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So, Raleigh/Durham etc. apart, the US housing market appears to be in horrendous shape.
The share price of all the major builders have plummeted by 50-75% in the past year. Apparently, major reports released this week from the housing sector are anticipated to be very ugly. Just how low can these builders share prices go? I personally doubt that we've seen the bottom of the market in most areas of the US yet and can see share prices plummeting further.
My question is...
..who thinks we'll start seeing major builders going bankrupt? If they do, what happens to half built subdivisions that will still be around? Will they become a patchwork of houses built by whoever buys the lots? What happens, to say, the half built house that I may be having built by XYZ homes?
I just received a national equity research report on builders and building products based on permit activity. The report for Raleigh, the 19th largest market in the country, indicates that traffic was short of expectations, prices and incentives had deteriorated, and time to sell lengthened in November. What is keeping your market strong? Seriously, not meaning to be curt here, just want to know the secret and how we can apply it to Florida. Or, did I misunderstand your post?
I just received a national equity research report on builders and building products based on permit activity. The report for Raleigh, the 19th largest market in the country, indicates that traffic was short of expectations, prices and incentives had deteriorated, and time to sell lengthened in November. What is keeping your market strong? Seriously, not meaning to be curt here, just want to know the secret and how we can apply it to Florida. Or, did I misunderstand your post?
No Karen, you didn't misunderstand my post. I made the post in September, which is when the general consensus around the Raleigh/ Durham messageboard was that this market was strong. Your report was made in November. It goes to show just how swift the real estate dilemma is moving. No doubt you will find many realtors in the Raleigh are disagreeing with me.
Personally, I could see the market slowing in Raleigh all year. When driving around the city there seemed to be new subdivisions springing up every month...with prices starting at the 400s, 500s, 600s etc. I just felt then, that there really aren't the jobs in this part of the country to make these houses affordable for all. Many of these houses would be sitting empty for many months. I think my feelings are coming true.
There is one obvious answer making your situation different to that in Raleigh. Raleigh didn't have the huge appreciation that Florida has had over the past 5 years. Shame you couldn't turn back time. You are in a right pickle now eh?
No Karen, you didn't misunderstand my post. I made the post in September, which is when the general consensus around the Raleigh/ Durham messageboard was that this market was strong. Your report was made in November. It goes to show just how swift the real estate dilemma is moving. No doubt you will find many realtors in the Raleigh are disagreeing with me.
Personally, I could see the market slowing in Raleigh all year. When driving around the city there seemed to be new subdivisions springing up every month...with prices starting at the 400s, 500s, 600s etc. I just felt then, that there really aren't the jobs in this part of the country to make these houses affordable for all. Many of these houses would be sitting empty for many months. I think my feelings are coming true.
There is one obvious answer making your situation different to that in Raleigh. Raleigh didn't have the huge appreciation that Florida has had over the past 5 years. Shame you couldn't turn back time. You are in a right pickle now eh?
I think Raleigh certainly had a big run up in certain neighborhoods. Whenever I've made my case concerning N. Raleigh and Cary increasing at double digit rates yearly, I would usually get the "you're jealous" responses as opposed to any true rebuttal. I do not recall many Raleigh homes costing 500-600K until more recently. Most of these homes were new construction, so of course they didn't have a "run up". Their lifetime was very short!
Raleigh lives and dies by transplant money. The employment picture lives and dies by information technology (services) and research. During economic contractions, these are the first entities to pull back.
Apparently your eyes were a lot sharper than those of the posters to the messageboards.
The housing sector analyst for Banc of America Securities polls realtors nationwide each month to glean their unbiased (i.e., anonymous) assessment of their respective markets. In exchange for participant in the survey, I receive the monthly report…here are the results from the September 4 survey:
Raleigh, NC
(13,471 single-family permits in 2006, 19th largest market in the country) Traffic well short of expectations. Our traffic index dropped to its lowest level over the past year, falling to 21.1 in August from 38.6 in July (any reading below 50
indicates traffic below expectations). 63% of agents said traffic fell short of expectations, 32% said it was in-line with expectations, and 5% said it exceeded
expectations. Prices flat, incentives higher. Home prices were flat in August, as our price index improved to 52.8 from 42.5 in July (a reading of 50 indicates flat pricing sequentially). 72% of agents said prices were unchanged, 17% said they were higher, and 11% said prices were lower. However, sellers offered higher incentives in August, as our incentive index measured 27.8 (from 18.4 in July) with any reading below 50 indicating higher incentives. 56% of agents said incentives were higher, 33% said they were unchanged, and 11% said they were lower. Time needed to sell a home lengthened – a negative indicator for future pricing trends. Our time to sell index fell to 13.2 in August from 19.0 in July, as 74% of agents said it took longer to sell a home over the past 30 days, and 26% said the time to sell was unchanged. We view the longer time to sell as a negative indicator for future pricing trends, and expect modest price declines in the coming months as sellers become more aggressive.
�� “It is very difficult to get deals closed – we’ve had problems recently with every transaction.”�� Hovnanian, Standard Pacific, and KB Home have the greatest exposure.
Hovnanian has the most exposure to the Raleigh market, as it represents approximately 4% of the company’s sales. Raleigh represents 3% and 2% of sales for Standard Pacific and KB Home, respectively.
No Karen, you didn't misunderstand my post. I made the post in September, which is when the general consensus around the Raleigh/ Durham messageboard was that this market was strong. Your report was made in November. It goes to show just how swift the real estate dilemma is moving. No doubt you will find many realtors in the Raleigh are disagreeing with me.
Personally, I could see the market slowing in Raleigh all year. When driving around the city there seemed to be new subdivisions springing up every month...with prices starting at the 400s, 500s, 600s etc. I just felt then, that there really aren't the jobs in this part of the country to make these houses affordable for all. Many of these houses would be sitting empty for many months. I think my feelings are coming true.
There is one obvious answer making your situation different to that in Raleigh. Raleigh didn't have the huge appreciation that Florida has had over the past 5 years. Shame you couldn't turn back time. You are in a right pickle now eh?
It's pretty amazing to me that you saw it coming. (Give you a rep click on that!) And now, here we are, builders bailing out. What do you see happening next?
I wish I could erase the last 4 years of exorbitant housing increases in Florida. From my chair today, the pickle situation is bittersweet. We know what happened to some and why it may get worse before it gets better. In the case of first time homebuyers and affordable housing (my weak spot), I am hopeful the prices will decline far enough to enable more people to afford a home to live in. When monthly housing obligations exceed income, there's a problem...and Florida has a big problem.
Last edited by TampaKaren; 12-03-2007 at 06:48 PM..
Snipped: The housing sector analyst for Banc of America Securities polls realtors nationwide each month to glean their unbiased (i.e., anonymous) assessment of their respective markets.
I'm pleased to glean a name for one of those 2400 anonymous BOA survey responders.
[Off topic, sorry]
Last edited by TampaKaren; 12-03-2007 at 06:44 PM..
[quote=TampaKaren;2158897]It's pretty amazing to me that you saw it coming. And now, here we are, builders bailing out. What do you see happening next?
I'm British, and we have booms and busts cycles more frequently than I'm aware in the US.
I'm sure several big builders in the US will go bust, hence my post. Its happened before, and the situation is bleaker now than then.
Look for those who have the majority of their market in California, Nevada etc. Standard Pacific come to mind. Plus Beazer seem to be in deep trouble too. Did you read about Lennar on the news today?
You should go to www.housepricecrash.co.uk
and look at the graph on the front page. Guess whats going to happen next over there? A crash, the like of which has never been seen before.
A house I bought for 43K in 1995 is now on the market for 169K. This is now about 7 times the average salary. This house had 1 bedroom and 1 bathroom and location is about 9 miles north of Oxford. An insane situation.
I'm British, and we have booms and busts cycles more frequently than I'm aware in the US.
I'm sure several big builders in the US will go bust, hence my post. Its happened before, and the situation is bleaker now than then.
Look for those who have the majority of their market in California, Nevada etc. Standard Pacific come to mind. Plus Beazer seem to be in deep trouble too. Did you read about Lennar on the news today?
A house I bought for 43K in 1995 is now on the market for 169K. This is now about 7 times the average salary. This house had 1 bedroom and 1 bathroom and location is about 9 miles north of Oxford. An insane situation.
For brevity's sake I didn't include it, but the purpose of the BofA survey is to assess builders, not local RE markets, and each of the monthly reports provides that assessment.
I've shorted (with leverage) several builders this year (Buffet says invest in what you know).
Personally, I think several will be bought out (which is why I took off my shorts a few weeks ago), but Beazer is one that I simply cannot see being acquired or surviving.
Your local paper has done a bang-up job covering what's been going on with them - Pulitzer-worthy reporting.
Personally, I think several will be bought out (which is why I took off my shorts a few weeks ago), but Beazer is one that I simply cannot see being acquired or surviving.
Okay, you've already got your long positions established, so I need to know something. Which ones are the takeover cadidates? Comeon, you can tell me . . . I won't tell anyone else. I promise.
BTW, you can put your shorts back on now . . . oh, you mean your shorted stocks. Sorry
To your primary point, I don't mind sharing my opinions - the odds of anyone here buying enough puts to affect my positions are pretty much nil - but if you really have an interest , send me an email and we can discuss it that way.
I'm currently struggling with figuring out the effect on stock prices as news breaks about land sales by builders (not to mention today's all-day marathon on governement's response to the foreclosure crisis).
That said, if you also do your own research, I'm always interested in sharing ideas on trading.
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Gee...Wow...Thanks!
Eric's takeover candidates
