Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Housing Slumps. Who's Surprised?

With apologies to Homer Simpson's Jack Nicholson impression, "No free money and no quick flip makes homeowners ... something, something ..."

"Drop prices?" Don't mind if they do.

Data released today by the National Association of Realtors (NAR) shows that home prices are plummeting just as sales are flagging. In other words, it's exactly as some of us bubble-bursters have been predicting for a while. Too much supply and not enough demand moves the needle firmly in the opposite direction of what the majority of (delusional) Americans seem to think. Houses are worth less now than they were. Fewer are selling. This goes hand in hand, and I don't think we've seen anything yet.

But back to this month's bad news. The chuckleheads in the mainstream media will probably report the numbers sequentially, following the lead that's taken by the NAR, hoping to put lipstick on the pig. Don't be fooled by the likes of the AP, which reports the sales volume comparison from month to month. The real story is in the annual comparisons, and things there are ugly.

Let's compare. Home sales "essentially unchanged" is what the six-percenters at the NAR would like to see reported, but from May 2006 to May 2007, sales dropped an impressive 10.3%.

The median price of a home dropped yet again, down 2.1% from last year at this time. As always, keep in mind that these prices are, quite likely, already unreasonably inflated by desperate givebacks that sellers have been using to move homes, givebacks that are not netted out of reported sales prices. In other words, the truth is probably worse. (Alas, no one really knows how much worse.)

That didn't stop the folks at the NAR from the usual spin, with President Pat Combs giving the Bizarro-world soundbite, "...higher inventories are helping to offset an affordability impact from higher mortgage interest rates."

With longtime bubble-apologist David Lereah gone, the new Chief Economist at the NAR, Lawrence Yun, blamed "psychological factors," for the drop in prices and sales, not the 5% increase in home inventory, which puts a nearly nine-month inventory of homes on the market. And this as interest rates keep rising and another few huge slugs of sub-prime and Alt-A, "liars" loans begin to reset higher through the end of this year.

In other words, there's a very good reason that the confidence of homebuilders like Pulte Homes (NYSE: PHM  ) , Toll Brothers (NYSE: TOL  ) , Ryland (NYSE: RYL  ) , Hovnanian Enterprises (NYSE: HOV  ) , and others is at a 16-year low. America's easy-credit, quick-flipping, borrow-now-and-forget-the-consequences lifestyle is coming to an increasingly painful, grinding halt. We have already seen the butterfly effect as dozens of mortgage brokers have been hammered out of business, and kings of mortgage-backed securities like Bear Stearns (NYSE: BSC  ) , Lehman Brothers (NYSE: LEH  ) , and Goldman Sachs have seen profits from all that mortgage trading go poof.

What's next? Something. Something.

Comments? Bring them here.

At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.

Read/Post Comments (0) | Recommend This Article (42)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 530197, ~/Articles/ArticleHandler.aspx, 10/22/2016 2:33:28 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 17 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
BSC.DL $0.00 Down +0.00 +0.00%
ELEMENTS Benjamin… CAPS Rating: No stars
HOV $1.62 Up +0.01 +0.62%
Hovnanian Enterpri… CAPS Rating: **
LEH $0.13 Down +0.00 +0.00%
Lehman Brothers Ho… CAPS Rating: *
PHM $19.06 Down -0.14 -0.73%
PulteGroup CAPS Rating: ***
RYL.DL $0.00 Down +0.00 +0.00%
The Ryland Group CAPS Rating: **
TOL $28.53 Down -0.18 -0.63%
Toll Brothers CAPS Rating: ***