...so start more construction!!! Nothing says 'we want to drive down prices as much as possible' as that burning desire to keep your employees and subs employed and that decision to build additional units when the new home (not existing home) inventory is 660,000+ (that we know of, on top of 2.5 million vacant homes). And as always, can't wait for those revisions! http://www.bloomberg.com/apps/news?pid=20601087&sid=ab.uvU3stAwY&refer=home March 20 (Bloomberg) -- Housing starts in the U.S. rose more than forecast in February, easing concern a worsening construction slump would sink the economy. Builders broke ground on new homes at an annual rate of 1.525 million last month, up 9 percent from a 1.399 million rate the prior month that was the lowest pace since August 1997, the Commerce Department said today in Washington. Building permits fell 2.5 percent to a 1.532 million pace. .... The median price of both new and previously-owned homes fell in January from a year earlier, recent data showed. The February report on existing home sales is due March 23 and figures for new homes are due next week. Some homebuilders have already turned more pessimistic. The National Association of Home Builders/Wells Fargo index of sentiment fell to 36 this month from 39 in February, a report yesterday showed. It was the first decline since September and a reading below 50 means most respondents view conditions as poor. ... `A Bust' Toll Brothers Inc. Chief Executive Officer Robert Toll last week said the start of the spring selling season was ``pretty much a bust'' and he cannot predict when the market will rebound. A few markets where demand was strong and the company raised prices included parts of the San Francisco area, cities surrounding New York and the Los Angeles area, Toll said. Pulte Homes Inc. also isn't looking for a quick sales rebound as buyers wait out the drop in prices. ``We're not projecting anything to bounce off the bottom at this point,'' Chief Financial Officer Roger Cregg said at a conference last week. ``There's been a lot of buyers that have moved to the sidelines.''
Who knows how many borrowers are being held in their loans by banks and lenders trying to limit damange. I don't trust their numbers...these guys are scum.
Aren't these some of those "bubble" areas you keep talking about? If L.A. stays strong it trickles down to S.D. and Vegas. If NYC stays strong then so does Miami. You guys can be as bearish as you want but I challenge you to find me even one prime area in any market in the country where prices are falling precipitously. In SoFla yea, prices are down 20%. Big deal. They quadrupled over the previous 13 years.
You're being shortsighted. A bigger deal is the risk of Option-ARMs being reset, prices being lowered, less people being given mortgages, builder sentiment, etc. You can say LA is strong...but LA encompasses a massive area and NY is an entity by itself. There will be more problems because of the lending standards that these firms had for the last 4 years during the real boom. I'm not saying it will cause a recession, but not being unnerved about these indicators which for the most part are bearish seems slightly naive.
prices have barely started falling. the problem is now huge inventory and today's #'s show people still building like crazy which is very bearish for the next 12 months. sellers will now have to face reality and lower prices. what people don't understand is even a small 10-20% price decline could rain havoc as there's so many home equity loans on homes
I'll be more than happy to concede that there are immune areas right now, from a price decline - so far. These areas are pretty few and far between, my friend. That would include a place like Manhattan. But guess what, Pabst? Naples is flat. Palm Beach is barely appreciating. Bradenton, the appreciation leader the last 3 years, is flat or marginal. Even the strongest areas are tepid. How long until we see price declines in these strongest markets? Just wait until Wall Street gets its next shakeout.
Banks Pick Up Where Fed Left Off, Restricting Access to Credit By Scott Lanman http://www.bloomberg.com/apps/news?pid=20601109&sid=aMpRiWhm_DkY&refer=home March 20 (Bloomberg) -- Banks are picking up the baton from the Federal Reserve, restricting access to credit months after Chairman Ben S. Bernanke stopped raising interest rates. Fed officials may discuss the tightening in mortgage lending and its impact on the economy, already slowed by a housing recession, at their two-day meeting that starts today. Countrywide Financial Corp., the biggest U.S. mortgage provider, last week stopped taking applications for no-money-down loans from risky borrowers without proof of income. The new constraints on lending may be real-world evidence of the ``lags'' in monetary policy that policy makers flagged when they ended two years of rate increases in August. The central bank will keep its benchmark rate at 5.25 percent, economists predict, counting on slower growth and past rate boosts to bring inflation within their tolerance zone. ``The market is definitely tightening standards, and to the degree the market controls the flow of capital, the Fed does not have to,'' said Carl Tannenbaum, chief economist at ABN Amro Holding NV's LaSalle Bank in Chicago. Officials have kept their tightening bias at the past five meetings, meaning any policy shift is likely to be a rate increase. The Fed's quarterly survey of senior loan officers, released last month, found a net 16 percent of U.S. banks recently tightened mortgage standards, the most since 1991. The report was based on responses from companies accounting for almost two- thirds of the $8.4 trillion industry. Beige Book The central bank's March Beige Book, a survey of regional economies compiled from businesses and Fed contacts around the country, found ``some weakness'' in consumer lending in the Dallas and Cleveland districts. Credit standards tightened on all loans in New York, the report said. A crackdown on lending may have begun as early as six or nine months ago, said Douglas Duncan, chief economist at the Mortgage Bankers Association in Washington. ``They're probably ahead of the Fed in some ways,'' he added. Deteriorating subprime loans fueled the rush to lift standards. Subprime borrowers, who have little or poor credit, fell behind on mortgages at the highest rate in four years last quarter and foreclosures climbed, the Mortgage Bankers Association reported last week. General Electric Co.'s WMC Mortgage, the fifth-biggest U.S. subprime lender, said March 9 that it would refuse mortgages to borrowers with credit scores below 600. The Burbank, California- based bank also fired 20 percent of its staff. Countrywide, Wells Fargo Three days later, Calabasas, California-based Countrywide limited subprime borrowers that don't document their income to loans worth 85 percent of their homes. Wells Fargo & Co., the largest U.S. subprime lender, said in a March 7 statement to Bloomberg News that it changed standards effective Feb. 16 for some risky customers. The Fed may alter its language to reflect the tumult in subprime mortgages. On Jan. 31, the Federal Open Market Committee said ``some tentative signs of stabilization have appeared in the housing market.'' ``That might be a little bit of a stretch'' this time, said Diane Swonk, chief economist at Mesirow Financial in Chicago. She added that the wording may acknowledge that the housing market's performance has been mixed. The Fed will release its statement at about 2:15 p.m. in Washington tomorrow. Adjustable Rates The central bank's 17 rate increases helped trigger the downturn in lending. The benchmark rate, which covers overnight loans between banks, has more influence on short-term loans, including the adjustable-rate mortgages that some borrowers are struggling to pay. A typical such loan has a fixed rate for one to three years, then adjusts annually. The arrangements allowed for cheaper initial monthly payments when short-term interest rates, such as the Fed's rate target, were lower than long-term rates, such as yields on 10- year Treasuries, a benchmark for 30-year mortgages. At the same time, there are few, if any, indications that borrowers with strong credit are finding it tougher to get a loan or seeing higher rates. The Fed's loan-officers survey showed that banks on balance left lending standards unchanged for credit cards and other consumer loans. ``The environment has improved for borrowers that have good credit,'' said Greg McBride, senior financial analyst at North Palm Beach, Florida-based BankRate.com, which tracks consumer interest rates. ``It's the best it's been in months. And that's the majority of borrowers.'' Fed Forecast As the subprime crisis intensified, Fed officials gave no indication of changing their Feb. 14 forecast for economic growth this year of 2.5 percent to 3 percent. Bernanke, 53, said March 2 that the central bank sees no ``spillover'' from the delinquencies in subprime mortgages. ``We're obviously going to watch it very carefully,'' he said at California's Stanford University. Policy makers may be surprised at the rout in subprime mortgages because rate increases typically don't have such a deep impact on just one area of the economy, said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. ``Generally that transmission is not viewed as being so narrow in one area and so absent in other areas of the economy,'' Kasman said.
This is why the bottom is not in yet, they continue to build with inventory levels still high. Housing has not bottomed and proabably wont find a bottom for at least another 18-24 months. As foreclosures increase and ARMS reset where will buyers come from, if anything the housing collapse could create more inflation problems as rents start to increase. Rents are finally starting to climb. Where my friend rents an apartment for $1750 a month, that same apartment was $2250 about 6-7 years ago. One guy is trying to rent an apartment in the same area for $2400 right now but has lowered it to $2200 since there are no takers. So you can see rents starting to increase which will only hurt the already tapped out consumer.
Another true problem for the housing market is that prices of existing homes will fall to steal sales from the new home market, and vice-versa. Some people 'need' a new home, and some people want an existing home, but at certain price points, a competition erupts...