NAHB writes:
"Reflecting increasing builder concerns about conditions in the market for new
single-family homes, the National Association of Home Builders/Wells Fargo
Housing Market Index (HMI) declined for an eighth consecutive month to a level
of 30 in September. This amounted to a three-point drop from an upwardly revised
33 reading in August, and is the lowest level the index has reached since
February of 1991."
Ouch!
>
Sources:
Builder Confidence Slips Further in September
September 18, 2006
http://www.nahb.org/news_details.aspx?newsID=3276
HMI Chart and Components
Data Source 9/18/2006
I’ll speak to my breteren about raising teepee production asap.
I’ll take a teepee or a wigwam these days ’cause i’m just two tents about the housing market…..;)
Another tidbit: Lumber prices took a bath these past couple of days even as home building shares rose (and as bond prices generally fell). Usually, bond prices, lumber prices, and home building share prices tend to trade in the same general direction. So I’m curious as to how this all resolves — is the rise in housing stocks “right?” Or are slumping bond prices and slumping lumber prices leading indicators of a new housing stock downturn? Inquiring minds want to know.
http://interestrateroundup.blogspot.com/
What “new” housing stock downturn? Market’s down, and going to be down for a good while, and the firms are not going to make money for a couple years. Simple.
Wonder what link there maybe between the housing falloff and FDC saying
“Western Union said it continues to be hurt by slowing demand for money transfers domestically and from the U.S. to Mexico. The company attributed the slowdown largely to uncertainty caused by recent debates over immigration.”
Fewer housing jobs, fewer transfers back to Mexico. Mr. R, any idea if FDC or the gov publishes # or $ of international transfers to Mexico?
TX, jj
It’s become clear that incentives aren’t bringing out the buyers. The next step is to slash the prices on the unsold inventory and take a hit on shareholder equity.
If I were in the market for a $400,000 house I’d tell the builder to shove the incentives and take at least $40,000 off the price or I’d walk away. I think that’s what potential buyers are doing.
Meritage warned tonight and this is my key takeaway: “It is difficult to accurately project the impact that increased cancellations and weaker prices will have on our revenue and margins, or the potential for additional asset write-offs, but these factors will make it difficult to achieve our guidance for the remainder of the year.”
But Cramer said the housing stocks are a buy today. Am I to assume that Cramer is wrong? After all, they are up 10% plus since August 25.
Brion, I laughed out loud. Thanks for your one-liner.
A lamentably short history, but when the HMI moves under 50, it does seem historically that reasonable value appears once more in the Home Builders.
However, bear in mind that I missed out entirely on the run up in Homebuilders from 2000 onwards, because they had always seemed much too volatile before 2000.
And, as I’m not any younger, my observation will undoubtedly remain a theoretical one.
It should be noted that the graph the NAHB provided (which Barry reproduced) was apparently not even updated with the most recent numbers; the picture is quite literally worse than it looks when the most recent data is included.
A slow down in the housing market was widely anticipated. Somehow it is – or will be – welcome for the stock markets. Its better to bet on stocks without a possible bubble in behind (endangering the economy). And – ouch! – stocks resist!
From Belgium. “The boom in the Belgian housing market has past its peak, a new report indicated. ‘Due to the very favourable mortgage conditions, buyers bought larger houses or in more expensive locations,’ ERA Belgium director Iain Cook said. But that does not mean that a row house with three bedrooms has also increased so much in price.”
“Unfortunately, sellers have not realised this, Cook said. It means that more and more houses are being put up for sale at an exaggerated price and are therefore difficult to sell.”
From Australia. “Welcome to the dark side of the housing boom. The question is, why have we borrowed so much more today? See the point? We took the benefit of lower interest rates and used it to achieve little more than a doubling in the price of homes.”
The National Post in Canada. “Royal Bank of Canada singled out the Vancouver market as ‘unsustainable,’ based on the fact the current median household income in the city of $54,912 means a typical family would have to shell out 72.8% of their pre-tax income to meet all the expenses of owning an average two-storey home.”
On TLC’s ‘the Housing Ladder’ (Flip this house) we’re now seeing houses that are unsold weeks after being completed. Seattle Times this weekend instead of talking about “multiple bids” is talking about “how to determine if your house is priced right (when it’s not selling)”. News programs talking about “how to avoid foreclosure”. What a change from a year ago. Still, more liquid homeowners who refinanced at fixed rates while rates are low have seen increased values and continue to benefit from lower payments than they were paying in the 90’s. The rich get richer. The poor go back to renting.