April 29, 2006

"This game is up" - Moody's predicts DC condo to plummet 20%, with more cities in trouble too

Let's just say when Moody's talks, people should listen. I'd like to see their forecast for Miami, Phoenix, San Diego and more. Predicting a 20% decline in the DC condo market is safe, but as we all know, bursting bubbles tend to overshoot on the way down. A 50% decline is not outside the realm of possibility...

Watch out below - some US cities are about to be devastated by this condo hurricane...

In D.C. Area, Condos to Take Biggest Hit as Inventory Grows

Home prices in much of the Washington region will likely drop 10 percent or more because prices have far outpaced affordability for first-time buyers and investors, according to a forecast this week by Mark Zandi, chief economist of Moody's Economy.com.

Condominiums will be hardest hit, Zandi predicted Thursday at the National Association of Home Builders' spring construction forecast. He said during his presentation that there are no hard data to pin down how far prices might fall or how the prices of single-family houses would be affected, compared with condos. In an interview later, he said that the growing inventory of condo units that are for sale or being built here suggests that the slide would be worse for that sector

"I could say roughly that prices would fall about zero to 5 percent for single-family homes and about 15 to 20 percent for condos," he said.

He pinpointed six areas where prices have exploded as the most likely to see crashes. In addition to the Washington area, they were Atlantic City-Ocean City, N.J.; Las Vegas; Miami; Orlando; and Phoenix.

"This game is up," Zandi said.

26 comments:

panicearly said...

SFH to fall 0-5%, talk about not sticking your neck out too far.

Anonymous said...

Here in Tampa the condo market is in a tailspin. Tampa Trib ads are listing condos for $97K (still too much IMHO) that were more than $150K a few months ago.

new 200 Mbps BROADBAND over POWER LINES said...

A.G. Edwards rethinks homebuilder ratings
As markets and orders slow, broker downgrades Toll, Pulte and others


By John Spence, MarketWatch
Last Update: 3:19 PM ET Apr 28, 2006


BOSTON (MarketWatch) -- A.G. Edwards analyst Greg Gieber on Friday lent his voice to Wall Street's chorus of bearish calls on the homebuilding sector this earnings season as declining orders highlight the cooling housing market.
"Over the past several weeks, we have felt increasingly uncomfortable with our investment ratings on select homebuilders given the current environment in the housing industry which we think will only get worse before it gets better," Gieber wrote in a research note.
Concluding that there were too many buy ratings, he explained the new-home-order data coming out of the sector this earnings period "heightened our worries enough that we circled back and reexamined our builder assumptions and in some cases our earnings models."
As a result, Gieber cut shares of Lennar Corp. (LEN : Lennar Corporation
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4:01pm 04/28/2006

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LEN54.93, -0.68, -1.2%) and Pulte Homes Inc. (PHM : Pulte Corporation
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Last: 37.35-0.54-1.43%

4:01pm 04/28/2006

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PHM37.35, -0.54, -1.4%) to hold from buy, and lowered Toll Brothers Inc. (TOL : Toll Brothers, Inc.
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4:01pm 04/28/2006

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TOL32.15, -0.49, -1.5%) and Beazer Home USA Inc. (BZH : Beazer Homes USA, Inc.
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Last: 57.63-1.42-2.40%

4:02pm 04/28/2006

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BZH57.63, -1.42, -2.4%) to sell from hold.
Gieber said his revised view on Toll, which targets the high-end luxury market, has changed due to concern about a correction for more expensive homes and about the stock's valuation. He forecasts net orders to fall 19% in 2006.
"Contrary to what some may believe, it is our opinion that the current inventory correction in the housing market is far from having run its course," the respected analyst said.
He's also grown more pessimistic on Beazer shares after the company earlier this week said it swung to a quarterly profit but lowered its earnings outlook and posted a 19% order decline from the year-earlier quarter. See full story.
Gieber pegged his 2006 earnings estimate for Beazer at $9.80 a share, while the consensus forecast is $10.40 a share, according to an analyst survey compiled by Thomson First Call.
Meanwhile, Pulte was cut to hold as the analyst said the firm "is not one of the homebuilding names in which we would add incremental investment dollars given our discomfort with a highly uncertain near-term housing outlook."
He emphasized he wasn't recommending selling shares, pointing to the strength of its Del Webb retirement-home operations.
Pulte earlier this week backed its 2006 earnings target, but on the company's conference call to discuss quarterly earnings, some analysts were skeptical about whether the company would hit its goals. Read related story.
Finally, A.G. Edwards lowered Lennar to hold from buy, but the analyst expressed some optimism on the outlook for the homebuilder:
"Lennar is a well-managed builder that has several gems in its California land bank, which should, in time, reward very handsomely those who stay with the stock."
Yet he also cautioned that the company's drive in California may not build enough steam to boost the company's performance until 2008.
"Until then, Lennar has [the] risk of languishing, facing the same problems that afflict other public builders," Gieber concluded.
More downgrades
Also on Friday, Janney Montgomery Scott analyst Lawrence Horan cut shares of Pulte, Ryland Group Inc. (RYL : The Ryland Group, Inc.
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RYL63.11, -0.68, -1.1%) and Centex Corp. (CTX : Centex Corporation
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CTX55.60, -0.10, -0.2%) to neutral from buy on order jitters.
The analyst expects second-quarter orders will decline at Ryland, which recently reported quarterly earnings.
"Given our expectation that most order comparisons are likely to be negative in the near-term, we don not see Ryland's valuation improving and earnings-per-share forecast could come down further," Horan said in a research note.
Ryland sees earnings of $9.50 a share in 2006, while analysts are projecting $9.42 a share.
Horan also lowered the rating on Pulte on disappointing orders and "the raised risk that management may have lower guidance for this year if orders do not accelerate soon."
Centex was cut after the company earlier this week said quarterly net income rose from the prior, but its backlog and new orders fell. The company said it took a write-off on land that has depreciated in value and knocked down its 2007 profit outlook. Read more on quarterly builder earnings.

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BBB75C964%2DA5EF%2D4DDC%2D919B%2D8C3BEF2F669B%7D&source=blq%2Fyhoo&dist=yhoo&siteid=yhoo

panicearly said...

anon,what kind of rent can you get on
a 97k condo in tampa?

Dogcrap Green said...

The major problem with DC real estate is that the pricing is based on racisem. Because there is nothing more racisit than a DC black man, most other races will spend more to live away from the hate fill blacks.

A condo in a non-black neighborhood sells for about $600,000. A single family house in a black neighborhood sells for about $180,000.

There is a huge price swing, yet the cheaper homes are far nicer.

As racesim dies the money will flow towards the nicer cheaper neighborhhods.

Much of DC is still apprecating. Just not in Georgetown, the North West, and Downtown.

Robert Campbell said...

The economist Mark Zandi has been wrong about the housing market for the last 2 years. He said there was no bubble.

Now Zandi is getting more and more bearish as the market gets softer and softer.

Like Bob Dylan said, "you don't need a weatherman to tell the way the wind blows."

Anonymous said...

More like the ponzi is up

Sly said...

Again, maybe it is regional. But it would shock many people of the downturn in the nicest neighborhoods in Broward County, Florida.

In Weston, for instance, I am seeing a 20% drop in the high end market -- $500k and up.

What Lereah and Zandi are saying does not match what is happening here, at least here in my corner of the world.

Miami is doing better but they have no less that 70 thousand condos on the way to add to their already high inventory.

Sly said...

Drove by the new subdivisions going up near us. Huge houses with a lot of nice architectural details but no yards. Front or back. What they call waterfront is really a retaining pool better known by native Floridians as mosquito resorts.

They start at 1 million. They are competing with lux "carriage homes" selling for 600K. A carriage home is a house with no lot or better yet a fancy townhouse.

Maybe I'm the fool but even if I had such money, I would not buy any one of those houses, even the ones on the nicest lots.

Sly said...

Forgot to add that this are all GCI built.

FUNNOMINAL said...

Reporting from Fairfield County CT--home of Greenwich, STamford, New Canaan et al...home of the original McMansions while the rest of the country was still at their White Castles.

Yeh, let all the 'Realtors' (Sinclair Lewis in Babbit does an initial and excellent job of ridiculing this bunch, circa, 1928) rant and rave about 'leveling out', back to 'normal', etc. but the reality will hit them like a kitchen light in a Bronx tenement at 2a.m. Scurrying under plates, into cracks
and standing still hoping they aren't the next ones crushed.

The magnitude is huge, the momentum is down and the time is now.

My local neighbor, an anti-social dude masquerading as a 'mortgage broker' blames it all on the media. Like somehow people are blind to the multitude of signs proclaiming 'for sale', 'open house', 'by owner' etc. (the word here is that each 'open'house has a 20 minute window for visitation then the whole bunch, including the listing broker picks up their sandwich boards and scrambles over to the next 'open' house, thereby fulfilling their duty to potentially earn their bounty.

Brokers here in CT are quitting the biz by the droves. I live in a medium size town by the shore, at the peak in September 05 there was one licensed broker for every 4 houses that even existed in the town. We're not talking about houses for sale, we're talking houses that could even or ever be possibly sold.
Now their parking lots are empty except for the fulltime receptionist or occasional 'broker of record' waiting for 'call-ins' or 'walk-ins'.

An agent friend of mine, now involved in a multi-level marketing scam said she got so sick and tired of driving people hither and fro only to hear them say they're going to wait or want to see the latest dozen houses put up for sale.

Over the past two years in this 'leafy' or 'toney' (as the NY Post refers to any NYC ex-urb!) town there have been very large houses erected only feet away from busy truck driven roads...no distance from noise, pollution or thieves.
Now these places are heaps of wood, not worked on at all in weeks, despite a beautiful spring... true 'handy-man' specials starting at 700k.

The big questions to me are:

1.Where are the lenders? Will mutual funds, hedge funds, foreign investors, etc act expeditiously to cut their losses if they have pools of MBS?

2.Are they 'marking' their loans to 'market'

3. How quickly will they foreclose and who will expedite the process locally.

4.How deep and fast a vortex will this unfold into--will the most marginal borrowers sell ahead of the impending doom?
Later,
Funnominal

Grinch34 said...

Dogcrap, It sounds like more of a socioeconomic situation than a black, white, yellow, red, brown, vulcan type of thing. Actually green seems to be the one that rules over everybody.

Anonymous said...

Sometimes green rules. Look at Zimbabwe where they kicked out all the white farmers through ethnic cleansing. Now the economy, which used to be the second most productive in Africa, is in shambles. Zimbabwe used to export food, and now they can't even feed themselves. It's all the fault of whitey the devil.

skytrekker said...

Zandi is a goof ball

as most economists- they are too close to the trees to see the forest- in the last 80 years very few have called it right. What they have failed to see is the vast imbalances that have caused recessions and depressions. When they are able to predict that- with some clearness I will believe- thus far many of them are about 25% right.

Dogcrap Green said...

Dogcrap, It sounds like more of a socioeconomic situation than a black, white, yellow, red, brown, vulcan type of thing. Actually green seems to be the one that rules over everybody.

Maybe so.. but in a black neighborhood it takes a white or other non-black ethnic up to an extra 1/2 hour to be served at a Denny's. And if you ain't black, you don't want to pick any food up from the drive through window.
It's like nothing I have ever seen before. And at the root of the problem are minister teaching black kids there is something noble about targetign those that are different for their hate fill agenda.

45 minutes up the road is Baltimore. And it is a completly different world up here. If you are a black that believes the Government should support you, you are a victem because of your skin color, and you have the right to express your haterd towards non-blacks - Heaven is in DC and that is where you will likely move. If your black and you reject all these beliefs and don't want them past on to your childern. Baltimore is your option.

Amazing how different the culter is. here in Baltimore I once lived across the street from a public housing project. Never thought twice about it, never felt uncomfortable walking about my neighborhood. In DC a black man would have shot me dead within a week. And the neighborhood preacher would say "I'm so proud of the nigger = No black on black crime with his young man."

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