No more bubbles to bail out the housing bubble

MSN money ^ | 12/18/06 | Bill Fleckenstein

[finnman69]

Wall Street has a soft spot for the "soft landing" thesis, but to me it's crystal clear that a serious economic slowdown is under way. What has been surprising: not that the economy is weakening but that so many people seem to expect a soft landing, and therefore remain in denial about the seriousness of the slowdown.

I guess the predilection toward a soft landing is a function of the following: So many folks in the investment business -- and in the country at large-- haven't experienced a consumer-led recession in so long that they think this outcome is just not possible. That's because the Federal Reserve Board has evolved into being a business-cycle suppressor and bubble manager. Consequently, folks just assume that economic weakness is a feature of the business cycles of yesteryear.

[finnman69]

Hovnanian shares sink on losses, weak outlook
The homebuilder blames land-related charges and warns it will deliver lower-than-expected results during the next fiscal year.

December 18 2006: 7:51 PM EST

LOS ANGELES (Reuters) -- Home builder Hovnanian Enterprises Inc. said Monday that $315 million in land-related charges led to a quarterly loss, and forecast lower-than-expected results for 2007, sending its shares lower.

For the fiscal fourth quarter ended Oct. 31, Hovnanian posted a net loss of $117.9 million, or $1.88 per share, compared with a profit of $165.4 million, or $2.53 per share a year earlier.

Revenues fell to $1.7 billion from $1.8 billion.

Shares of Hovnanian (Charts), which competes against rivals such as D.R. Horton (Charts) and Pulte Homes (Charts), fell over 4 percent in after-hours trade from its close of $35.25 on the New York Stock Exchange.

Hovnanian said it incurred $336 million of charges related to inventory impairments and land option write-offs in all of 2006, including $315 million in the fourth quarter.

The company said it had not anticipated the suddenness or magnitude of the fall in pricing. The pace of new home sales was still being affected by high contract cancellation rates, increases in resale listings and in new homes available for sale, it added.

Hovnanian forecast fiscal 2007 earnings between $1.50 to $2.00 per fully diluted common share. For the first quarter, it projected earnings of between five cents to 10 cents per share, with earnings significantly weighted to the second half of the year.

Analysts on average had forecast Hovnanian to report net income of about $2.50 per share for the year and 44 cents per share for the quarter, according to Reuters Estimates.

[Fierce Allegiance]

Thanks.

[Always Right]

Because in a slump, those areas will go to zero-demand.

If we get to a zero demand situation in housing, there will be a lot bigger problems with the economy than just a housing bubble. Our economy is not on the verge of such a depression, and if we are you might as well live it up while you can because we are all doomed.

[Always Right]

It looks like I was 4 to 5 minutes late though.

[finnman69]

Based on what?

Inflation roars back with 2 percent wholesale price jump Dec 19 10:01 AM US/Eastern

US inflation made a surprise comeback in November with a surprising 2.0 percent rise in wholesale prices, the biggest monthly jump in 30 years, the government has reported. The Labor Department's producer price index (PPI) was far ahead of Wall Street expectations of a 0.5 percent rise and showed strong increases in a wide range of goods. The core index, which excludes volatile food and energy prices, was up 1.3 percent -- the largest increase in more than 25 years -- against expectations of a 0.2 percent rise. The surprise jump in prices challenges expectations from economists and the Federal Reserve that inflation is under control.

[Toddsterpatriot]

You are trying to split hairs by saying you did not specifically call him a liar.

He talks like a lawyer, doesn't he.

[Fierce Allegiance]

I still appreciate it.

Seems I'm not the only one who remembered that one clearly.

[ex-Texan]

Hartford Conn. is down about $ 24,000 according to this Housing Watch site. Sales prices have been going down steadily in Conn. for the past month. In fact, sales prices are down all across the map:

http://housing-watch.com/home.aspx?d=180

I invite you to visit the site every week. The news is going to be very bleak and getting bleaker troughout 2007.

That is what December 25th edition of Business Week is saying:

Housing: Curb Your Enthusiasm About A Recovery:

Home prices still have room to decline, and it may take 15 years or more to reach new inflation-adjusted highs

Excerpts:

Housing booms are short and exciting. Housing busts, on the other hand, are long and painful. So don't put much faith in those oft-heard assertions that the worst is already over. Prices are likely to fall further in many markets in 2007. * * *

Advice to homeowners: If you need to sell and you're not getting much interest, cut the price by an extreme amount. If you make halfhearted cuts, you'll remain overpriced and you'll follow the market all the way to the bottom. Advice to buyers: Bargain hard. Many sellers are still asking for too much. "As tough as our market's been, the toughest thing is to get sellers to understand that prices aren't going up 18% to 20% a year anymore," says Ned Redpath, head of Coldwell Banker Redpath & Co. Realtors in Hanover, N.H. * * *

Housing prices were pushed up in part by get-rich-quick speculation. Now real estate has lost its grip on the public's imagination. Says Richard J. DeKaser, chief economist of National City Corp. (NCC ) in Cleveland: "We're looking at several years of weak home prices. It'll return to the time when no one is talking about real estate." Oh, well. You can still take a flier on Google Inc. (GOOG ).

http://www.businessweek.com/magazine/content/06_52/b4015085.htm?chan=top+news_sprb_realestate

Take a peek at the comments posted below the article. People are saying exactly what I have been attacked for saying on FR. One expert says prices will fall 40% to 60% in D.C.

[Fan of Fiat]

To bad September and October dropped 1.3 and 1.6 respectively.

[Toddsterpatriot]

One expert says prices will fall 40% to 60% in D.C.

Well, if an expert said it, it must be true. LOL!

[headsonpikes]

Interesting post.

In 1933 gold coins were confiscated – now we have a threat of nickels being confiscated.

Well, nickel is almost a dollar per ounce

http://www.metalprices.com/

- fiat money eventually transforms all metals into precious metals, I'd guess.

Invest accordingly.

[Always Right]

Hartford Conn. is down about $ 24,000 according to this Housing Watch site.

They are comparing June/July prices with Nov/Dec prices. Prices tend to peak during the high demand months and drop during the winter months. Year over year the drop was $5K or 1.8%.

[Fan of Fiat]

Well, if an expert said it, it must be true. LOL!

An expert named "tooskinneejs".

Seriously Ex-T, when you said "One Expert", what drove you to call the poster an expert? Or was it just artistic license.

[Toddsterpatriot]

Margin rates were just lowered here and the FF rate which was lowered to 1% supported a big housing boom.

Where were margin rates lowered?

[Porterville]

wow, so I guess the fact that many teachers, nurses, cops, and other professionals around here making North of 70,000 per year mean nothing to the value of housing...

but then again I guess neither does the low interest rates.

Another stupid sh*t analysis about the real estate market from people living in trailers.

[Fierce Allegiance]

The link in post 1 disagrees with this information, and it was posted by your fellow doom & gloomer. The info I posted to directly refute your jerk and liar claim backs up the link in post 1.

Also, you post info specifically about Hartford proper. Have you ever seen hartford? It's like the bad side of beirut. Specific anecdotal evidence of a single city doesn't correlate well to an entire region.

I am sick of you cherry picking the single worst town, and feeling you can extrapolate that data to a state, or even our entire country. Your chicken little claims are wrong, and you have been called on this several times.

I'm surprised the mods aren't so sick of having to fix your bogus titles (FLORIDA HOUSING PRICES DROP 44%) and other falshoods andmisrepresentations.

So you have one site with an agenda to back you up. I guess calling you a liar is improper, but saying you are guilty of intellectual dishonesty is a direct hit.

[Fan of Fiat]

people living in trailers.

Or subsidized apartments.

[ex-Texan]

Just because FA asserts something does not make him correct. I back up most of my posts with specific details and/ or link for proof. You naysayers typically shout, 'Liar!,' at me. Just like Pedro. Every high school kid knows name calling does not win debates. Guess that makes all you former members of Pedro's Posse guilty of a vicious Ad Hominem attack.

[Fierce Allegiance]

"We're looking at several years of weak home prices. It'll return to the time when no one is talking about real estate."

This is Business week. they are discussing single family homes purely as investments. OK, so looking at housing as an investment isn't a hot market, but there is CERTAINLY no indication of it being a loss. For a homeowner, there are benefits that go beyond the investment value.

If anything, this comment backs up what i am saying. there is n decline, but weak increases. The author certainly didn't say "Get out now before the bottom drops".

[Porterville]

"Gee Suzy Anne, I can't see why they'd pay so much for a house when they can live like you and me!! There must be a housing bubble, 'cause we be so educated.... We say stupid little quotes all the time with no substance like:

If there ain't no foundation then it must be on wheels, or

Bubbles float to the top of the can and spill on the floor only to be licked up by the pig.Or,

I'm so stupid that I'm a bitter dumb ass."