Monday, April 18, 2005

Thanks For The Help

Check the comments for answers about this paragraph found on PrudentBear. As one reader noted, the typo doesn't change the validity of the writers' position.

"Recently, we have become aware of some statistics on the front end of this “market on fire”. 1.) Homes for sale, not yet started, have accelerated from a 1998 low of some 30M to in excess of 80M, exceeding the previous bubble number in 1991 of 70M. The rate of change recently growing over 60% yr over yr. 2) Homes not sold, still under construction has shot up from the 1993 low of 130M to over 260M, way over the previous bubble of 1989 of 220M. 3) Total New Homes for sale are headed for half a MILLION in a spike blowout 50% higher than anything previously seen. Admittedly, the extreme points of heat in this “market on fire” are concentrated geographically but so was the previous housing debacle that extinguished the S&L industry. Remember also, that the previous era did not have 0% down 5 yr I/O “financial engineering” to help it along. It also did not have the Trillions of $ of “financially engineered” mortgage backed securities."


At 7:25 PM, Blogger John Law said...

that's a home for every four people in the US, no?

I read that earlier and it seemed hard to believe.

At 7:29 PM, Anonymous Anonymous said...

According to this site, new housing starts are at about 2 million a month, so the stated figures seem a bit suspect.

I think the writer is using M to mean thousands, but then those numbers don't seem outlandish to me. For example, 220M homes not sold, still under construction would be one tenth of a months' starts, which is only 3 days of inventory ????

I'd write the website moderator and see what he has to say. AAMOF, I'll do it for you... stand by for a reply.

At 7:42 PM, Blogger CalculatedRisk said...

Ben, the previous comment had it correct; the writer is definitely using "M" for thousands. See table 3 in this document:

No big deal.
Best Regards!

At 8:35 PM, Blogger Ben Jones said...

Thanks for your help. I'm too tired to write the website but the numbers are intriguing enough that I'll try it tomorrow.

At 8:49 PM, Anonymous hellboy said...

Kind of off topic and late since all the homebuilders have already reported some time ago. I thought I would give you some of the things said on KB Homes conference call, which I finally was able to listen to the other day. I just started to follow them because they have significant operations in CA. I figure when they start to slip California can’t be far behind.

Inventories are rising; 4.7 billion up from $3.2 billion. Nothing new here but an analyst I spoke to says most of the increase is in the land under development category. KB doesn’t break this out as most homebuilders do. Typical homebuilder has 40 to 50% in land under development and fully developed land. The balance is in homes under construction(backlog).

Co. says 75% of inventory is “liquid” and will flow through to earnings in the next 18 months.

Co. says 97% of homes pre-sold, so they don’t build on spec orders. Statement is misleading since on closer inspection of their pre-sold orders you can see that the details of the deposit are anything but pre-sold. Customers typically, only need to put down $500 or so which is fully re-fundable. Deposits are higher for people who add on options. However, with a change of sentiment there is nothing that will keep somebody from walking away. I felt this was the most misleading statement made by the company.

Company still sees the west and south west as being good markets through the year but did say Texas was soft. California in particular is strong with backlog up 50% with a 6 month fill time. One analyst says to watch the backlog closely for any signs of slipping. Inventory should continue to rise and is the last the that will turn once the market turns.

500 units delayed in California due to the weather. Expect good sales counts in California in the second quarter. Alternatively, if they miss in the second quarter things are really bad and have potentially turned on a dime.

Margins up to 25.5% from 23% and expected to hold due to better mix of products, ie. They sold higher priced homes.

Overall, tone was way too bullish for my taste. As if nothing could go wrong and they couldn’t be affected by a downturn. Just some info for those that haven’t already heard.

At 9:40 PM, Anonymous Anonymous said...

Thanks a million hellboy! I'm short on KB and this kind of information is invaluable.

Interesting California is such a strong market considering the net population for the state really hasn't changed much over the last several years. :-)

In regards to the Prudent Bear article: The writer's point is still valid. Figures mirror other bubble periods (are worse, in fact) and he corrected himself when he mentioned half a million.

At 12:00 AM, Anonymous wheninrome said...

Writer is old school. "M" is the Roman numeral for "thousand".

At 5:46 AM, Anonymous Javier said...

huge news!!

"Housing starts plunged 17.6 percent in March, marking their steepest drop in more than 14 years, as groundbreaking for both single-family and multi-family homes tumbled, a Commerce Department report showed Tuesday."

At 6:59 AM, Anonymous Anonymous said...

Snap, crackle, POP!

David Seiders, chief economist at the National Association of Home Builders, said the plunge in starts most likely represented just a pause after a couple strong months.

"We'll probably see better numbers in April," he said. "It's not time to panic over here for sure."

At 8:00 AM, Anonymous Anonymous said...

The decline in housing starts should get some peoples attention.
But housing stocks are up on the news!I invest in realestate,and it continues to be difficult to find deals.Buying during a bubble is very frustrasting.You feel you never know when the other shoe will drop.I have missed alot od deals to because of hesitating cause of price just to see it up another 50K a few months later.
I cant wait for a more normal
Have broken down what areas of the country were the weakest housing starts?


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