Starts of new U.S. homes plunged 14.6% in October

Quote from dandxg:

Less supply could mean higher prices assuming the market isn't already saturated with people that purchase more than 1 home, which I believe it is.

The big home builders aren't that dumb. Their analysts can see what is coming and they are making smart business decisions. They have volume and leverage on their side. They can squeeze their suppliers for cuts. They are now offering only 3 models when they offered 5 before. Everything is going to alacarte in the new homes. Throwing in tv's and etc. You get the point. My wife called her contact in home sales division and the forecast for the first quarter is ugly, plain and simple.
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Not saying they're dumb - but the cycles present strong forces that the builders can do little to change. I'm saying stock chasers are perhaps the dumb ones here.

There's simply too much inventory out there, especially resale homes, to compete with - so even if there are less new homes, they can't do anything about competition with the surplus in the resale market.
 
Quote from dac8555:

this is one of the biggest reasons why i am a bear. IF the CEOs of the homebuilders say "no end in sight to the decline" and recently the housing industry is one of the largest in the united states when you include

1. Steel
2. building supplies
3. lumber
3. Copper
4. Home improvement Manufacturing
5. Home improvement retail
6. realty
7. roofing
8. Transportation serives
9. construction services
10. construction equipment.
11. lending services including banking and finance
etc.


you get a HUGE portion of the economy.

when i see days like today with such a staggering housing starts number...and home builders are actually UP on the day...

I am LITERALLY beating my head against a wall...i have a bump.
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Good points, I would like to add another large one - consumer spending. It would be interesting to obtain a sense of the proportion of consumer spending that is/was driven by debt, more specifically housing debt.

Flat or decreasing housing prices means the end of consumers utilizing their houses as a bank account, and I personally suspect that this aspect of things will ultimately put a serious dent in consumer spending.
 
Quote from Chagi:

Good points, I would like to add another large one - consumer spending. It would be interesting to obtain a sense of the proportion of consumer spending that is/was driven by debt, more specifically housing debt.

Flat or decreasing housing prices means the end of consumers utilizing their houses as a bank account, and I personally suspect that this aspect of things will ultimately put a serious dent in consumer spending.
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once housing prices come down like they have you can say goodbye to the atm machine they call a house. That is what has been fueling this economy for the last 5 years. 2/3 of the GDP is based on the consumer, once the consumer is tapped out where will they go and where will the economy head?????
 
Quote from scriabinop23:

And it also means less revenues, less book value of assets (because there are fewer), negative profit growth, and is a sign of worse times to come. KBH up, BIDU up, etc. This current market has abandoned fundamentals.

The markets won't remain oblivious forever - they will just for a while. So many crap stocks being bid up higher and higher for the only reason that trailing PE looks nice and there's nothing else cheap to chase up.

Dumb market, but it won't remain for long. Housing's only hope is massive wage inflation to pick up the slack after more ARMs start resetting.

The fed's goal should be pro-inflation, devaluation of the dollar, and lowering interest rates. Its the only -temporary- way out of the housing doom without immediate pain. This will keep everyone happy for a few months.

Then they'll see commodity prices even higher than before, since the dollar will be worth so little.

Another odd joke is that Bush will take credit for the bull market of the last 5 years and the incoming next (likely Democratic) president will take the heat on the USD deflationary death spiral we're about to head into.

And it won't be a 12 month death spiral. This will be a 5-10 yr deep one.
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Look my friend, fewer starts and permits obviously means builders will have less revenue somewhere down the road. At the same time it means that all other things being equal, there is less on the market, and therefore is a precondition for a stabilization of prices and/or rising prices. Rising prices ultimately attracts builders who increase permits and starts.

That said, stock prices on builders are down for a reason. You're not telling anyone anything they don't know. You're telling them what they can read in the headlines of any newspaper of this country. Now ask yourself this, when is the last time anyone made any real money reading the headlines?

You call it a "dumb market". But "dumb" is actually a guy on the wrong side of the market who thinks the only thing wrong is the "dumb market".

Markets don't reflect the present, they anticipate the future. And in case you haven't noticed, the stocks of most homebuilders have stopped going down.

OldTrader
 
Quote from OldTrader:


You call it a "dumb market". But "dumb" is actually a guy on the wrong side of the market who thinks the only thing wrong is the "dumb market".

Markets don't reflect the present, they anticipate the future. And in case you haven't noticed, the stocks of most homebuilders have stopped going down.

OldTrader
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I like those 2 quotes, mind if i steal them :D
 
Quote from OldTrader:

Look my friend, fewer starts and permits obviously means builders will have less revenue somewhere down the road. At the same time it means that all other things being equal, there is less on the market, and therefore is a precondition for a stabilization of prices and/or rising prices. Rising prices ultimately attracts builders who increase permits and starts.

That said, stock prices on builders are down for a reason. You're not telling anyone anything they don't know. You're telling them what they can read in the headlines of any newspaper of this country. Now ask yourself this, when is the last time anyone made any real money reading the headlines?

You call it a "dumb market". But "dumb" is actually a guy on the wrong side of the market who thinks the only thing wrong is the "dumb market".

Markets don't reflect the present, they anticipate the future. And in case you haven't noticed, the stocks of most homebuilders have stopped going down.

OldTrader
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And I am saying the market (generally speaking) is deluding itself and anticipating too little a decline in these companies' bottom lines. The fact that we're breaking all records in the strongest bull in quite a while is pure proof of that. The market as a general does not believe the impact of housing will be generally that detremental to the bottom line. The whole point of this thread is a general consensus of stark disagreement with that prevailing view. So me saying the 'market is dumb' is just different nomenclature for this same point.

Just because home builders are adjusting and building less doesn't mean the issue is solved. If the cycle is deeper (which I am saying it is), then their adjustments will be reactions too late in the game - big losses will still be felt and revenues (in overshot areas especially) will dive even past current expectations. Furthermore, new homes compete with the resale market as well. So even if you decided to not provide any new homes for sale, there is still plenty of supply- and home builders can not simply control this.

Like I said, the only way out of a housing crash is hyperinflation and low interest rates (including serious wage inflation). Devalue the dollar massively and suddenly no one will think twice about spending current prices on these overinflated markets. Its tough to massively devalue the dollar and simultaneously keep short term interest rates small enough to continue support of the HELOC based spending spiral we've fallen into.
 
It is getting damn ugly in housing.

There is no way this isn't going to crush cyclicals, IMO.

Furniture makers are already reeling.

BRIC or no BRIC.
 
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