You forgot immigrants. Whole US economy is build on immigration especially those that been shipped here in containers. By the way what a slow mover almost 50% down in less than 4 months.
I couldn't help but notice on a YTD basis everything is coming back to where they started. We have 2 months left in the year and home prices are still close if not above double digit gains for the year. So where is this crash?
Many of the bubble markets are down month over month for some time now, most all are down over a 6 month period as well. Markets will continue their titanic cycles, no matter how hard it is to conceive of a different pattern now. In the summer, it's hard to believe that it gets too cold. But this chill in the air is real. It is coming. Dude, denial is a very interesting human trait. While perhaps useful and practical in some aspects of life, in terms of investing it can be disastrous. Put down your rose colored crack pipe, it's over! These monthly declines have been happening for long enough for some markets to start showing down YEAR OVER YEAR declines now.....all the bubble markets will be down year over year soon. From the Boston metro area... http://www.lowellsun.com/business/ci_3188959 "This past week, Banker & Tradesman released September statistics for home sales in Middlesex County. The listings reveal something we haven't seen in a while -- year-over-year median price declines." "Oh, sure, we've seen year-over-year sales declines for some time now. And, more recently, we've seen month-over-month price declines in the Massachusetts Association of Realtors' statewide reports. But even lately, year-over-year price comparisons had still been showing modest increases." "But there are chinks in the armor, and you don't have to look far. In Dracut, the median price among the 26 homes sold in September was $302,950, B&T reports. A year previous, the median price for the 39 homes sold in town was $307,000." "So not only was the number of homes sold down by a third (so much for "infinite demand" -OWP), the median price for those that were sold slipped 1.3 percent."
Denial? Is that like calling a crash since last year and then posting the results from the most troubled company(Domion Homes) in the sector inorder to justify a position? To say DHOM is representive of the housing market is like saying Woolworth's represented the retailing market during the 90's. As for the childish crack pipe reference (ya think this board would be civilized, ha!), I still have a good laugh at the DHI POS post and then watch it climb 50% in 6 months. I recall back in August that Lereah, from NRA, mentioning that the hot markets were cooling but their surrounding areas were now picking up steam. At the same time Robert Shiller agreed that this phenomina could last and he backed off his housing crashing rhetoric. I posted a RE article from FDIC a few posts ago where they provide some history of home prices. Now 30% is considered a bust, what exactly constitutes a crash? And where the heck is that crash?
Although i was stopped out last week...got back in friday...short 500 HOV and short 500 DHI...didnt have enough cash to also do TOL. last i looked...up $2800 today...whew. i cant brag...that just makes up for my loss and over trading last week in the damn things trying to catch the turn around. I am going to stay short on these guys through the cold months at least...and not trade them any more...just sit and wait.
Your position is looking even stronger today...good move! The homebuilders have not participated in the rally that the NDX, etc, have enjoyed since 10-14 or so, they are underperforming big time. And now the NDX rally is looking long in the tooth and might be starting to roll over, if so the "homies" might begin another down leg and your profits might grow even more. This is an interesting post from another message board...thought I would cross pollinate and paste here... "Mr. D. said..." "Forget guessing about pent up demand, here are the important numbers:" "In the year 2000 we had 9% fixed rate 30 year loans, and payments for a $200,000 mortgage were $1,600 a month." "Then rates dropped to 5.5% on a 30 year loan, and suddenly the same buyer could afford a $285,000 mortgage, and they bid up prices accordingly." "Encouraged by these gains, new buyers wanted to get on the bandwagon, and so they started bidding up prices." "They were then joined by safe haven buyers fleeing the stock market, right at the bottom. To pull in more business, loan standards were erased, so that almost anybody could qualify for a loan, no documentation needed." "By now prices were up 90% or more, and speculators saw easy profits, and bid prices up further." "So, how do new buyers afford these astronomical prices? They apply for and receive, a 5% interest only loan, and suddenly they can "afford" a $387,000 mortgage. Now that $200,000 house can be sold for 94% more than it did 5 years ago. Voila, you have a "strong" real estate market." "But, these higher prices bring sellers out of the woodwork, and cause most sensible buyers to step aside. Inventory piles up, and prices soften." "Then, over the next few years, these interest only loans start requiring principle payments. But even using a 30 year loan, these borrowers can only afford a $255,000 mortgage, so they have to sell." "But who will buy once prices are falling? All of the buyers willing to use exotic loans are already up to their neck in mortgage debt." "Meanwhile, the cautious buyers that held back before, are unlikely to step forward and take out an exotic loan now that prices are falling. So they wait till prices fall to levels that make homes affordable using traditional 30 year loans." "However, as noted above, that means a $255,000 mortgage, which is 34% less than could be borrowed using an interest only loan." "Which means one of two things. Either prices will fall around 34% so that buyers can afford them using 30 year loans. Or, borrowers and lenders will continue to use interest only loans forever. Which do you think is more likely?"
This is a great post... the stock market is clearly forecasting a collapse in housing.. i will not bet against it.. The question is whether this will derail the economy and put us into a recsession.. i certainly believe so.
Great post by Mr. D. Thankfully, I have held out on buying these last two years, and am on a company expat assignment that will last another two years. Or so. At that time I'll be looking to buy, and it seems the timing may just be peachy.
thanks guys..i am liking it. Move in on a few other just a bit today. I think the next move will be to look at home lenders, home improvement retailers, and banks with heavy lending departments like Washington Mutual. the banks make take another year to really get hit, and the retailers may be a wiser move after the retail season. do you guys have any other ideas on how to take advantage of the declining market? Does anyone think it will hold out?...i am curious to hear a strong case for the other side. might i add "people need to live somewhere" is not a strong case in my book. i hope there is not a recession...that doesnt just effect the USA, it effects the world.
This sort of real world article supports "Mr. D's" position as adjustable ARM rates rise and rise and the speculative mania dies. We've allowed people to play in a highly speculative market without requiring them to put their capital at risk. Their buying decisions have nothing to due with preservation of capital, but are based on pure, blind greed. ....OWP "Speculators Bring 'Hidden Inventory' To Market" http://www.sptimes.com/2005/11/09/Pasco/Housing_slowdown_sign.shtml "The St. Petersburg Times reports on speculators in that Florida city. "In Ballantrae signs of a real estate boom could be starting to sputter. Real estate speculators who grabbed lots last year are having trouble selling their marked-up houses for the prices they want." "An illustration of the investor home glut is Glenapp Drive in Ballantrae. On Glenapp, five new but nearly identical 2,657-square-foot houses are for sale. Their owners are asking for an average of $345,000 for houses they bought for between $230,300 and $240,199 in the summer." "No one's buying, not yet anyway. And why should they? KB Home, the model's builder, markets the same house a few miles up the road for less than $300,000. 'We're going into a buyer's market,' said Pam Koenig, a Land O'Lakes real estate agent for one of the five Glenapp homes. 'It has to be.'" "What we could be witnessing is the downside of the investor mania that has pumped up the housing market the past two years. In a search for gains unmatched on the sluggish stock market, speculators gobbled up lots across Pasco. This fall, many of those investors are trying to discard the properties simultaneously." "'Investors are competition for us. They actually become hidden inventory,' said Kevin Robles, president of the Pasco Building Association. One of two builders, US Home, recently discounted its homes and undercut investors. A sign announcing a 'builder's closeout' appeared." "US Home reduced one model formerly listed for $440,000 to $420,000. It's no coincidence a speculator was reselling the same model in Lake Talia for $439,000. One Talia investor resorted to a hard sales pitch to shed his property: 'Reduced for quick sale!!' and 'SELLER WILL PAY $4,000 TOWARDS BUYERS CLOSING COSTS.'" "'The market's slowed down a great deal,' Koenig said. 'There's so many real estate flippers, it's diluting the market.' Pasco builders reported that about 25 percent of their sales last year and earlier this year were to investors. For some builders, it may be an undercount. Many investors say they are buying for themselves and later claim to have changed their minds before moving day. A son will build a house for an elderly parent who never materializes after closing." "The Glenapp Drive phenomenon could herald further localized home gluts. Investors might have to make do with lower returns, said Koenig, whose clients are listing a Glenapp house for $349,900, $108,000 more than they paid for it in July. Another investor markets the same house on the same street for $319,900." "'If you are one of those five people on Glenapp and you want to sell, you adjust your price accordingly,' she said. And the adjustment that Koenig suggests is in a direction that few have contemplated the past three years: down."