Housing is on a slippery slope
I have questioned reported figures before, both by corporate and by government reporting agencies. These days it is prudent to cast a dubious eye on them all.
It has been pointed out that R/E agents can pull a house off of the market, reintroduce it a few months later as a new listing with no record of it having been listed before. Also, large builders are experiencing high numbers of cancellations on new houses. These numbers don't get reported by the census Bureau. They are recorded as sales thus on paper affecting the apparent quantity of houses for sale.
Does anyone else see a fundamental problem with this and recent news stories of reduced housing stock and increased sales?
Vern
This from Ben Jones at The Housing Bubble Blog http://thehousingbubbleblog.com/
From Bloomberg. “Anyone who thinks ‘housing has bottomed should talk to Lennar,’ says Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago. ‘Inventories of completed homes continue to increase, both in absolute terms and relative to their total inventories,’ he said. ‘Historically, until the relative inventories of completed homes begin to decline, the starts of new homes continue to decline.’”
“Because the Census Bureau, keeper of the new home sales data, doesn’t capture cancellations in the monthly statistics, sales are probably being overstated and inventories understated.”
“The lag between turning points in residential and non- residential construction is variable, economist Ian Shepherdson said, but one follows the other as night follows day. ‘The plunge in housing construction promises tough times ahead, sooner or later, for the non-residential construction business,’ he said.”
From the Street.com. “Homebuilders rivalry is intense. The result is shrinking home prices and eroding profitability. Lennar remains the biggest bully in many markets, cutting prices and aggravating fellow builders.”
“Lennar announced this week that orders were down 6% in its latest quarter, but its backlog of homes fell 42% year over year in dollar terms. JMP Securities analyst Alex Barron says those numbers imply the prices of Lennar’s new orders fell at least 30%.”
“‘If that is remotely true, I don’t see how or why any builder, public or private, will just sit there and not eventually have to begin cutting prices down to match or beat that,’ Barron says.”
“The only real way to hold steady on prices in such a market is to offer a differentiated product. If you travel around the country, you’ll find Lennar’s homes similar to other builders, Barron says. ‘There is not a huge noticeable difference from one to the next,’ he says.”
“The threat of substitutes remains high for builders. There is a glut of existing-home inventories, and rental apartments and houses are often more affordable across the country. In some communities, builders selling new homes are facing competition from buyers looking to sell a version of an identical home purchased a year ago.”
From Forbes. “Automatic Data Processing on Wednesday forecast a 40,000 decline in American jobs. If the payroll processing firm is correct, it would be the first time in nearly four years that U.S. employment rolls have declined.”
“‘Given the economic slowdown, particularly in housing, firms could be getting more cautious about hiring,’ Goldman Sachs economist Andrew Tilton said.”
“Tilton said the most vulnerable employees are those working in the residential real estate market. ‘You have seen huge declines in home sales,’ he said. ‘Yet housing employment is just slightly off. So this sector needs to shed some employment.’”
It has been pointed out that R/E agents can pull a house off of the market, reintroduce it a few months later as a new listing with no record of it having been listed before. Also, large builders are experiencing high numbers of cancellations on new houses. These numbers don't get reported by the census Bureau. They are recorded as sales thus on paper affecting the apparent quantity of houses for sale.
Does anyone else see a fundamental problem with this and recent news stories of reduced housing stock and increased sales?
Vern
This from Ben Jones at The Housing Bubble Blog http://thehousingbubbleblog.com/
From Bloomberg. “Anyone who thinks ‘housing has bottomed should talk to Lennar,’ says Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago. ‘Inventories of completed homes continue to increase, both in absolute terms and relative to their total inventories,’ he said. ‘Historically, until the relative inventories of completed homes begin to decline, the starts of new homes continue to decline.’”
“Because the Census Bureau, keeper of the new home sales data, doesn’t capture cancellations in the monthly statistics, sales are probably being overstated and inventories understated.”
“The lag between turning points in residential and non- residential construction is variable, economist Ian Shepherdson said, but one follows the other as night follows day. ‘The plunge in housing construction promises tough times ahead, sooner or later, for the non-residential construction business,’ he said.”
From the Street.com. “Homebuilders rivalry is intense. The result is shrinking home prices and eroding profitability. Lennar remains the biggest bully in many markets, cutting prices and aggravating fellow builders.”
“Lennar announced this week that orders were down 6% in its latest quarter, but its backlog of homes fell 42% year over year in dollar terms. JMP Securities analyst Alex Barron says those numbers imply the prices of Lennar’s new orders fell at least 30%.”
“‘If that is remotely true, I don’t see how or why any builder, public or private, will just sit there and not eventually have to begin cutting prices down to match or beat that,’ Barron says.”
“The only real way to hold steady on prices in such a market is to offer a differentiated product. If you travel around the country, you’ll find Lennar’s homes similar to other builders, Barron says. ‘There is not a huge noticeable difference from one to the next,’ he says.”
“The threat of substitutes remains high for builders. There is a glut of existing-home inventories, and rental apartments and houses are often more affordable across the country. In some communities, builders selling new homes are facing competition from buyers looking to sell a version of an identical home purchased a year ago.”
From Forbes. “Automatic Data Processing on Wednesday forecast a 40,000 decline in American jobs. If the payroll processing firm is correct, it would be the first time in nearly four years that U.S. employment rolls have declined.”
“‘Given the economic slowdown, particularly in housing, firms could be getting more cautious about hiring,’ Goldman Sachs economist Andrew Tilton said.”
“Tilton said the most vulnerable employees are those working in the residential real estate market. ‘You have seen huge declines in home sales,’ he said. ‘Yet housing employment is just slightly off. So this sector needs to shed some employment.’”
posted by Vern Wichers at 9:14 AM
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