Saturday, March 03, 2007

L.A. Times: Builders see some growth in residences - "People are tired of waiting to buy"

According to this March 2 article by Annette Haddad, homebuilders are seeing a 40% bounce in new-home orders. In addition, in the first month-over-month increase since June, permits for single-family homes have risen, in January, by some 18%.

Homebuilder Standard Pacific attributes the gains to an "aggressive pricing strategy."

According to the homebuilder, the rate at which buyers are canceling orders is declining. January-February cancellations ran at 24%, better than Q4's 43% drop and 2006's 26% drop.

Industry observers state that new-home community traffic has picked up. One observer says, "Developers say the lights went on at the beginning of the year."

We know what "aggressive pricing strategy" is a codephrase for. Before we celebrate the housing bottom, it should be noted that January permits were still down 21% YOY. And a few industry analysts want to see what happens this spring before making any prognostications about the market.

Yes, we know that January was somewhat of a rebound month. It showed up as such, in the attitudes of homebuyers. That same attitude can show up in homebuilders. What is still apparent here is that the media takes any little blip up in a bigger overall downturn and trumpets it as a sign of recovery. In my opinion, the psychology isn't right for a recovery.

I am not even sure if all the sale data for February is reported, so I am holding off posting the February dollar volume charts. Let me put it this way - in terms of where the data is now, dollar volume in some zip codes in the area I cover (southwest Los Angeles County, (excluding 90249, 90274, and 90710 due to wacky data) are showing plunges to 5-year lows and even exceeding that. So I want to be sure all the data is in. Thanks for your patience.


Blogger oc_fliptrack said...

If we can trust the last RE decline to provide some guidance as to how this decline will play out, we're going to have multiple mini-rallies all the way to the bottom.

Looking over the headlines from 90-95, I can recall at least four occasions where things would suddenly pick up then fizzle a few months later.

I see no reason why it should be different this time.

7:48 AM, March 03, 2007  
Blogger bearmaster said...

That's right, markets have upward corrections while trending down.

And the last time we went through a horrible market the press was probably trumpeting every little pause as a recovery.

7:55 AM, March 03, 2007  
Blogger mike said...

when they talk about a pickup in the market are they referring to 1) growth in sales units, 2) sales $, 3) or appreciation, or all three? i think in most consumers' minds the third (appreciation) is the most important, but a truly healthy market should see an increase in all three.

but if you're only getting sales through "aggressive pricing strategy" then you can throw #3 out the window, and possibly #2, if the increase in unit volume isn't enough to off set the decrease in average prices. w/ prices falling it's going to be a long time before we see sales $ volume like we saw in '04 and '05.

it's also funny how when prices are falling they never use the month to month numbers on median prices but rather year over year, but will pull out a meaningless figure like permits rising month over month and tout it as signs of a recovery, even the YOY we're far below '06.

regardless, i don't think that at this point in the cycle permits are the thing to watch, especially in an extremely over-priced market like socal. if we're talking home prices what's going on in the sub-prime mortgage industry (and likely soon in the mortgage industry as a whole) is going to do a lot more to dictate how much people will be able to spend on a house than anything else. as long as they're lending the money there will be greater fools out there to prop up the prices.

8:31 AM, March 03, 2007  
Blogger bearmaster said...

That's right. It seems like the bottom-pushers cherry-pick the attractive MOM numbers to make their case.

But by inventory (that hidden inventory), inventory to sales, YOY prices, YOY sales volume, YOY dollar volume, and affordability measures we have barely begun any meaningful downturn.

The preliminary dollar volume figures for Redondo make me think there have been a few eager buy-the-dippers out shopping. (The ones tired of waiting to buy.) Will they get their heads handed to them on granite tiles?

11:56 AM, March 03, 2007  
Blogger judicious1 said...

Let's not forget, $1.5T in ARM resets will play themselves out this year in an environment of building inventories, foreclosures and lost speculation. The housing market is about to get crushed, but it will take a few years before *everyone* realizes this. If you're about to buy...don't.

3:23 PM, March 03, 2007  

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