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EScroogeJr (< 20)

median falls to $211,700

Recs

2

October 24, 2007 – Comments (4)

The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record. The weakness in sales translated into further pressure on prices. The median price -- the point at which half the homes sold for more and half for less -- fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.

http://biz.yahoo.com/ap/071024/economy.html 

This is obviously bad news for my bullish thesis. A month ago I pointed out that the median rose 0.4%. It appears, however, that the expensive segment of the market may still be experiencing some rough patches. A 4.2% drop certainly qualifies as a rough patch. Let us now see if Bernanke's helicopter will have to fly more missions.

4 Comments – Post Your Own

#1) On October 24, 2007 at 12:31 PM, floridabuilder2 (99.24) wrote:

escrooge... hey buddy hang in there... i have a feeling that from a stock standpoint (not necessarily industry standpoint) you will see a lot of value investors jumping in towards years end or in January...  i know we bashed heads in the past, but i do have a lot of respect for you and if you have a 3-5 years time horizon the builder stocks are absolutely cheap... the only issue i have is the lack of visibility on whether the housing crisis gets worse or if we are going to hit bottom this spring...  i have been harvesting builder stocks on the short side, but I will be giving that up soon... i think 90% of the easy money has been made on the short side...  i like it when the odds are in my favor

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#2) On October 24, 2007 at 2:19 PM, EScroogeJr (< 20) wrote:

floridabuilder,

yes, this is exactly right. I do indeed have a 3-5 years time horizon. I never expected that my stocks would never be underwater, that would be foolish. If I bought a little too early, that doesn't bother me. Looking at TOL or MDC at today's prices, I see at least a double by 2011. This is more important than squizing an extra 10%-20% through market timing. Speaking of which, I feel that we already hit the bottom. No proof, just personal gut feeling. My real money is on TOL, NVR, MDC and RYL, and a smaller stake on HOV (protected by options). I can only say that I will be extremely surprised if this portfolio returns less than 20% a year for the next 5 years. The valuations are already ridiculous, like $3.3 bln for TOL...yes, the biggest luxury home builder in the U.S is cheaper than Chinese CTRP...how much cheaper can it get? So yes, I'm in for the long term, and there's no way I'll be selling my positions before 2011. But I do hope that you're right, if I can buy some more TOL below $18 or NVR below $400, it will be just terrific.

EScrooge 

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#3) On October 24, 2007 at 3:47 PM, Imperial1964 (97.89) wrote:

The more bad news comes out, the closer we are getting to a bottom.

I'll still be waiting most of '08 before I think about buying homebuilders.  I don't even try to catch falling knives in CAPS anymore.

If I do buy, I'll be looking at TOL and MDC, too.

And I am expecting to see Ben's helicopter shortly.  The housing bubble he didn't rescue.  When the banks have trouble he takes note.  And from the sound of it, they are still having trouble selling short-term paper.

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#4) On October 24, 2007 at 9:53 PM, devoish (98.18) wrote:

My gut says don't spend any money until after some homebuilders go under. My gut feels that way from reading floridabuilders blogs.

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