You doom and gloomers kill me. You think trees grow to the sky and roots grow to the center of the earth. OK, check out the attached spreadsheet to see what I'm saying. I never really needed graphs, but some folks do. This is the same national sales data previously posted in graphical format vs. time. Throw a ball into the air, and the rate that it moves toward the sky decreases until at some point, it reverses itself. There are factors at play, like gravity, that will (and are) changing the direction of the sales data. Its not an "if" but a when. Employment is up, sales are up, factory orders are up, and mortgage rates are still low...these things all act as the gravity that can and apparently are reversing the direction. Working people buy houses, and working people don't need to sell at a loss, they can stay where they are. Increasing demand with decreasing supply. I can already hear the doom and gloomers saying this so...Yes, there is that supposedly ominous "ARMS will reset next year" issue, but the few people I know with ARMS are aware of the situation and are electing to stay in what they are until the last minute since their payment is still low. If I was in an ARM, that is exactly what I would do. I would keep saving money on my payment until the last possible instant...and apply that savings to the closing costs of a new fixed rate loan. As long as rates stay low (or appear to be staying low), there isn't really much incentive for those people to refinance until they have to. Doom and Gloomers like to count the ARMS on the bank's books, but they should be trying to figure out what percentage of those ARMS will actually default. Consumers are just being economically rational. If you really believe that all of the ARMS resetting will be a huge factor, you should invest in a business that makes money when the ARMS do reset. Sales going to zero? Huh? Maybe in a nuclear war. OK, you wait until the trend is fully established and prices are back up to 2005 levels before you buy houses. That level of comfort will ensure that you don't make much money at all. As for me, I buy low, sell high, let the tenants pay them off and enjoy ever increasing rents and huge tax deductions. I know that the time to buy houses is the first moment that they will pay for themselves. And then be the first one in so you get the good stuff. Rents are rising, and prices aren't dropping like they used to be. You want to catch that ball right before it reverses, not after it hits you on the head... SM
I only care about housing in MY AREA.... National numbers don't mean SH!T!!!! Why is that so hard for some people to understand. We are down at least 20-25% from the peak in my neighborhood with plenty more to go. Qualified former renters already bought a place. The pool of buyer is GONE. 20-30% of our community is vacant from flippers ready to get roasted. Builder is undercutting last sales buy 20% on a fully upgraded place. Rents here ARE NOT RISING! They are FALLING! Plenty of properties to choose from here. NOD's up 200-300%, 33% of all NOD going to foreclosure when historical norms are single digits... yeah it's candy and nuts here. Prices here are going to 2000-2001 IMHO.
OK...read this from the Motely Fool. The discounting can only continue until inventory levels get low enough. And homebuilders are more savvy about holding inventory than they used to be... Homebuilders Hit Bottom? By David Lee Smith January 26, 2007 Bob Toll seems to have found a roomful of dance partners. You may recall that, early last month, when he discussed homebuilder Toll Brothers' (NYSE: TOL) latest quarterly results, CEO Toll said, "We may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom or slightly above." During the past couple of days, builders D.R. Horton (NYSE: DHI), Centex (NYSE: CTX), and Ryland Homes (NYSE: RYL) have released their own quarterly results. Each seems to be at or near the homebuilding market bottom as well. Fort Worth-based Horton, which seemed more aggressive than rivals in dumping land position and options, reported net income for the quarter of $109.7 million, or $0.35 per share. That's down 64% from year-ago earnings of $310.1 million, or $0.98 per share. Horton's inventory impairments cost only $0.08 for the quarter, while a penny more went toward writing off deposits and pre-acquisition costs related to land options contracts that the company decided not to pursue. Net sales orders for the quarter fell 23% to 8,771 homes, vs. 11,463 units the prior year. Dallas-based Centex reported a loss of $235.4 million from continuing operations, or $1.96 a share, compared to year-ago earnings of $313.2 million, or $2.37 a share. For its part, the company spent $138 million writing off option deposits and land pre-acquisition costs, plus $297 million for land valuation adjustments. Looking ahead, Centex's management predicts breakeven results for the fourth quarter, ending March 31. For fiscal 2007, it expects $0.25 in earnings from continuing operations, following another anticipated round of land charges and an increase in the company's tax reserve. After the market's close on Wednesday, California-based Ryland checked in with quarterly earnings of $1.98 per share. That was a 40% plunge from last year's comparable $3.32, but materially greater than analysts' $1.84 consensus expectation. Closings fell 15.8%, compared to Centex's 12% reduction. In the final analysis, the company's homebuilding segments reported earnings of $130.5 million, a drop of 50.8%. Perhaps more importantly, Ryland's 2007 guidance calls for an earnings range of $3.75 to $4.25 per share, versus $7.83 last year. So there you have it: an almost choreographed dance of homebuilders at or near the bottom of the market. I say almost because Centex, with its ongoing meat-axe approach to its land positions, seems somewhat out of step with its peers. Ryland's quarterly earnings weren't great, especially compared to last year's -- but even if changes in the market hadn't rendered that an unfair comparison, smaller profits are still better than a loss. I still consider Toll and Ryland solid long-term plays. But I'm shelving my previous enthusiasm for Centex until it slaps a tourniquet on the draconian cuts in its land position. For Fools like me who believe that 2007 will see homebuilding slowly, steadily rise again, Toll and Ryland might deserve your attention. For related Foolishness: Homebuilders Defying Housing Numbers Return to Centex Tomb, Sweet Tomb Fool contributor David Lee Smith does own shares in Centex, but not in the other companies mentioned. He welcomes your comments or questions. The Fool has a disclosure policy.
Because the people here don't live in your area. Most live in the U.S. and some live abroad. Makes more sense to talk about the national market than what is happening on your street.
Housing is a REGIONAL market, always has been, always will be. You invest in Real Estate and know better. A family in OK, TX or NE doesn't give two rats A$$e$ about what is occurring in the coast states, unless they are moving there. If that chart isn't from an independent source, other than the NAR or one of there other organization... call me skeptical. I noticed you haven't questioned any of my observations of the markets in CA, NV, AZ, OR, WA. You can't positive cash flow a property where I live without at least 50% down, 30 yr fixed loan. I sold my last home (2005) and currently rent. If I had bought, my monthly outlay would be in the $4200-4500 range, rent is $1600. Now take into account the property has dropped from in the 500-530 area to the high 300's, I made the right choice.
smartmoney do not let doom and gloomers kill you ! that would be awful . smart monet you must have some intuition besides reading the same thing that 99.9% of the public does. do you see the picture now ? its propaganda my friend ! peace, bgp
I'd been quite bearish the past couple of years for several reasons. Stretched P/E's (rents vs. resale value), my expectation of higher rates and the skyrocketing costs of ownership such as property taxes and insurance. As others have noted, it's seemingly insane to buy rather than rent. HOWEVER: these truths are also evident. Commodity prices aren't breaking. I can only get so bearish on a hard asset like housing when gold (which pays no interest) is hanging out at $650 an ounce. Or when I get it stuck up my keester everytime I short an index future. Or knowing that my native Chicago has gone from like zero Latino's in 1980 to a metropolitan area population of 1.3 million today. And while rents are SO cheap to resale, rents ain't breaking. So who am I to say that the RE market isn't forward looking in predicting that wage inflation (as part of a mega inflation trend) is going to cause continued strength in rents which will cause a mean reversion break in P/E's with resale prices only needing to trade flat or down slightly. In America's third world neighborhoods there's a housing squeeze. That's why sleepy little towns now have ex-Chicago blacks living in them. In turn whites with assets ala' a home, pension, mother in laws inheritance are selling the old formally unmarketable house to a Mexican owner of a pool installation company and then trading up for cultural insulation.
Sounds like you did make the right choice. And I have to admit that I wouldn't have done that. I prefer to look at the national market because it is my market. My market mirrors it, but in an exaggerated fashion. SM
Heh. I try to read between the lines and filter out the recompilation of old data and look at only the newest. I also do my own studies by watching neighborhoods locally. So, I really think its more than a gut feel, its the tapestry that stray threads are starting to form. You can make a heck of a lot of money if you can beat 99.9% of the crowd to the right conclusion... peace to you. SM
I think you are right on immigration pushing housing demand. There might be a backlash coming in that area. All they need to do is create a digital SSN card and require REAL verification to get a job. Just like verifying when you buy a gun. This will do more to stop illegal immigration than any additions to the border patrol (more catch and release - like fishing at a dude ranch). It cost too much to live in this country if you can't get a regular job - cheaper to live in Mexico etc. They will go back on their own. One would think that with the whole homeland security push this would have happened already - but, I think big business wants workers to be scared and the big finance companies want everyone deep in debt to make up for stagnating wages. An unholy alliance.