what are the "rules" as far as how the sentiment behaves at the tops? with bottoms it is simple: a sharp rise in bearish sentiment typically marks the bottom. what about the tops? the tops are not as pronounced as the bottoms. so i would not expect a sharp jump in bullish sentiment just before a downturn. by the way, there are maybe as many bulls as bears now. http://www.thestreet.com/story/10487768/1/bull-or-bear-vote-in-our-poll.html?cm_ven=GOOGLEFI Total Votes: 2236 votes 1 What would best describe your stance heading into the coming week of trading? Bullish 42.53% 951 votes Bearish 42.88% 959 votes Neutral 14.57% 326 votes
As you may have suspected, things were milk and honey from 1998 to approximately 2006, when the bottom fell out. 2007 and 2008 were horrible years, which gave me a lot of free time and time to reflect on whether there's a future that resembles what was an admittedly great time to make money in real estate development (especially the commercial side). The longer we get this deflationary pressure and credit crisis, and the more unemployment spikes, the more pressure we're seeing in on the residential and commercial side, the less confident I am becoming that there will be anything even remotely resembling a V shaped recovery, and that begs the question of whether we're going to be stuck in a 5 year, 10 year or maybe even longer rut on the development side. Office is dead completely. When I attended ICSC in Vegas, there was literally 30% the head count of attendees as there were in 2005, and the major retailer booths had reps who admitted they were there just to stage a presence, basically. There were a few exceptions, such as some of the deep discounters (Steinmart, Costco), but the regulars like Best Buy and Home Depot were not real interested in talking shop. I took a long drive from Henderson all the way to Lake Havasu, and noticed that the same KB Home and Del Webb projects I had seen two years earlier were dead, with units selling for as little as 30% of peak prices. And then I came across an industry article that stated Pulte walked away from a 500 million dollar deposit on (I think) 1200 acres of land they had bid and won on from the bureau of land management. I am a low profile person, and do not care for ostentatious types, but will tolerate them if they have other redeeming qualities. Some of the people I've known or my family has known fit into this category, and they had individual net worth of anywhere from 30 to 100 million dollars (maybe slightly more, rough estimates) at one time (2004 to 2006, mainly), and are now bankrupt. One of these individuals was developing over 2000 lots per year and building well in excess of 600 homes per year, in addition to building commercial projects, when times were good. Although not a friend of mine, one individual I had the opportunity to look at a major project with in Utah had a checking account that had over 100 million dollars in it - I saw it with my own eyes, and yes, he was bragging. He is not broke exactly, but common sense dictates that he took a major hit to his net wealth as asset values have declined. None of what I just stated is exaggerated in any way, shape or form.
It's been my experience that contractors are the last to know on both sides. They're last in...and last out.. What do think?
On the contrary, they're the canaries in the coal mine. If you call them and they don't return your calls for a while, despite having good relations with them, that's a sign that they're busy, and it's a creeping affect, where there was no clear signal before. Of course, in the last year, I've contacted contractors on smaller jobs only to find they have moved to other states to try and find work to keep their crews busy, just out of necessity, or their numbers have been disconnected - I'm talking about guys that have been around for 40 years, who dealt with my father.
Oh well that I know full well from doing so many remodels in my life. But it has always seemed to me that they're the last to buy new land (unless they're holding it from last recession) and the last to start up building again when the recession is over.
The contractors I am familiar with are actually scared of buying land or anything else that requires a big investment. They are psychologically set up to get paid on a contract, sum certain, for doing the things that are in their comfort zone. The ones that used to be contractors learned to get out of that conservative mode and either prospered or busted, based on whether they knew what they were doing in the brave new world of much higher risk based on no more guaranteed payment on contracts from bigger fish.