Thursday, March 17, 2005

Fear Sweeps Through Housing Sectors

Fannie Mae (FNM) finished the day down 4.3% and was down over 5% intraday. GM continued its fall, down another 2%. The home builder sector was hit as well with Toll Brothers leading the retreat off 4.5% and Countrywide Financial dropped 3% in the last two sessions.

Keep in mind that Fannie is largely held by institutions. And despite being down over 20% since the beginning of the year, FNM volume today was 3 times the average. Fear is sweeping through the credit markets when institutions sell into such a fall.

Time will tell if this is the beginning of the end of the housing bubble, but it very well could be. If so, it is following a path I have expected; a cascading collapse through finance stocks, home builders and finally down to the retail level.

Regardless of where we are in the cycle, billions of dollars evaporated from mortgage lenders and home builders in the last two days. And if the financial media continue to whistle past the graveyard, rest assured The Housing Bubble will keep you up to date.

5 Comments:

At 6:57 PM, Blogger http://piggington.com said...

Hi Ben - Can you explain why you expected "a cascading collapse through finance stocks, home builders and finally down to the retail level?"

I always felt like homebuilders might get hit first: as bubbles exhaust themselves, people stop buying homes (homebuilders suffer), then home prices go down, then people start defaulting (finance companies suffer). But this was just speculation... why do you feel the finance companies would go first? Is it because you thought rising rates would precipitate the whole mess?

thanks!
rich

 
At 7:32 PM, Blogger Ben Jones said...

Hi Rich - I was living in the oil patch during the 80's real estate bust, and as I saw it, sectors were pulled down in waves. It was brutal. Plus, when I started this blog I discovered the mortgage #'s peaked in 2003; then the GSEs had problems in 2004, etc. Meanwhile the street is charging on, apparently taking the home builders with them, at least until recently.

As to rates, I always felt the bubble would come down with high or low rates, and you can see I don't blog on that much. Thanks for dropping by..Ben

 
At 9:40 PM, Anonymous Dan said...

Ben,

I just wanted to say that this is an excellent site!!

Dan

 
At 9:09 AM, Anonymous Anonymous said...

Seems the housing market is being driven by excess liquidy and very lax lending standards. Things aren't going to change until banks stop lending money to anyone with a pulse. Perhaps the FNM shakedown is just the beginning as they have to reduce their leverage.

 
At 11:52 AM, Blogger Ben Jones said...

The issue may be "Separating lenders from default risk." See todays Pennsylvania story..Ben

 

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