Man, what a massive meltdown for the builders. It's dot-com all over again - you don't see 50%+ declines in sales year over year unless something historic, something massive has happened to your business.
And so it has.
2 Major Homebuilders See Drop in Fourth-Quarter Orders, Profits
PHILADELPHIA (AP) -- In a sign of a deepening housing slump, two major homebuilders on Tuesday reported steep declines in new orders and weaker fourth-quarter results.
Luxury home builder Toll Brothers Inc. of Horsham, Pa., said home-building revenue fell by 10 percent and signed contracts were down by 55 percent compared with a year ago. The company, which released its quarterly outlook ahead of earnings, also said it will incur a hefty charge against profits as it pares down the number of lots it controls.
Beazer Homes USA Inc. of Atlanta reported a 44 percent decline in profit as higher revenue was offset by squeezed margins. The company said there was "significant" discounting in most markets.
New orders for Beazer fell by 58 percent to 2,064 homes from 4,937 last year, as the housing market continued to slow. It has cut 1,000 jobs, or 25 percent of its work force.
November 08, 2006
Housing Devastation: Toll Brothers sales down 55%, Beazer Homes down 58%
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9 comments:
If you want to eliminate speculation in housing simply demand that people buy houses with as little margin as they can buy stocks. A 50% margin requirement or down payment should be required. How many properties can you own if you have to pay 50% cash up front?
That largely eliminated speculation in stocks after the 1929 crash. In retrospect, it was stupid to allow people to buy stocks like they were buying futures with only 10% down. Hell, you can put 0% down on a house and "own" it!
People will speculate with anything that you can buy on margin.
Nice. Veeeeery nice.
So what you are saying is that sales are reverting to the mean? That the speculative nature is being bleed out of this bubble?
A reversion to a normal market is not a crisis.
If people suddenly started having four kids and then reverted to having two, is that bad? NOT.
Supply and demand will always correct the marketplace.
hi keith,
wci has reporete a negative ordernummer for their towerbusiness
minus 4!
tower homebuildingorders "minus 4"!!!!!!!!!! the winner of the ugliest warning is ....wci!
http://immobilienblasen.blogspot.com/2006/11/tower-homebuildingorders-minus-4.html
Foxwood, I would agree that supply and demand will dictate the equilibrium price. But I would disagree that this precludes a crisis. I'm still not 100% convinced that a crisis is imminent. But I think it is highly possible, if not likely.
Demand for homes was grossly inflated during the last 5 years by a speculative mania. 40% of homebuyers were buying for 'investment' purposes, an act which only made financial sense while prices were rising at double-digit rates. Double-digit price gains were unsustainable and as soon as that rise even flattens out, which has definitely occurred, all that 'investment' demand goes away. That is a reduction of 40% of demand - highly significant.
On the supply side, that which was formerly speculative demand now turns into supply as 'investors' are unable to sustain their properties with negative cash flow. Supply is also inflated by buyers with option arms and interest only mortgages who cannot make their mortgage payments once they reset to a higher rate - these buyers are in the majority in places like California over the last few years.
Additional factors driving down demand are:
1) psychological element as the image of homeownership becomes associated with bankruptcy and financial miscalculation
2) massive budgetary and current account deficits will force interest rates higher as foreign countries demand a higher return for investment in american debt - mortgages and the mortgage backed securities are instruments of american debt and mortgage rates will be affected.
Yes, supply and demand will dictate the equilibrium price. But all factors point towards a tremendous downward movement that may accurately be described as a crisis.
The stock market didn't even notice, they all must have been given a heads up to go short..must be nice to be inside..thanks bob!
Hey Keith,
Is that pic in the post of a burning house the burning house of the Falcon's Andre Rison that was set on fire by the late Left Eye from TLC?
"Analysts have their say
Wall Street analysts were quick to react to Hovnanian's warning with lowered expectations.
Stephen Kim at Citigroup slashed his full-year profit estimate to $2.24 a share, down from $5.11 previously. In fiscal 2005, Hovnanian delivered earnings of $7.16 a share. "
A reversion to a normal market is not a crisis.
If people suddenly started having four kids and then reverted to having two, is that bad? NOT.
If people started having 5-7 kids (or more) that would be great.
You can easily afford that many children if you're not paying thousand$ per month in interest (home, car, credit cards, student loans).
And if you trash the TV, your kids won't want all the licensed junk.
Oh, and you don't HAVE to send each kid to college on your "dime". They can earn scholarships and WORK -- they'll appreciate their education a lot more.
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