45.08, -0.71, -1.6%) have slashed their profit outlooks as the housing boom unwinds and home-order levels cool from the torrid pace of recent years. Cancellation rates are rising, inventories are growing and more incentives are being used to move homes, the companies warn.
Against this backdrop, Wall Street analysts covering the sector are divided over whether builder stocks offer bargains or are a value trap for unsuspecting investors.
Much of the debate centers on whether the housing market is experiencing a “hard” or “soft” landing.
Those in the soft-landing camp acknowledge that higher mortgage rates and slackening speculative demand are pressuring the housing market, but argue that solid job growth and discipline on the part of builders will cushion the impact. In a recently released study, Harvard’s Joint Center for Housing Studies forecasted that while home-price growth will moderate to more normalized levels in many regions, sharp drops are unlikely. See related story.
On the other hand, many analysts have been surprised by the magnitude of the downturn and are cutting their earnings estimates for the home builders, after the hoped-for rebound during the spring-selling season failed to materialize.
“Unfortunately as we feared, the soft-landing scenario does not appear to be unfolding as many had hoped,” wrote JMP Securities analyst Alex Barron in a recent note. “It may not be until next year that the housing market finds a bottom.”
Razing the roof
Although some builders have managed to grow net income this quarterly earnings season from the year-ago period, the outlook is cloudier due to falling sales.
Orders for new homes are a key forward-looking measure, because the companies typically ink contracts with buyers months before the finished house is delivered. Builders also disclose their backlogs of homes awaiting construction, which adds to profit visibility.
With orders falling from last year and an ugly spring largely in the books, many analysts have issued across-the-board downgrades on the sector, scaling back both their earnings estimates and target prices on the shares.
“Much like lemmings going over a cliff into the sea, sell-side analysts appear to be in a race to the bottom,” said Susquehanna Financial Group analyst Stephen East.
With the traditional spring-selling season a “much bigger flop than virtually anybody had imaged,” he commented, the speed of the cooling process “surprised even the more bearish industry watchers.”
Even company managements are growing more cautious, as evidenced by a builder-confidence index in June hitting its lowest mark in more than a decade. See Economic Report.
Higher interest rates, which increase borrowing costs for the companies as well as mortgage rates for home buyers, are a primary driver behind the pessimism.
After 16 straight rate hikes, the Federal Reserve is widely expected to raise its short-term target rate to 5.25% next week with another quarter-percentage point increase.
In its latest survey for the week ended June 22, mortgage lender Freddie Mac (FRE : Freddie Mac
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FRE57.23, -0.30, -0.5%) said that the 30-year fixed-rate mortgage averaged 6.71%, up from 5.57% at the same time the prior year. The benchmark 30-year rate has not been higher since May 2002 when it hit 6.76%.
With mortgages moving up, housing affordability stretched and an uncertain outlook, many buyers are simply waiting on the sidelines for the housing market to stabilize.
A stumbling housing market “coupled with higher mortgage rates (especially on the shorter-term ARM products) prompted significant levels of inventory to enter the market, which in turn, overwhelmed demand,” wrote Robert Stevenson at Morgan Stanley in a recent note.
I’m happy to be one of those “sitting on the sidelines”. This weekend I move into a never lived in rental house in Meridian, Idaho- bubble capitol of the state.
As with the rest of the country, spring appears to be a dud around here. Inventory climbs every week according to the housing tracker and new construction appears to be moving slow- for sale signs everywhere. According to the MLS, nearly 1200 “under construction” homes are for sale in the Treasure Valley around Boise. “New and never occupied” accounts for another 800 homes on the market.
Yet many bearish analysts caution that the picture is likely to get worse before it gets better.
“It is always the darkest, just before it gets pitch-black.”
Max — LOL. Great bone-dry humor on Ben’s blog.