July 12, 2007

A message from HousingPANIC to out of control homebuilders and Desperate Homedebtors


Homebuilders: Keep building. Keep adding inventory to the fire. Keep pumping out houses nobody wants, nobody can afford and nobody can get financing for anymore.

Desperate Homedebtors: Keep asking for prices that no sane person would pay. Keep holding out for that price you "deserve". Keep hoping against hope. Keep reading realtor blogs.

Why, you ask, would HP ask such a thing?

Because unsold and unwanted housing inventory will continue to build and build and build and build and build and build and build and build and build and build some more...

And then home prices will crash back to the level where the fundamentals will make sense again.

Toxic buildup in slumping housing market - Home builders are fighting the shrinking demand ... by adding more supply

CENTRAL VALLEY, Calif. - How do you deal with excessive supply? Add more supply!

Sounds like a head scratcher, but that’s exactly what home builders are doing.

The housing market hasn’t seen any light at the end of the tunnel: Home builders have built too many homes and they've had too many cancellations. There are too many existing homes on the market competing with them, and now here come the foreclosures adding to supply.

Though homes don’t sell, home builders are building fast in some places.

You might wonder why home builders would dig larger holes for themselves.

Standard Pacific won't comment for the story, saying the company is in the quiet period before posting earnings. But Ara Hovnanian, CEO of home builder Hovnanian Enterprise said recently that building Spec homes is about the only way to liquidate land these days.

"It's easier to sell land by popping a house on it than it is to just sell land because there are just not many buyers out there," he said.

31 comments:

Anonymous said...

Remember Global Crossing and Cisco during the dot com crash? Same thing

wtf said...

what's the deal with the manic stock market today?

Anonymous said...

Dow soars 286 points to record high, S&P also ends at all-time record, you guys are so full of it.

Anonymous said...

Anonymous said...
Dow soars 286 points to record high, S&P also ends at all-time record, you guys are so full of it.

July 12, 2007 8:14 PM


Inflation much ding-dong?

Who cares if the DOW is at 50,000 when a loaf of bread is $100.

Hasn't happened yet.

It will.

cobra2411 said...

ROFL...

Gotta be a bad day at the office when you realize you'll loose less if you build a house then if you don't...

Oh, and WTF, it's the kool aid that everyone's drinking that's responsible for today... Dollar's tanking, oil's over $72, NAR's confirmed the housing slump isn't going to be over in '07, the 10yr note is over 5.11%... Retailers aim for the floor and manage to hit it and everyone jumps...

Anonymous said...

what's the deal with the manic stock market today?

Good question. GM is up %2 today in spite of the fact that they're losing billions and there's no prospect in sight for them ever making a profit again. It's like the market has totally disconnected with reality. Kind of like it was at the end of 1999.

Anonymous said...

Build Build Build!!!

Anonymous said...

Blow-off top and also triple-top

Anonymous said...

I have to say that when I was driving from L.A. to Seattle a couple weeks ago, I was shocked to see all the spec homes going up south of Stockton west of I5

moneychanger said...

The DOW is hitting record highs because real world inflation is running at 10%. You HP bubble sitters don't get it do you? Prices for everything are headed higher, and the big drop in house prices you are waiting for is NEVER going to happen. Yes, places like Vegas, SoCal, Phoenix, and Miami will see some tough times because there is too much supply. Everywhere else the builders are building and people are buying. The only thing that will stop this train is higher interest rates. Like THAT's going to happen in an election year.

Anonymous said...

That's the trouble with tribbles ... and the stock market ... self fullfilling feeding frenzies always end badly.

Get disciplined about selling.
Start selling now.

Shakster said...

cobra2411 said...
ROFL...

Gotta be a bad day at the office when you realize you'll loose less if you build a house then if you don't...

Oh, and WTF, it's the kool aid that everyone's drinking that's responsible for today... Dollar's tanking, oil's over $72, NAR's confirmed the housing slump isn't going to be over in '07, the 10yr note is over 5.11%... Retailers aim for the floor and manage to hit it and everyone jumps...
----------------------------------
......LMFAO
I just wonder what it's like to be Joe Six Pack.

Anonymous said...

1929

Anonymous said...

Ok, so here's my take on stock market vs housing market.

Hundreds of thousands of mortgages have defaulted and will default. Most of this mortgage money came from, at the end of the day, Wall Street (CDO's, Bonds, etc.). Now Wall Street knows it's only a matter of time before the bond market takes it in shorts. How do they get their money back?

Simple, pump up the stock market.

Joe six-pack buys an overvalued house and defaults on his mortgage. The seller of the house, if he was smart, didn't put the money back into real estate. It ends up in his investment account (Wall Street knows this is where semi-smart money always ends up).

The bond market is currently taking a hit (sub-prime, alt-a, interest rates, LBO's), and so cash is moving from bonds to stocks. That's why you're seeing the stock market move so high (bond market is easily 10x the stock market).

When the hedgies and institutionals have sufficiently pumped up the stock market where they can recover their bond/cdo/etc. losses, look out.

For now, the stock market is attracting as much cash as it can. Does the Dow seem irrational? That's because IT IS!

If you're all in cash and are comfortable with what you have, stay where you are and buy some popcorn, the show will only get better from here. If you have some extra cash and it doesn't matter if it turns to dust, then you can still make some $$ on the stock market, but by all means, cash investments ONLY (no margin) and roll with the trend (don't bet against the market). Remember, the market can stay irrational longer than you can stay solvent.

My belief is that this pumped-up market is the only method Wall Street has of getting its money back. And the only way they have of transferring their bond losses to someone else (you!!!!).

westwest888 said...

"More homes being built even as vacancy rates increase. In the short run, it seems optimal to a homebuilder to finish the projects he has begun. Sunk costs are sunk, and he wants to maintain good relations with those whom he worked with during the good times, so many will still build if it covers their variable costs, even if they take a loss in the process."

Anonymous said...

286 pts up!! The flight to nowhere.
Remember Japan?Oh yeah.

Anonymous said...

By the way, from the market's peak in 1929 until it's bottom a few years later, it LOST 90% of it's value.

Mark in San Diego said...

I agree - add more inventory to the rental market - rents are crashing around SD - "reduced rent" signs and Craigslist all over the place.

Anonymous said...

Put your money in the stock market. Everyone with cash sold their house or RE investment and is now going to dump money into stocks. Where else can they go. Gold is crap, just like RE, so stock will start hitting huge highs. Sorry keith. Even if P/E are bad like during the dot.com era people will get on the next badwagon stock market. It's all cyclical RE is dead and people are to greedy for 5% savings.

JWM in SD said...

"The DOW is hitting record highs because real world inflation is running at 10%. You HP bubble sitters don't get it do you? Prices for everything are headed higher, and the big drop in house prices you are waiting for is NEVER going to happen. Yes, places like Vegas, SoCal, Phoenix, and Miami will see some tough times because there is too much supply. Everywhere else the builders are building and people are buying. The only thing that will stop this train is higher interest rates. Like THAT's going to happen in an election year."

YEAH, right on Moneychanger. The only thing that I need to make that work is my 200% raise. I'm going to march straight into my bosses office tomorrow and demand it right then. The other day he was muttering something about outsourcing and India but I couldn't stop talking about that house I want to buy.

Mark in San Diego said...

To Anon - view of stock market. . .
Agree - the market has become detached from the "Joe Sixpack" world. Rich people are not buying shitboxes in Phoenix or Las Vegas or Cleveland. . .if they buy at all, it is in Manhattan, SF, Aspen, or Bev Hills, etc. Houses in those areas ARE still going up at the high end. . .but, that is a very small segment of the market.

Wealth is being concentrated in a small number of net high worth individuals (Marketwatch said 3 million in USA) and they don't chase consumer goods, they chase investments. So, since there are only so many shares outstanding at any time - and being reduced by buybacks, and taking companies private - there are fewer quality shares available. Hence when there is a shortage of anything, the price goes up, and that is why the DOW is going up - trust me, it isn't Joe Sixpack who is pushing Chevron and Exxon up to record prices (actually it is - Joe is filling his SUV tank with expensive gas to get to work). . .SO - the market goes up, housing prices go down, the rich get richer and the poor get poorer (hey isn't that a song?). . .

J at IHB and HFF said...

"Jim, this Realtor is a Klingon!"

Shakster said...

http://www.financialsense.com/editorials/bronson/2007/0709.html

robert said...

“Desperate Homedebtors: Keep asking for prices that no sane person would pay. Keep holding out for that price you "deserve". Keep hoping against hope. Keep reading realtor blogs.”

Perfect. I tell anyone thinking about selling a home the same. Put it on the market! Cash out! Hold out for top dollar!

Sheeple. I have a co-worker contemplating trying to move up. He found a home for sale $100K less than any comp in the neighborhood. It’s been on the market for 200+ days. The owner is facing forclosure. Even I think it’s a good deal but it’s too much house for me, and a small yard.

Of course the scenario above (DOM, priced well below comps) does not apply to his home. No worries he says “My house will fly off the market!”. I only encourage him. He does not realize that he will only add to the already bloated inventory and DOM.

Anonymous said...

This is a classic race to the bottom. Whichever companies are standing at the end of this train wreck will be the dominate players when things settle out in 15 years or so. Look at GM it wasn't the best car maker in the 1920's it was the one with the deepest pockets. The same will happen today with home builders. Also for that matter only the strong companies of all types will survive this crash the others will end up on the rocks are be bought. Basically if you have a job through this mess a little cash and your credit in tact you will be wealthy. If you lose your job own a house or are in debt your a screwed duck.

Cash will be king because nobody will have any to speak of.

Good luck see you at the bottom.

Sequoia512

Anonymous said...

home builders can't just "stop" building...they need cash flow to keep afloat. So they just keep building and building hoping that the "bottom" comes and goes and all is well again. But with such a tremendous hangover from the recent home feeding frenzy, reaching the bottom has long way to go. And with it's prolonged arrival, smaller builders will have burned through their cash and go belly up. Only the strongest will survive.

About the stock market....as one great trader Jesse Livermore once said: the market is never wrong, only the opinions of where it should be going.

MarkIFC said...

What's the deal with people still building?
With the price of land and price of materials you can buy the same house that's a resale for as much as 20% less.

DaveO said...

"The DOW is hitting record highs because real world inflation is running at 10%. You HP bubble sitters don't get it do you? Prices for everything are headed higher, and the big drop in house prices you are waiting for is NEVER going to happen. Yes, places like Vegas, SoCal, Phoenix, and Miami will see some tough times because there is too much supply. Everywhere else the builders are building and people are buying. The only thing that will stop this train is higher interest rates."

Like jwm said, sure inflation is quite bad, but are everyone's SALARIES going up 10% annually to compensate? Unless people in general start getting huge raises, prices will have to fall to levels that people can afford. This is compounded by the fact that the higher interest rates that are coming, because of this insane inflation, will reduce the prices of houses to compensate for having to pay more interest.

Anonymous said...

Higher interest rates..." Like THAT's going to happen in an election year."

HAHHAHAHA How much you wanna bet on that chump? The 10 yr t Note is building a base that will shoot higher rates faster than flies on shit.

You better hope you dont have a variable interest rate mortgage, like so MANY SUCKERS out there.

The PAIN HASENT EVEN BEGUN, YET.
Come October this year, you'll start to see it....

snicker...

robert said...

Anonymous said...
“Dow soars 286 points to record high, S&P also ends at all-time record, you guys are so full of it.”


-Wall Street: target of housing lawsuits
July 12, 2007: 01:59 PM EST


Jul. 12, 2007 (AFX International Focus) --
WASHINGTON (AP) - Lawsuits blossomed after Enron Corp.'s collapse, many targeting the energy giant's bankers. Wall Street firms could again become the bull's-eye for investors seeking recourse from the subprime mortgage debacle.

Billions of dollars are at stake, depending on how many of the mortgages -- made to borrowers with shaky credit -- default. Credit Suisse Group (NYSE:CS) estimates losses to investors between $26 billion and $52 billion, while Deutsche Bank (NYSE:DB) AG says losses could total $70 billion to $90 billion.

Investors 'are going to be looking for deep pockets where they can maximize their recoveries,' said Rick Antonoff, a New York-based lawyer with Pillsbury Winthrop Shaw Pittman, which has a group of lawyers assigned to subprime mortgage litigation.-

http://money.cnn.com/
news/newsfeeds/articles/newstex/AFX-0013-18093145.htm

Anonymous said...

Oh I dont know. I put my home up for sale here in SoCal a little over a month ago and I have 2 serious offers. I am going Help-U-Sell route so I do my own open houses, by talking to these families I could see they were misinformed and DESPERATE to own a home, tired of renting. To all the Realt-whores : PLEASE KEEP LYING TO THE BUYERS! Keep them coming. I could have sworn it was 2002 all over again. A mini-bidding war STILL IN 2007.