Friday, May 16, 2008

Important Announcement: Spring Selling Season OFFICIALLY FAILED.

I was announcing that in January, but hey, why listen to me? As a matter of fact, if you are primarily single family builder with lots mostly in the suburbia (far from work center/city centers) (RYL, MDC, CTX, DHI, TOL, etc.) , life IS good, eh? heee heee heeee

Now wasn't the purpose of all the Q1 money trying to front-run "recovery" in housing activity predicated upon this moment of truth?

I did offer my head ( I will hire several people to decapitate myself in front of the camera and post it to youtube ) if the next bubble was going to be HOUSING again in January. But even such promise sealed with a bloody finger print wasn't ever gonna be enough to stop some people's EGO. Now I guess they will be sending their videos to Youtube.

UPDATE: It's Official: Spring-Sales Season A Bust For Housing Market
By John Spence

BOSTON (Dow Jones) -- The hoped-for rebound in home sales failed to blossom this spring with the housing market caught in a downward spiral, as falling prices continue to sap consumer sentiment and keep would-be buyers on the sidelines.

The all-important sales season that unofficially kicks off after the Super Bowl again failed to lift the residential market out of its doldrums. Although a surprising jump in April housing tarts was reported Friday by the Commerce Department, enthusiasm was tempered by the fact that the gain reflected a jump in multifamily units. Starts of single-family homes lost nearly 2% to the lowest rate since 1991.

There are other reasons why it's not yet time to break out the champagne to celebrate a bottom in the housing market. The sagging confidence of home builders points to more pain this summer. On Thursday, the National Association of Home Builders said that its sentiment index fell close to a historical low. " The housing market has shown no evidence of improvement thus far," said David Seiders, chief economist for the builder trade group.

The final nail in the coffin for the spring-selling period came this week after luxury-home builder Toll Brothers Inc. (TOL) reported dismal sales figures for the quarter ended in April. The company's chief executive, Robert Toll, said traffic levels at its communities were "the worst that we have ever seen."


Greenie said...

How do you think this commodity game is going to end?

If Ben hikes rates, housing is dead squared. If Ben lowers rates, people will start to grow potatoes in their yard.

MTGSPY said...


The news today about "Paying interest on reserve" may, some argue, not have anything to do with "surprise rate hike".

I argue and they agree it does separate the availability of money issue with the cost of money.

That is important, because then, will you not be able to say

"Okay, I have two tools instead of one at my disposal.

One is to deal with price stability/inflation and GENERAL economic growth. And the other is to deal with providing illiquid market with TEMPORARY MARKET OPERATION."

Don't you see that if that's the argument you could solve your dillemma, Greenie?

Otherwise why is Bernanke so ADAMANT pushing this issue up the priority list as if he had nothing to do?

Read this:

MTGSPY said...

To add another sidebar to the discussion, the role of political pressure as a monkey in Federal Reserve back:

This is from grumblings in DC receptions, what are inflation-linked population thinking about CPI at 2.2% when the 1-yr inflation EXPECTATION is shown to be 5.3% and climbing at 0.5% per month? Are they being robbed in the daylight?

The argument would just be: well AARP understands that CPI is "non-political" and when they signed the deal they KNEW what they signed, so this time they'll just throw the republican party under the bus.

Or you can take from experience with people who are into entitlements and taking debt, that signing the dotted line doesn't mean you know what you are doing, and when you feel later you are cheated you'd do what you can and apply MASSIVE political pressure to congress and ask that inflation be put under control before it is TOO LATE.

Housing is DEAD at any rate level because the cost of mortgage is at this point INVERSELY related to the change in fed funds rate. In any case it is DEAD anyway because until Asset exceeds liability there is no relevance of the cost of the liability because the homeowners will end up defaulting.

Greenie said...

I missed the issue on 'paying interest on reserve', but your argument makes complete sense. So, you really think that Bernanke is getting ready for a surprise hike? Some of the Fed noises makes sense in that backdrop. Yesterday one of the guys said that bubbles should be popped early rather than waiting till the end. Most people took it as an admission of failure by Fed. I thought it was a subtle hint that they do not like commodities bubble, and want to take preemptive action.

really said...

By paying interest on reserve they effectively lower rates.

Now the banks have the best of both worls, a place to dump off FANTASTIC ASSETTS that won't sell and low short term borrowing rates keeping the yield curve to their advantage.

Now the fed can turn around and say it's addressing inflation. They really don't give a fuck about the greater economy, just keeping the franchise, but this is just great politics.

MTGSPY said...

Forget about housing dynamics for a second and just replace it with "externalities" that affect Banks balance sheet, just so not to clutter our minds.

Then what you want to do is help banks who has a worthy asset avoiding fire sale.

But how can you do that if the only tool you have is the Fed Funds rate, when what you need to give them is a temporary shelter (for which they have to pay penalty rate) to avoid forced sales while raising equities?

They did lower what they can to the current Fed funds rate, and unlike Greenspan's time, Ben doesn't have time in his side. Look at oil / cmdty price since Sep 2007, and compare with the way they evolve prior to that. There is no chindia to dump inflation to, or much less space there.

Then you also realize, the people you serve are CONSUMERS buying from places you dump inflation to in the past!!! And that 70% of the economy is consumer DOESN'T HELP thing a bit if inflation is not immediately controlled and allowed to go the 1970s way.

You may argue about the "unlimited pool" of "talents" in Chindia, but go back one paragraph and what did we say about that?

Circular reasoning was used in support of Decoupling Theory. A combination of appreciating yuan, recession here, and precise monetary control (vs. brute force rate changes) will fix that issue for long term.

The guy is scored on his ability to balance growth and inflation. For the moment there is NOTHING left he could do on one - he's worked on it non-stop for 9 months, while the other is rearing its REALLY UGLY HEAD.

Greenie said...

Being from India, I know how the dynamics changed there. 10 years back, India had very good universities, but those who graduated from there were underemployed. So, you could pay 1/5th US salary and hire someone 5 times better. Now the same skilled person needs almost equal salary. So, the salary arbitrage is almost gone. And then you have uncertainties about currencies, distant labor, unknown political background and so on.