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Housing is still a mess - Part 2



December 30, 2008 – Comments (6)


A week ago I penned (can you really say penned if you aren't writing on a piece of paper, hmmmm) a post about how anyone who thinks that housing has bottomed is nuts: Housing is a mess: anecdotal & statistical evidence.

Additional statistical evidence that the fall in home prices is accelerating, not slowing was published this morning in the form of the Case-Shiller index.  According to Case-Shiller, home prices fell in October at the fastest annual rate since the survey started 21 years ago.  Specifically the 20-city index showed an 18% year-over-year decline in home prices and the 10-city index showed a 19.1% drop.  Both indices have now fallen every single month for twenty-two straight.  Ouch. 

Home prices post 18 percent annual drop in October

I am sure that some will survive this ordeal and the ones that do will eventually emerge as strong companies with much less competition, but in my opinion now definitely is not the time to buy stock in home builders.  If anything, I personally would rather still short them at this point.


6 Comments – Post Your Own

#1) On December 30, 2008 at 10:34 AM, ocsurf (< 20) wrote:

Just waiting for Floridabuilder to give us the call :)

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#2) On December 30, 2008 at 10:47 AM, TDRH (96.58) wrote:

This may come across as antagnistic for those going through a very rough time in their lives, but the declines are necessary and healthy.   The median home price is now $181,000 nationally.   In my humble opinion I believe it needs to fall an additional 14-18% to reach equillibrium and to where the overall economy can start to turn around.  Within reason, the faster the median drops, the faster the turnaround can begin. 

Depending on interest rates and employment levels, at the current rate of decline we could see the bottom for the housing market in the spring of 2010.    It may ride this bottom for a number of years, but at least the major bleeding will have stopped and the healing can begin.

As for homebuilders, I agree with you, though shorting them is still dangerous.   Floridabuilder argued that the public homebuilders would benefit once the market turned around because the privates would all be backrupt.   He has forgotten more than I know about the industry than I know, but I disagree.   I think that the homebuilding landscape is due for a surgical reduction/consolidation.   Those that survive will not thrive as I do not see the barriers to entry in this market that would give an established builder with a huge debt load any advantage over new capital.

2009 is just going to be tough.   The overall shift in consumer demand will be painful.   In my humble opinion federal interference in the correction is a complete waste of time.   If the government wants to help it should invest in the retraining of individuals who are displaced to educate/build/train a competitive workforce for the future either through direct subsidy, or tax incentives for employers.


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#3) On December 30, 2008 at 10:52 AM, BlueLakeVentures (< 20) wrote:

Two year ago, I predicted housing would bottom end of 2009, and will not rebound until 2013. The prediction still holds.

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#4) On December 30, 2008 at 10:58 AM, Gemini846 (34.75) wrote:

You can expect an overcorrection too though. It may be shallow but if a market takes a long time to capitulate it may oversell. As a current renter I would love to see a period where housing prices remain low with cheep credit too.

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#5) On December 30, 2008 at 12:02 PM, carcassgrinder (34.79) wrote:

Remember....the market always over punishes and always over rewards.

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#6) On December 30, 2008 at 11:22 PM, DemonDoug (30.70) wrote:

135k is where the median should be.  And maybe less. that would mean another 30% drop or so at least.

all publicly traded HB's suck.

all of them.  When i first started blogging about them 2 years ago, I felt many were worth nothing.  They are still worth nothing.

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