Things keep getting worse for homebuilders
Housing starts continue to fall:The National Association of Home Builders released its economic outlook yesterday at the International Builders Show in Las Vegas. Single-family-housing starts, which fell 40% to 617,000 in 2007, are expected to drop to about 441,000 this year — the lowest since records have been kept. That would be a nearly 75% drop from the industry’s highwater mark of 1.7 million single-family starts in 2005.
Builders are not only facing a large overhang of home inventory, there’s also the problem of the credit crunch. “Economists said lending remains so tight that many consumers won’t be able to take advantage of declining housing prices and mortgage rates,” Jim Carlton reports in today’s Journal.
Also, homebuilder sentiment has reached a new low:U.S. homebuilder sentiment sank to a new low in January as concerns about the faltering economy and reluctant homebuyers hurt confidence in the market for newly built single-family homes, an industry group said on Wednesday.
The National Association of Home Builders said its preliminary NAHB/Wells Fargo Housing Market Index was 8 in January, down from 9 in December. That is the lowest level on record since the gauge was launched in January 1985.
Readings below 50 indicate more builders view market conditions as poor than favorable.
Foreclosed homes are selling briskly, though:Foreclosures are the place to be. Low-priced, bank-owned homes are selling briskly, says market research firm MDA DataQuick. Newly-built homes, on the other hand, are sitting on the sidelines.
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Best news I have red all day. Charging outrageous prices for chipboard houses slapped together by illegal aliens in gated communities located outside city limits that destroys farmland or tree stands to make another cookie cutter suburb for some Dobson acolyte soccer mom to drive her Suburban around in is just all kinds of bad Karma. It is wrong on so many levels.
ReplyDeletebut in the Baltimore burbs prices are still 150-200% of 2000-01 levels.
ReplyDeleteNew home divisions by Toll bros will not come down on price - they offer to trhow in a few upgrades worth mayber 0.5% of total purchase.
What gives? Incomes have been stagnant and unemployment creeping up. I guess the sidelines remain the place to be until reality sets in - or are the areas recession proof???
example: standard mid-grade almost-Mcmansion bought new in 2001 for $450K are on market for $750K....
Exactly. I commented previously that "suburban sprawl died in 2008", and that is the truth.
ReplyDeleteWhat is it that facilitates suburban sprawl? Cars and the supplies and infrastructure that support cars. What industry is on its death bed at the moment? The auto industry.
Beep..beep.......beep.....bee..... beeeeeeeeee......
FLATLINE. Dead. doornail. Stick a fork in it.
Suburban car culture lasted only about fifty years.
"Suburban car culture lasted only about fifty years."
ReplyDeleteThat is quite a comment. I would day down but certainly not out.
Even at these reduced levels prices feel like they are defying gravity. All of this cheap money will prolong the pain.
ReplyDeleteAmazing how the buyer mentality has changed. People finally realize they can buy more later for less if they just rent and wait.
The builders are loathe to lower prices, so they unload undeveloped land holdings to help cash flow while they wait it out, but they can't wait forever.
"That is quite a comment. I would day down but certainly not out."
ReplyDeleteDavid the bubble blogger; are you saying that suburban sprawl growth will continue when the dust settles?
If you are saying that sprawl culture will see a revival, you are saying that there will be a significant recovery in the home-building business.
2009's first half will be a continuation of the pain though not as drastic as 2008.
ReplyDeleteI think we will see real home prices continue to fall (meaning stagnant and falling prices with inflation to boot) AND a long duration. We've got at least two more years of this before we start to recover.
ReplyDeleteCan anyone tell me the last time Americans used Interest Only, No Downpayment and other "exotic" mortgages like in the last few years?
Try the 1920's! And look at the result then.
I was talking to a good friend of mine and she was telling me that her parents bought a nice house in the suburbs of Philly in 1937 and everybody thought they were crazy to buy then. I think we will have hit bottom when everybody literally thinks that you are crazy to buy. We aren't there yet. In reality people are buying foreclosures and thinking they are getting a deal still.
"If you are saying that sprawl culture will see a revival, you are saying that there will be a significant recovery in the home-building business."
ReplyDeleteI'll say it. There will be a significant recovery in the homebuilding business. Not soon, but a decade from now our current troubles will be long past us. Over the long run, as long as the U.S. population keeps increasing (which it will), "suburban sprawl" will continue.
..."example: standard mid-grade almost-Mcmansion bought new in 2001 for $450K are on market for $750K...."
ReplyDeleteI've been sitting on the sidelines renting for a few years now and I too see prices that are still well above 2001, etc. If fact, prices are only back to the 2004 level, however, the higher priced homes are falling quickly.
Think about it. The home you mention in your post selling for $750K would require $150K down payment. First of all, between loss of equity in homes and the stock market collapse, few people have this kind of money. If they do have $150K they would need to borrow $600K which puts you into the non-conforming category. Once you are above $494,500 in my county (Howard) the interest rates go from less than 5.0% to over 7%! I have decided to sit and see what happens. If you talk to any honest realtor, they will tell you that homes above $700K are not selling. Those prices will have to fall or the government will need to step in to help prospective buyers with lower rates.
"Not soon, but a decade from now our current troubles will be long past us."
ReplyDeleteYes, and a decade from now, the tractor trailers needed to supply the sprawl will run on pixie dust and dreams.
Either that, or people will live the way they did for thousands of years prior to the advent of sprawl: they will live in close, sustainable communities that don't require long-haul trukin' to get ripe tomatoes to your dinner table.
500 million people can't all own a two acre plot and drive 100 miles a day.
Here's some good country livin' for ya, Jimmie: http://www.kunstler.com/eyesore_200810.html
ReplyDelete"Over the long run, as long as the U.S. population keeps increasing (which it will), "suburban sprawl" will continue."
ReplyDeleteAh. So the guy who rails against the "Real Estate Industrial Complex" for many years comes out and argues that the REIC will prevail and as a result, all will be right with the world.
Anonymous said...
ReplyDeleteAh. So the guy who rails against the "Real Estate Industrial Complex" for many years comes out and argues that the REIC will prevail and as a result, all will be right with the world.
Don't confuse me with David. I have nothing against the "real estate industrial complex" and I don't use the phrase. I also don't use the word "homedebtors". I have nothing against homeownership or homebuilding. I just believe there's currently a housing bubble in the process of deflating. I also don't like people who lie about the outlook for housing (thus screwing their customers) in an effort to increase sales.
Home prices and fuel prices are in the process of returning to normal. Once that process is complete, all will be right with the world. Ten years from now tractor-trailers will run on diesel fuel just as they do now.
"Ten years from now tractor-trailers will run on diesel fuel just as they do now."
ReplyDeleteT. Boone Pickens, a self-made oil industry billionaire, disagrees. He is elderly and rich, yet he spends his own money and what's left of the precious little time he has on earth trying to educate people about the outlook for energy in the United States. Why?
http://www.pickensplan.com/index.php
The Pickens Plan link again:
ReplyDeletehttp://tinyurl.com/5cbuau