Homebuilder Sentiment at 15 Year Low
From Bloomberg:
U.S. Homebuilder Sentiment Index Falls to 15-Year Low
U.S. Homebuilder Sentiment Index Falls to 15-Year Low
Confidence among U.S. homebuilders plunged to the lowest level in 15 years this month as buyers cancelled orders and inventories of unsold dwellings piled up, a private survey showed.
The National Association of Home Builders/Wells Fargo index of builder confidence fell to 32 from 39 in July, the Washington-based association said today. It was the seventh consecutive monthly decline.
Homebuilders including Toll Brothers Inc. and Hovnanian Enterprises Inc. are slashing profit forecasts as high borrowing costs and home prices discourage many potential buyers. The Federal Reserve last week suspended a two-year cycle of interest-rate increases, saying a cooling housing market had contributed to slower economic growth.
``This is an indication the Fed has every reason to tread cautiously on interest rates,'' said Eric Green, chief market economist at the securities arm of Countrywide Financial Corp. in Calabasas, California. ``The risk is if they press too hard, what remains a decisive and orderly decline in housing could become disruptive.''
...
The confidence survey asks builders to characterize current sales as ``good,'' ``fair'' or ``poor.'' Readings below 50 mean more builders view conditions as poor.
Economists polled by Bloomberg News forecast an August reading of 38, the median of 21 projections. The latest figure is the lowest since February 1991. The index averaged 67 last year.
32 Comments:
HAHAHHAHAHAHA!
15 year low.
Oh My. In 1991 Real Estate was tanking 50% for condos and 25% for houses. NYC Co-ops nobody wanted to buy them. Had hard time selling co-ops at 50% mark downs.
But This is NYC and there is noway this could happen.WRONG! It did!
Accept it.
I know....I know it's different this time.
The bubble is by fqar much bigger and debt levels are at record historical highs anyway you look at it.
Not good. Not good at all dreamers.
But there is always hope you can bag one last "FOOL" than can buy your dreamboat.
Party is over and the hangover is going to be miserable for many. Not all.
Hello!!!
Wakeup! Time to make the doughnuts.
Are you listening Dreamers.
http://articles.moneycentral
.msn.com/Banking/
BankruptcyGuide/
TheBankruptcyBoomIsBack.aspx
From MSN:
The bankruptcy boom is back
Consumer bankruptcy filings continue to increase, with Chapter 7 liquidation filings rising 54% in the second quarter compared to the previous three months.
Consumer bankruptcies had plunged following the passage of a tough new bankruptcy law last year. By the second quarter, however, the pace of filings had picked up to 2,200 to 2,300 new filings per business day, more than four times the level in November 2005 after the bankruptcy law went into effect, according to Chris Lundquist, founder of Lundquist Consulting, which tracks bankruptcy trends.
...
Currently, courts are reporting an average of 2,300 to 2,400 daily filings, Lundquist said. That's still significantly less than the record filing levels that drove passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. But it may indicate that the bankruptcy juggernaut was just stalled, not cured, by the new law.
The confessional is getting mighty crowded dreamers.
‘On the same day a report showed the confidence of U.S. home builders collapsed to a 15-year low, Bank of America and National City executives offered their own bleak views of the real-estate market and economy on Tuesday. The executives didn’t waste time debating whether real estate and economic growth would continue to deteriorate, instead presenting their banks’ defensive strategies. ‘There will be a slowdown,’ said Eugene Godbold, president of commercial real estate lending at Bank of America, speaking of both residential and commercial real estate. ‘The question nobody knows the answer to is how far will it dip and how long will it last.’
BAAAAWAAAAHAHAHHAHA
If only these "Pros" admitted this 2-3 years ago before maniacal activity went into overdrive.
WOW!
Thnaks for letting us know how bad it is going to be!
it is absolutely disgusting to see the admissions so late in the bubble.
The damage has been done. many unsuspecting FOOLS I mean Bagholders going to be taught life lessons.
Oh well, this type of insane (irrational) activity occurs every decade or so.
Oh My. In 1991 Real Estate was tanking 50% for condos and 25% for houses. NYC Co-ops nobody wanted to buy them. Had hard time selling co-ops at 50% mark downs.
And somehow we all survived. No blood ran in the streets. No bread lines.
Most of us hardly paid attention, frankly.
6:11 I disagree.
Keeping it real, of course no blood flowed in the streets.
However, many, many people lost jobs, including real estate folks [like you?].
The economy stuck. It wasn't pretty. And housing was NOT the player it is today. You can take a look at http://www.csmonitor.com/2006/0726/p01s01-usec.html
Right now, in 2006, there are millions of workers at risk.
I sincerely hope, that if your bread & butter comes from housing, that you've already begun formulating a survival strategy. I don't want to pay your way.
Pat
And somehow we all survived. No blood ran in the streets. No bread lines.
Most of us hardly paid attention, frankly.
Don't discount the fact that it took place. Just because you didn't notice doesn't mean it didn't happen.
Believe me, those who purchased in the 1987-1989 timeframe were acutely aware of the state of the market during when it turned.
Many who tried to sell in the early/mid 90's found that they lost considerable money over that time period. Still others needed to bring cash to closing when they sold, others couldn't even sell.
They paid attention to the market during that time.
You know who else paid attention?
The builders, tradesman, and contractors that found themselves unemployed. They paid attention as their businesses folded.
A recession is when your neighbor loses his job, a depression is when you lose yours.
grim
grim:
I think the takeaway here is that the fundamentals of the economy are still intact. As a result, there is still a lot of room to manuever around here.
To pronounce the real estate market dead or doomed may be a correct prediction, but the data certainly don't fully support it yet [we are talking NNJ/NYC - not national]. There is a core of strong earners who have resources to spend in this area. Until a recession hits, that is not going to change.
I do think a recession will happen, but it is just my opinion. We are not at the point of no return yet.
You want a call?
These comments fall under the "Benny is a hack" theory - which is just my frantic flailing at the darkness [source - WAGNER]
I think that the CPI will come out tomorrow as completely opposed to today's PPI numbers, and the market will sell off.
I would posit that the Benny is a hack theory suggests that Benny SHOULD have tightened last week, but now he CANNOT for the next TWO meetings, because of the November elections.
Benny and the Feds are going to want to lay low, and stay out of the public view in what could be a landmark election season, with possibly both houses of Congress changing hands.
Benny won't be able to do anything until December, and at that point he will be "behind the curve".
I really hope this doesn't happen, but if you see the Fed move at the next two meetings, Benny IS A HACK.
If the CPI comes out weak tomorrow, I look like a total lereah-hole.
fingers crossed
chicago
Chicago, now you and I and just about anybody who drives up to a gas pump or rents knows what for brunch tomorrow. What's with the post script?
Come on, Walmart may be the best leading indicator.
Pat
Chicago-
My total ignorance about the Fed. Why would it be bad if the Fed moves in the next 2 meetings? Thanks.
ak
Don't discount the fact that it took place. Just because you didn't notice doesn't mean it didn't happen.
Believe me, those who purchased in the 1987-1989 timeframe were acutely aware of the state of the market during when it turned.
I bought in '86. Of course I acknowledge that a downturn occurred...but at the time, since I wasn't selling and wasn't in over my head with a mortgage I couldn't handle, it just didn't resonate with me. Life went on.
I have to wonder why the posters on this blog always turn things to the personal:
However, many, many people lost jobs, including real estate folks [like you?].
No, I'm not in real estate, but I don't feel too welcome here, either.
Anyone who expresses any opinion, thought, or fact contrary to the prevailing sentiment is attacked.
Why is that?
Your blog is interesting...but it seems that the insane HAHAHAHA cackler is better tolerated than someone who wants to question your assumptions even in the most minor way.
anon 6:59
Why do you feel that you are being attacked when Grim is only pointing out something that you obviously were not aware of. Just because you bought real estate at one point does not make you a know it all!
Just an observation.
Just because your life wasn't affected does not mean others' life wasn't (like KL).
May be you need to be more open-minded.
Anon:
The insane cackler signs his posts, so that we can track his consistency of message. He is clear, consistent and precise with his message. Whether or not I agree with him, I trust him.
You, on the other hand, threw out massive untrue generalizations based (perhaps) on only your own personal experience.
"We all survived." That is your opinion. It is a generalization, one that includes no economic reality. You've not placed a link here to the chart that shows net financial impact of real estate losses on those, more unfortunate than yourself, who were forced to sell.
"Most of us hardly paid attention, frankly." Tell it to all those people who voted Republican in the 90's. Show me the statistics, and I will not "attack," as you call it.
Please spare us the pity party, "but I don't feel too welcome here, either."
The title of this blog is not "Pity Party for Those of Us who Hope/Fear Real Estate Has Not Tanked."
I'll debate anything with you, just leave the unsubstantiated opinions and whining home with the family. This isn't the place.
Don't go to a bar if you want skim milk.
Pat
Oooh. That was harsh. The mouth runneth overeth.
Sorry, Anon 6:11.
Hope you come over to play.
Pat
If your interested in seeing what Grim is talking about, we posted a revised sentiment graph tonight. It's ugly.
BubbleTrack.blogspot.com
"I think the takeaway here is that the fundamentals of the economy are still intact."
What fundamentals are you referring to?
Anon 7:28
I had the same question: Which fundamentals?
-Sapiens
Take a look at how the construction industry fared during the last real estate collapse:
New Jersey Construction Jobs
Quite a few construction workers found themselves out of work. From peak to trough the number is approximately 45,000. From 1990 to 1992 the construction industry in New Jersey saw a massive contraction.
I think the question we should all be asking right now is whether or an industry-wide slowdown can serve as the trigger that causes a similar contraction to take place in the current market.
Will construction companies begin to layoff in a defensive fashion?
Can the construction jobs we've created over the last 5 years even exist in a "normal" market?
What would the macro level impact of even a 10% reduction in construction and real estate related job losses be to the NJ economy (and housing market)?
grim
Here's the part I don't get. There are apparently thousands (if not millions) of people out there sitting on the sidelines but chomping at the bit to buy a house. When do all of these people take the plunge? When prices drop 10%? 15%? 20%? Seems to me as soon as the masses get back in the market, the housing "plunge" is over, and the merry circus starts up all over again. So where does that leave those of us who feel that even a 20% drop is not enough? I just think houses are massively overpriced right now, but maybe I'm a dreamer.
I don't know about construction but some anecdotal evidence...today at the monmouth mall, a line of folks waiting to purchase school clothes at children's place...but what were the clerks talking about? The store is going to be reducing their hours soon.
"people out there sitting on the sidelines but chomping at the bit to buy a house"
A point here raised by Grim, and perhaps others, is that the exotic financing used to buy over-inflated houses has led many to purchase homes before they could actually afford them, since "the monthly payment is low."
For the past few years, lenders have been tapping the pool of future buyers.
Add in rising inventory, ARMs adjusting, rising interest rates...
RentinginNJ
8/15/2006 08:17:47 PM
You are exactly right. Comparing today's market to 1989 is comparing apples to oranges. The better comparison is to 1929 and the tulip bulb mania (google it, 1600's). Today's psychology is more reminiscent to those markets than 1989. I don't recall buyers bidding up properties 10-20% over asking price, house prices were 10X annual rent, not 25X. Buyers were paying 3-4x their annual salaries, not 10-12X. Hard to believe but buyers were putting down 20%!!!!!!! Didn't know anybody back then that were using their house as an ATM.
Remember the recession of 1990 caused that fall. This market is imploding on the back of its own sheer absurdity. What caused this market to stop on a dime??? Interest rates, no still at historic lows. Recession, no economy is doing fine. This market is imploding by itself, that by its own very nature is cause for alarm. This will have much more crushing ramifications than 1989, caused by recession. This bursting bubble will result in a recession, probably much more severe than 1989.
Remember back then, buyers were not upside down. Now they are upside down and inside out.
BC Bob
So what are the chances of a government bailout to avoid a severe recession? If there are a signifigant number of people affected, plus powerful banking and housing supporters, could this happen?
Anonymous said...
"I think the takeaway here is that the fundamentals of the economy are still intact."
What fundamentals are you referring to?
8/15/2006 07:28:20 PM
Anonymous said...
Anon 7:28
I had the same question: Which fundamentals?
-Sapiens
8/15/2006 07:47:33 PM
Bergen County Bob stole my thunder.
He is correct. The economy is fine. People have jobs.
The financial sector [strongly significant, but not dominant part of this area] is generating record profits.
Energy costs are important, but this area has the best public transportation infrastructure in the nation. Our cost of living, hence wages, are the highest in the nation, so $3 gas hurts, but is a smaller percentage of our pocketbooks.
Real estate is hurting, but it only affects a sector of the NNJ/NYC economy.
BC Bob has pointed out that this bubble has been so egregious, that it is imploding on its own, which is remarkable.
Appreciate right now that what we are experiencing is NOTHING. No blood, no guts, no car crashes, no explosions. NO PAIN = NO PAIN
The future may be bleak, but the present is not.
chicago
Anonymous said...
Here's the part I don't get. There are apparently thousands (if not millions) of people out there sitting on the sidelines but chomping at the bit to buy a house. When do all of these people take the plunge? When prices drop 10%? 15%? 20%? Seems to me as soon as the masses get back in the market, the housing "plunge" is over, and the merry circus starts up all over again. So where does that leave those of us who feel that even a 20% drop is not enough? I just think houses are massively overpriced right now, but maybe I'm a dreamer.
8/15/2006 08:30:24 PM
You called it right, just don't be fooled.
Beware the false bottom.
Cross off 2006.
Here is my story from 89 housing slowdown (I am not calling it a crash or burst).
My sister bought a house in 1989 for 195K in the nice area of central jersey as an investment thinking the market has bottomed out.
She put in around 25K in it to make it more "presentable". She tried to make money in 93-94 season with not much of a success.
Eventually closing in mid 95 by paying for the closing cost.
Thus loosing around 50K...remember only 50K.
But the bottom line is that many who tried to play the market that time got burned. Fortunately the burns were "minor" considering the average home prices were considerably low. There were very very few folks living in 3000-4000 sqft. MANSIONS as today.
Bigger grid brings big PAIN.
Central Jersey Observer
chicagofinance said...
You want a call?
I think that the CPI will come out tomorrow as completely opposed to today's PPI numbers, and the market will sell off.
WRONG CALL
Anon,
Seems to me as soon as the masses get back in the market, the housing "plunge" is over, and the merry circus starts up all over again.
I think you're assuming that everyone on the sidelines would jump back into the market at once. And I think that would have to happen for the scenario you're suggesting to play out.
I think it is unlikely that those of us on the sidelines will all jump back into the market simultaneously. Just reading over this blog the diversity of people's circumstances becomes clear and this diversity will lead to people jumping in at different times. Also, people differ on what they feel is an appropriate price for a given home. As others have said, "a home is only worth what someone will pay for it."
Also, this country's rate of homeownership is at an all time high which suggests that many of those who would buy a house have already bought.
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