We may not be in the midst of another housing bubble but it’s not for lack of effort on the part of the homebuilders. In the attached clip EuroPacific Capital head Peter Schiff says the inducements being thrown in for potential buyers are evidence of desperation, at best, and excess that could endanger the economy at worst.
“If you remember, during the housing bubble instead of dropping prices, which would have been a sign of trouble, the builders started throwing in freebies,” Schiff explains. “Some of the developers were even throwing in brand new cars so they didn’t have to acknowledge prices were falling. Now they’re doing it all over again. Builders are loading up on incentives because they’re having a hard time selling their homes. This is really a precursor to falling prices.”
We may not be back to the bad old days of house flipping but there are no shortage of offers out there. In New Jersey you can get table tops, built out living rooms and all manner of customer-friendly perks to encourage buyers to close the deal.
Still, if the attempt is to divert investors’ attention from the falling levels of demand it’s not working very well. The SPDR S&P Homebuilders ETF (XLB) has been worse than dead money all year. In part that’s because the banks find themselves in the awkward position of being asked to make affordable loans even as the government raises lending standards.
Regardless of why demand is flagging Schiff says the Fed is out of suckers to “lure” into getting involved in real estate with relatively cheap money. Among the big funds that were pushing demand there seems to be a limited appetite as well. After spending more than $8 billion buying up housing in 2012 and 2013 Blackstone (BX) stopped purchases in March of this year.
Retail sales, which account for about one-third of consumer spending, dropped 0.3 percent last month after a 0.6 percent gain in August, the Commerce Department said. It was the first decrease since January.
Economists had expected a decline given a slower pace of sales reported by automakers and a drop in gasoline prices that would have cut into receipts at service stations.
But what came as a surprise was that the weakness was so broad-based. A gauge of so-called core sales, which strips out automobiles, gasoline, building materials and food services, and corresponds most closely with the consumer spending component of gross domestic product, fell 0.2 percent. Economists polled by Reuters had expected it to rise.
Sticker shock already affecting housing and soon a slowdown in the auto industry to take place. Middle class continues to struggle making ends meet with Obama part time jobs.
Looks like testing of $16.75 underway as PHM hits $16.73 this morning.............
I guess somebody forgot about a market correction besides this stock was over priced.
Looks like PHM selling pressure increasing....... PHM opened today at $16.95 down 5%.
Blackoutbuzz and Grasshopper heading for the bunkers.
While the number of new-home communities in Phoenix grew by a third in the past year to 457, sales per community plunged 45 percent last month from a year earlier, said Jim Belfiore, president of Belfiore Real Estate Consulting in Phoenix. Prices, including incentives, fell 0.2 percent in September from a year earlier, following a 7.5 percent jump last year, he said.
"Phoenix is a cautionary tale about raising prices too aggressively and opening up communities too aggressively," said Alex Barron, senior research analyst at Housing Research Center LLC in El Paso, Texas. "It's a bad combination where affordability got out of control and the FHA limit went down. Homes are unaffordable now, and all of a sudden there's a ton of supply."
The Bridges at Gilbert and the 5-square-mile (13-square-kilometer) Eastmark master-planned community nearby each have more than 65 finished homes yet to be sold, said Rachel Cantor, Arizona director for homebuilding-research company Metrostudy.
"There are few subdivisions in Phoenix right now where a builder is not offering some kind of incentive," she said. "Builders aren't usually this close together. If you go into The Bridges and Eastmark, they're right across the street from each other. It's cutthroat."
PulteGroup Inc. (PHM), Lennar Corp. (LEN), Meritage Homes Corp. (MTH), Taylor Morrison Home Corp. (TMHC) and Woodside Homes are among the builders at The Bridges, while Ryland Group Inc. (RYL), Standard Pacific Corp. (SPF), Maracay Homes, Meritage and Taylor Morrison are selling properties in Eastmark.
"The issue in Phoenix is the market got away from itself, so everybody is offering some level of concession," said Joel Shine, chief executive officer of Salt Lake City-based Woodside Homes. "Frankly, in a master plan with 10 other builders, and all offering concessions and you choose not to, then you need to make sure you buy your salesperson a high-quality TV set so they have something to do.
Next up........ next phase of Obamacare sticker price shock to place another burden on the economy.
WASHINGTON (AP) -- U.S. home prices in July increased at the slowest pace in 20 months, reflecting sluggish sales and a greater supply of houses for sale.
The Standard & Poor's/Case-Shiller 20-city home price index rose 6.7 percent in July from 12 months earlier. That's down from an 8.1 percent gain in June and the smallest increase since November 2012.
Nineteen of the 20 cities in the index reported lower annual gains than in June. And a new national index of home prices compiled by S&P rose just 5.6 percent.
Lower price gains should make homes more affordable for would-be buyers. Sales of existing homes picked up over the summer but then dipped in August. Sales have fallen 5.3 percent in the past year.
Looks like until July---2015.
Under applicable NYSE procedures, Standard Register was required to submit a business plan to demonstrate its ability to achieve compliance. Standard Register submitted its confidential plan, which provided a forward looking view into performance expectations, including the final phase of the integration of the WorkflowOne acquisition, improving revenue performance for legacy and growth solutions, and proactive management of its pension liability and funding requirements. Standard Register will be required to achieve the minimum continued listing standards of either average market capitalization over a consecutive 30 trading-day period of $50 million or total shareholders ’ equity of $50 million at the completion of the prescribed plan period that terminates on July 9, 2015, unless the listing is reassessed prior to that date.
Welcome back....... glad to hear you were finally released from your PHM bunker. I think housing will remain a very slow growth industry for the next 5-yrs. In the meantime take your own advice and buy more shares of BX after selling PHM and enjoy the current 6.7% dividend while you wait for BX to climb to the next level.
As you well know, BX is under valued and PHM is over valued.
Stock is over valued compared to previous history and analysts have lowered 2014 earnings downward the last 60-days. Stock will retest $16.75.......... PHM is not in favor right now as witnessed today when it failed to rally during the market recovery.
See article in Barron's ..........
Put Aside PulteGroup
Shares of the home builder lack upside at current levels.
September 2, 2014
PulteGroup (PHM: NYSE) By FBR Capital Markets ($19.22, Sept. 2, 2014)
We are downgrading PulteGroup to Market Perform from Outperform given relative valuation and performance over the last 12 months versus our home-building coverage universe.
Over the past 12 months, PulteGroup (ticker: PHM) has been one of the strongest performers in our home-building coverage universe, and we believe its diverse geographic mix and product...
I think it will retest $16.75.
Two months in a row they have failed to average the required $50 million average market cap. I wonder if the pension smoothing will allow them to hang around awhile longer??
No follow up by the trust to sell since......must be wait for the stock to reach $6 again. Which means SR will not meet the $50M market cap for the second month in a row.
Here we go again over building in Obama's part time economy.
Grasshopper what's going on since you are so close to the real estate business.