Homebuilder mergers may help to reduce the inventory problems in housing IF they continue to reduce capacity and building. Otherwise, it’s just shuffling deck chairs.
On the other hand, the housing glut has not reached its worst yet, as there is still a lot of what I call “dark housing” out there. It’s like dark matter: it’s there, but you can’t see it. In the case of dark housing, you can’t see it because no one lives there, the water, gas and electricity are off, etc. These are of many types: bank repos, buy-and-bail homes, foreclosures, givebacks, second homes, third homes, etc. I’ve heard that there are millions of these, and no one wants to talk about them.
The buble wasn’t quite as big here in the Tacoma area. In Seattle prices shot up someshat more. Even so, I am glad that the buble burst. Construction companies seem intent on clearing every spot of land for miles arround. They then put up signs saying “Homes from the low 400s.” They had to be nuts. As is clear now, congress and the fed were the chief culprits. As Obama said while running, you can’t solve the problem unless you deal with the cause. So why is he proping up prices and demanding that banks lend more?
Local radio around here is saying that the banks have some 11,000 home they are holding off the market because of low prices. But, around here, “low” is still twice what the average person can afford. Eventually those banks will be forced to put those homes on the market. This will make our current glut even worse.
Like most areas that went from sky high to the stratosphere, they built homes around here like the rest of the world just became a toxic waste dump. In Santa Rosa there are new developments around every corner – huge multi-level monstrosities with barely enough land around them to walk between the houses. And every new development is half empty and desperate to sell. To who?
The wine industry is shedding jobs like like the neighbor’s springer is losing hair, construction workers of all types are running to the end of the unemployment checks and tourism is in the toilet. High taxes and cost of living has been pushing out manufacturing for two decades, news papers everywhere are folding, restaurants are closing left and right and retail in general is doing a fast shrink.
No building here any time soon.
Oh, and please, Paul or someone, tell me why home builders merging will have any effect at all on current inventory? I so totally don’t get this. They can all join together to make one big giant company and it wont change the number of houses on the market one iota. It wont lower the cost of building. It wont produce more viable home buyers. Why, oh why, does it improve the stock value?
For that reason, she said investors might want to focus more on companies that are likely to be survivors of the downturn, i.e., ones that may be doing the buying instead of looking to sell.
Ross mentioned D.R. Horton (DHI, Fortune 500), KB Home (KBH, Fortune 500), MDC Holdings (MDC) and Meritage Homes (MTH) as examples of companies with strong balance sheets and an attractive portfolio of land holdings. Her firm’s Aegis Value fund owns Meritage.
How does someone make the above comment, hoping to influence the stock of a company they own, and pass it off as not a conflict of interest? That seems awfully wrong to me.
The housing market in Florida sucks, and continues to go in reverse in terms of the home values. Where once I had 75% equity less than 3 years ago I now have less than 5%, and it’s not expected to get any better anytime soon. These so-called “experts” predicting the housing market has seen the bottom likely have an agenda for saying so. There is no evidence, narrow or braod, to support this statement. The truth is, for many homeowners like me, we couldn’t sell our homes for more than 85-90% of what we owe currently. I don’t expect my resale value to exceed my mortgage balance in the next 5 years. That’s a very bad thing for the economy and the recovery, which we won’t see until late 2010.
Builders gotta’ build, that’s what they do, so they are building and building and building. Most of the houses going up today were permitted and planned 24 months ago and nobody seems to want to stop what is in motion.
God only knows who they think are going to move into any of these houses that keep going up… Right next the other dozen shiny new over-priced vacant ones.
I live in Las Vegas, Nevada. Need I say more?
The stimulus housing credit has taken many of the immediate foreclosures off the market.
However, there are so many abandoned housing projects, some parts of Las Vegas are looking like a scene from “Resident Evil: Extinction”. Even the Strip is filled with rusting shells of uncompleted, abandoned high rises.
Since most of the residents of the city are much deeper underwater in their mortgages than the 105% equity-to-loan level, the Obama refinancing initiative has done nothing here.
In the long run, Las Vegas will return. It’s a great place to do business and there’s not much more land in the city on which to build homes. The remaining empty land in the city is designated for wildlife protection or is set aside for military use.
More attention needs to be paid to cleaning up blighted, incomplete housing projects. If the builder is bankrupt and there’s no possiblity of resuming the project, the incompleted projects should be demolished and returned to the desert. I have a feeling Las Vegas is not the only community in this country suffering from the blight of half completed and abandoned construction projects.
We haven’t seen the bottom on prices nationwide. We may see a rebound of maybe 10 to 20 percent over the next few years but when the dollar starts to crash and rates go skyward (in a year or two), the decline will begin again in earnest reaching new lows for this cycle. Unless oil is being priced in another currency by then it will reach the $200 a barrel level. What ever economic recovery we have had will cease. Builder mergers will not impact overall supply as we boomers start flooding the market with our homes as we retire and there are fewer and fewer buyers.
Like cars there is a glut of SUV and large Trucks (monster home) on the market. In our area if it was less then 2,500 sq ft in the boom times it was a dump. Now we are seeing a good number of smaller more affordable building. More condos, smaller community homes with shared resources such as play areas. All a good thing. The large look at me homes are a glut on the market as consumers are saying “what was I thinking” as owing one of these monsters is not unlike owning a large truck, lots of gas to keep it going.
Hopefully the “investor mentality” will die soon and home buyers will buy for the right reasons, we need a nice place to call home and oh by the way if it makes some money all the better. People went nuts with the investment angle of home ownership forgetting that a home is first a home then an investment. Do not flip this house needs to become the norm. If you want to invest in real estate do so outside of your home. Consider any gains of the home as a bonus that may not last forever as seen by this market. Bottom line, home ownership is just what is says, ownership. In the past it was home investment, with more risks then most folks could ever imagine.
I think it depends on the area, around here there is NO construction going on and I love it! Hope it stays dead for years! We still have a long way before we hit bottom we are not even close!
The lower end of the market is spiking both in sales and prices. Middle market is moribund and the upper tier is still somehow selling. A definite recovery is under way in San Diego. We were the first to go down rapidly and may be the first to recover.
My area is quite stable relative to housing, having NOT participated in the stupidity of the housing buildem’, flipem’ shams.
I’d like to point out that most ALL stock market activity lately is based strictly on the “HOPE” that things are looking up. “HOPE” is not a wise and prudent investment strategy, fundamentals are, and the fundamentals absolutely stink. There are hundreds of thousands of “shadow” homes (empty shells of completed or abandoned homes still on the banks books). These zombie homes have not been released to foreclosure yet because the banks are “hoping” the housing turnaround is coming real soon. Keep dreaming…wages are sinking, unemployment is rising, housing prices are still dropping, who in their right mind would want to buy now? Nobody I know with half a brain. You’d be buying into a dimishing priced market so you’d have to plan on going in underwater to start. Why would anybody do that? It’s nuts. of course, the housing hype machine is still cranking out the baloney talk about , “now is the time to buy”, so to anybody swallowing the baloney I say, CAVEAT EMPTOR (let the buyer beware). You are going to get burned, most assuredly.
The force of an economic correction is equal and opposite to the economic deception that PRECEDED it. We have only begun to weather this storm, the worst is yet to come. We are staring at years of economic problems going forward. It’s sad to have to say, but very few are saying it and our government is exacerbating the problems a hundredfold with all this bailout and TARP and TALF and…..nonsense. We are in the early stages of a DEPRESSION and it a’int going to be GREAT. It’s going to be COLOSSAL.
There is a housing glut, both in excess quantity excessive price (this is the bigger problem).
The average American income is $40k per year. How does that justify an average home price of > $200k and average mortgage bigger than the average price ? In some areas, it got even more out of line. Average prices in Northern California have come down from around $665k at the peak (!!!) to around $300k now, so the correction is finally underway.
We’re seeing a lot of short sales, givebacks, and foreclosures. These are necessary steps to renegotiate bloated loans. The good news is that we should be out of these woods in about 3 more years and housing may be affordable.
What will help the “business cycle” will be to get rid of the Federal Reserve and their jacking up and down of the money supply. When money/credit is cheap and the government manipulates statistics builders and buyers get fooled. The fix should be centered on the cause.