I must admit that it appears the third stage of our nation's current housing slide may linger far longer than most of us had envisioned. That conclusion seemed to be substantiated Tuesday by woeful prognostications coming from two of the nation's major homebuilders.
Early Tuesday, Fort Worth-based D.R. Horton
Tuesday afternoon, California-based Ryland
These two disclosures came one day after Stephen Kim, Citigroup's capable housing analyst, downgraded a host of builders, including Hovnanian
And so, here we are in what appears to be the third stage of the housing collapse, with no end in sight. The first stage saw orders reduced for the big builders, along with a drop in housing starts. In that stage, which basically consumed the last half of 2006, most observers believed that the softness would be fairly short-lived. But as we moved into the second stage, the enormity of the mortgage problem underlying the slump became apparent, and much of America learned that subprime did not refer to an inferior cut of beef.
The third stage, which clearly will be the most protracted, involves the cutting of prices by both builders and those wishing to dispose of their pre-owned homes by amounts that ultimately will rationalize the nation's bloated housing inventory. At the same time, there's a continued effort to deal with the economically dangerous mortgage lending contagion.
How long all this will take is anybody's guess, but that very uncertainty and the piling of bad news upon more bad news for the homebuilders indicates that, for now, Fools should give the whole group a wide berth.
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