For the first year or so of the current housing apocalypse, investors kept waiting for the market to hit bottom. But lately, there's an emerging recognition that the debacle may be here to stay for a good, long while.
That feeling was enhanced Monday by a study that emerged from the Joint Center for Housing Studies at Harvard. While it emanated from the nation's oldest -- and some would say, finest -- institution of higher learning, the study really didn't plow new ground. Indeed, it probably didn't plow all the ground it should have.
First, our friends at Harvard blamed the two-year house price drop -- which by now has worked its way into every nook and cranny of the nation -- on record foreclosures and limited access to credit. That's probably fine, as far as it goes, but another obvious impediment to a quick housing recovery was detailed on Tuesday by the Conference Board, which reported that its consumer confidence index fell to 50.4 in June, from 58.1 in May. And looking ahead, consumers' expectations fell to a record low of 41.0.
So, peering at Harvard's pair of reasons for the ongoing housing mess, Countrywide (NYSE:CFC) will fall into the arms of Bank of America (NYSE:BAC) and, following other ministrations, the credit markets will eventually recover. But foreclosures will continue to escalate, at least for a while, adding to the already bloated inventory of houses for sale.
And beyond that, it's difficult to see how consumer confidence can be righted when those same consumers are soaked every time they pull up to a gasoline pump. And they aren't inclined to tie into big purchases like new homes and their related monthly levies. That's especially the case when, as the S&P Case-Shiller home-price indexes also told us on Tuesday, the decline in house prices continues to get steeper across the land.
So from my perspective, homebuilders stocks shouldn't be touched with a 100-foot pole. Indeed, the only remaining question concerning the sector involves the extent to which the builders still feel compelled to chop the value of the land assets on their books. That will be answered in a few weeks, when the likes of Pulte (NYSE:PHM), Ryland (NYSE:RYL), and Lennar (NYSE:LEN) tell us about their quarters. At this point, my expectations are not at all high.
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