From Marketwatch:
CEOs still looking for housing’s bottom
Home-builder stocks rallied Tuesday on lower-than-expected quarterly profit declines, falling Treasury yields and the expectation that the worst may be over for the U.S. housing market.
However, many chief executives at home-building and mortgage-lending companies who are in the trenches aren’t ready to break out the champagne just yet. Many are saying they’re still waiting for signs of a market bottom.
Below is a sampling of recent CEO comments on the housing market:
“We’ve got another year to go . . . the rest of 2006 as well as 2007 looks to be a transitional environment.” — Angelo Mozilo, Countrywide Financial Corp. CEO, Nov. 14, Merrill Lynch Banking & Financial Services Conference
“I’d say we’re in the early stages of a declining market. Most of these downturns are longer and deeper than we envision at the beginning.” — Don Tomnitz, D.R. Horton Inc. CEO, Nov. 14, quarterly earnings call.
“In most of our markets we are seeing no signs of stabilization yet, and we fear that we have yet to find a bottom. That indicates to us that this correction is going to last maybe longer than others think it may.” — Antonio Mon, Technical Olympic USA Inc CEO, Nov. 14, quarterly earnings call.
“We continue to look for signs that a recovery is imminent but can’t yet say that one is in sight.” — Robert Toll, Toll Brothers Inc. CEO, Nov. 7, quarterly earnings release.
“Despite recent references to signs of a bottoming or even the beginning of a recovery, we have not yet seen any meaningful evidence to suggest that a rebound in the housing market is imminent.” — Ian McCarthy, Beazer Homes USA Inc. CEO, Nov. 7, quarterly earnings call.
“The question is how long will this downturn, referred by some as a recession, last? We have seen forecasts from anywhere from 12 months to as long as four years. I don’t think anybody is anticipating that it is going to turn around anytime in the next six to nine months. So, in any case, we’re looking at a minimum 12-month horizon, and certainly longer than that.” — Alan Levan, Levitt Corp. CEO, Nov. 8, quarterly earnings call.
Update on the new state nontraditional mortgage guidance, from Calculated Risk:
http://calculatedrisk.blogspot.com/2006/11/state-version-of-nontraditional.html
I’ll say it again; Are you comfortable buying a product in which the leaders of the industry have ZERO confidence????
“I’d say we’re in the early stages of a declining market. Most of these downturns are longer and deeper than we envision at the beginning.”
Tomnitz has it right, this bust will be longer/deeper that anyone can imagine. Has he been reading this blog????
JB-
Would you say the bust started in Q3 of ’05? If so we are heading into the 15 month of this…If I’m remembering correctly, the late 80’s/early 90’s bust was 5 years long? Take out fifteen months, that leaves 45 to go (at least).
Jm
It will be more severe and swifter to the downside. More leverage means bigger bust.
Spring 2007 is going to be a bust for prices. Not sales but prices are going to just fall of a cliff.
MLS ID#: 2333903
Can someone pull an address on this property in Denville for me?
JM,
September/October of 2005 saw a clear break in the sales trend. That would put us 13-14 months into the downcycle. The 80’s bust saw the steepest real price declines in the initial 3 years (36mo). Some signs of weakness occured a bit earlier, so the 4 year mark doesn’t seem unreasonable.
It’s likely that this bust may play out quicker, simply due to the speed at which it’s taken place thus far (Information? The internet? The media?)
jb
cross off 2007?
does anyone think the retirement of the boomers will add to the bust? consider 4yrs from now how many will be retiring and adding to inventory. i would think this could add to the downside or start the next boom.
i guess it will depend on lending standards, current prices and interest rates and of course other variables.
will boomers be in position to sell? or will current equity be gone from downside and atming their current homes?
This just in: My wife’s aunt said that house prices NEVER go down in Little Falls! That is all.
Nov 14
8:30 AM Business Inventories
8:30 AM Core PPI
8:30 AM PPI
8:30 AM Retail Sales
8:30 AM Retail Sales ex-auto
Sorry i meant to post reports scheduled for Nov 16 :(
anon,
I think the retirement of the boomers will compound this bust. so many of them are counting on cashing out of their houses to fund their retirements. I think supply of existing homes for sale will remain high for a long time.
only way to avoid this is if boomers decide to keep working. still, a lot of them will have health problems and won’t be able to work even if they want to. so to me the only question is how bad will the inventory situation get?
I might start looking for real beginning Fall 07. I think sellers will have renewed hope this spring and will need about 6 months to see that the recovery just isn’t going to happen.
chicagofinance: When you say cross off 2007, do you mean as far as prices falling? From where I sit, I think SpringSummer 2007 we will see some big, big price adjustments, and prices back around 2002 levels. What are your thoughts?
I think life events override everything. That said, I would probably choose to take a couple of vacations, work on my golf game, and spend inordinate amounts of time with my son, rather than devote even a second to look at a house in 2007.
Cross off 2007? Whose knows, but I wouldn’t give you anywhere near even money odds at this stage if I was a bookie.
oh yeah – beware the false bottom……
2007 is going to be when all of this shakes out. It will also be the first time people who have bought in the last 2-4 years will not be able to use their houses as ATM’s due to not being able to get the comps.
once the comps level off (which is basically now), and people realize they can not pull “equity” out of their houses to pay for their houses, they will be forced to sell. many are already upside down.
2007 = shake down year
2008 = everyone nervous about the economy and bearish on housing
2009 = great deals to be had for all of the people who have put CASH into the bank and saved it for the last few years.
Well I am bidding in 2007, and will see what happens, 80+ houses in my town just sitting, some notable price reductions, but still too high.
One week before Thanksgiving, and all this inventory, plus more to come on in Spring 07
I will chart the houses I am interested in, including last purchase date, and bid 20 to 25% off list price, maybe more
The whole process might take 6 months, maybe evern more, but the process has to start.
And I will have no problem approaching the sellers directly, the thought of not having to deal with a realtor is a beautiful thing.