April 18, 2007
Bizarre-o-world: Homebuilder stocks jump because they're (supposedly) adding more dead inventory into a crashing market
The untrustworthy and error-prone Commerce Department new home permit numbers yesterday prompted the media to deceptively headline that homebuilding rebounded - up 0.8%! Party time!
This is strange in and of itself because the number was actually down 23% year over year, which is the only number that really matters. It was up 0.8% vs. the month prior, but nobody looks at month to month (nobody smart that is). Plus the numbers themselves were bizarre (and obviously so error filled they're worthless). A 44% surge in the midwest and down in all other regions. Yeah, right. Detroit and Cleveland we need more houses!
So homebuilder stocks rallied off their lows, as Wall Street bets are coming in the the housing crash is over, because they think homebuilders are building new homes at a faster pace (which they aren't), which is great news - more inventory! (which is actually terrible news)
Confused? Because Wall Street sure is. They should be FREAKING OUT that homebuilders are building ANY homes, given that inventory is skyrocketing and sales are falling. This would be like celebrating that Global Crossing was laying more fibre-optic lines during the telecom crash. More inventory! Great news!
Even the government warns people not to rely on these numbers - with AN 11% MARGIN OR ERROR ON EITHER SIDE! Permits flat? Maybe - they could have been down 11% or up 11%, f*ck, we just don't f*cking know! Don't trust us!
Folks, there's an 8.1 month supply (at least) of dead inventory out there, only fools are buying houses, you can't get a mortgage anymore, and the number of completed but unsold homes is up 43% vs. last year, at 179,000 unwanted units (thanks housingdoom!)
Bottom line - homebuilders are on the way to Chapter 11. Adding ANY more inventory into this disaster is a horrific business model. And this will all end so, so, so badly.