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alstry (35.51)

New Home Sales Dying!!!!!!!!!!!!!!!!!!

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July 30, 2008 – Comments (8)

WARNING from Standard Pacific's report tonight:

Our absolute sales absorption rates continued to reflect difficult housing conditions in most of our markets, resulting from reduced housing affordability, and the higher level of homes available for sale in the marketplace, including increasing levels of foreclosure properties.  In particular, the Company's sales absorption rates in June 2008 were weaker than the prior two months, and thus far the Company has seen these slower trends continue into July 2008. These conditions have been magnified by the tightening of available mortgage credit for homebuyers, including increased pricing for jumbo loans and the substantial reduction in availability of "Alt- A" mortgage products. All of these conditions have resulted in a declining home price environment which has contributed to an erosion of homebuyer confidence and a decrease in the pool of qualified buyers.

http://biz.yahoo.com/prnews/080730/law536.html?.v=14

With a Q2 absorbtion rate of just two per selling effort per month....how bad are June and July??????

Now with the Housing Bill just passed.....DAP(downpayment assistance programs) financing is prohibited....this accounted for over 20% of sales for some new homebuilders.  Further, the bill is likely going to put tighter restrictions on Fannie and Freddie now that Uncle Sam is on the hook for defaults.

Tighter lending standards, increasing layoffs, rising foreclosures, crashing prices.......the outlook is challenging indeed.

Demon is this inflation???????

8 Comments – Post Your Own

#1) On July 30, 2008 at 10:39 PM, MarketBottom (29.78) wrote:

1993

Costs of new homes was not used to compute cpi anymore.

Rent was substituted and used to compute cpi.

Rising or falling prices of homes  has no effect on either inflation or deflation, unless it effects rents.

Thanks Bill and Allen 

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#2) On July 31, 2008 at 6:41 AM, DemonDoug (98.81) wrote:

It is deflation of housing prices, but again alstry you are looking at one very small piece in a very large puzzle.  If a puzzle is a hawaiian beach, but you just see one piece that is sand, you might think it's a desert, as opposed to a tropical high-rainfall area.

would you like me to break out the oil numbers again?  would you like me to mention the only 300b in completely new money that is being created to bail out homeowners?  How about all the toxic MBS's that are being monetized through the fed?

Prices are crashing in finance and real estate economies.  They are exploding in the production/consumption economy.  Government intervention is at the heart of both.

If you don't understand this:

You will never even begin to comprehend this:

How's 13% inflation for ya there al?  Seen the price of bread, rice, eggs, or milk go down lately? Or still going up (in san diego is it?  Or are you in the LA area like me)?

Do you understand this following statement:

Industry and agriculture, transport and power, and similar production and consumption expenditures account for less than 0.1 percent of the economy’s flow of payments. The vast majority of transactions passing through the New York Clearing House and Fedwire are for stocks, bonds, packaged bank loans, options, derivatives and foreign-currency transactions.

What this means is that if just a blip of the money that goes into all these paper assets starts flowing into the p/c economy, we get too many dollars chasing not enough real (not paper or financial) assets.

And now that I've shown you the palm trees and coconuts and the ocean, you can put that little piece of sand in and see the entire beach, and stop calling it a desert already.

BTW I still want SPF to die and I want all of it's former CEO's and executives and pretty much everyone thrown in jail.  They are the worst of the worst of the worst IMO.

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#3) On July 31, 2008 at 7:25 AM, alstry (35.51) wrote:

Demon,

What percentage of the economy is finance and real estate vs. the percentage that is consumer and fuel?

If most of the economy is crashing in price buy a relatively smaller segment is rising rapidly, is that inflation?

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#4) On July 31, 2008 at 11:57 AM, jesusfreakinco (29.56) wrote:

Al,

Are finance and real estate purchases factored into the CPI - no.

DD is right.  Most categories other than finance, autos, and housing are experiencing signficant inflation.  Remember that we are much more dependent on imports than ever before and as the USD gets weaker, import prices have to rise.  I think the last data on import prices is that they were up nearly 12% which is consisent with the SGS CPI numbers stated above by DD.

On another note, the PPT is doing a hell of a job holding up the USD right now.  But, when you have an unlimited printing press at your fingertips, what can you expect.  It won't be long, however, until the USD breaks down.  There are too many headwinds not the least of which is the trade deficit which requires $60 billion monthly to fund our excesses. 

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#5) On July 31, 2008 at 12:34 PM, jesusfreakinco (29.56) wrote:

European Inflation Quickened to 16-Year High in July

The inflation rate for the 15-nation euro region rose to 4.1 percent from 4 percent in June, the European Union statistics office in Luxembourg said today. The rate, the highest since April 1992, 

`But the ECB will keep open the possibility of one further rate hike because a wage-price spiral could be even more damaging than the economic downturn we're seeing now.''

The ECB wants to prevent companies passing on higher costs and has urged workers not to seek pay raises to compensate for increased living expenses, saying this may unleash a wage-price spiral. 

http://www.bloomberg.com/apps/news?pid=20601068&sid=afAiVyGGAmpM&refer=economy

Inflation is spiraling worldwide.  The US statstics are manipulated to keep down the CPI adjustments in various entitlement programs.  Can you imagine social security increasing by 11% right now and the impact on the debt/deficit? 

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#6) On July 31, 2008 at 12:55 PM, alstry (35.51) wrote:

Guys,

I know that CPI, as defined is spiraling upward.  But CPI is not the definition of inflation.  Growing total money supply is inflation defined.

We had a lot of inflation between 1980 and 2000 and Gold performed miserably(money supply grew like crazy).

I think the relatively small group of us are talking apples and oranges and agree on pretty much everything.

The question going forward is whether NET money supply will grow or contract in upcoming months.

Right now, there is Hundreds of Billions of dollars of debt about to default....especially relating to residential and commercial RE.

If Debt is defaulting faster than dollars are being printed, that is deflationary.  If dollars printed are growing faster than debt is defaulting.....that is inflationary.

At this point I am on the fence....but debt defaults are accellerating causing me to tilt toward deflation.

 

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#7) On July 31, 2008 at 1:20 PM, jesusfreakinco (29.56) wrote:

I think there are many definitions of money supply.  I am not an economist...

There is no doubt total money supply increased as petro-dollars, among others, have poured into the US stock and bond markets (fools...).  If that is your definition of money supply, as this type of growth slows (soas not to keep up with trade imbalance) or reduces because of loss of confidence or better interest rate rewards elsewhere, the USD will tank and import inflation will accelerate and lead to CPI acceleration.  

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#8) On July 31, 2008 at 4:13 PM, alstry (35.51) wrote:

There really is only one definition....cash plus credit.  But then you could say the world uses many definitions.

That is why Demon and I get along so well even though we can agree to disagree.  Actually, I am not sure we are disagreeing....simply applying two different definitions.

Clearly Demon is one of high intellect.....and not a bad CAPs player to boot.

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