Thursday, August 24, 2006

common sense and houisng

sehr treffend. gesunder menschenverstand ist in der tat angebracht. wer bitte braucht wirklich analysten und die fed usw um zu merken was im realen leben abgeht.

Common sense and housing

SAN DIEGO (MarketWatch) -- Genius that I am, I could've told you existing-home sales were down without looking at a single piece of data.

In my tract-home slice of once-blistering-hot San Diego, there has for months been a noticeable drop in weekend open houses.

Yep -- that's anecdotal, and I realize the situation might be different where you live. But sometimes the real story is right beneath your nose -- and the real reason is so obvious it's easy to miss: Even with housing prices falling, prices are still too high. Only so many people can afford $1 million-plus, especially as prices of so many other goods and services, starting with gasoline, go higher. (I don't care who you are or what you are -- $1 million or thereabouts, give or take a few hundred thousand, is still a lot of money and can require a ridiculously high mortgage. Not good when interest rates are rising.)

While you could argue fewer homes on the market should equal higher prices, there's a flipside: Speculators are gone, and maybe anybody who wanted to buy has bought. And maybe, just maybe, all but those who need to sell are holding back -- not wanting to be first on their block to set a new low selling price in this Southern California mecca that as of the second quarter remained the country's sixth-least-affordable housing market.

With that kind of on-the-ground approach, I also could argue conversely that new-home sales at some point could actually show an increase -- not because the business is back to booming, but because prices are being slashed to clear out inventory. Even Toll CEO Bob Toll is telling investors he doesn't know when his industry's bubble will finish bursting. What would appear clear, even to a mere journalist like me, is that prices and therefore margins will continue to fall - and, for some companies, quite bit.

Some analysts, meantime, are trying to spin the story to suggest these are the lows for housing stocks based on book value, a key metric -- earnings and balance sheets be damned.( denke da an den ubs analysten der auf dem call von toll nachdem der binnen des letzten quartals drei warnungen rausgehauen hat folgendes gesagt hat "congratulations on your good quarter")

If only it were that easy. A lower lot count at Toll, for example, is being offset by higher inventories as the company opens new communities. New communities while the industry is in a slump? That's what happens when a builder has already committed to build.

On one hand, housing companies are in the commodity business of construction; on the other, they're in the trickier business of land, which can be quite different, and lead to different outcomes from company to company. Do they own the land? Do they have options on the land? That's all part of the equation, but in the end the stocks are likely to continue to be influenced by psychology, which will be determined by earnings, which are not likely to be rising anytime soon
Just as they overshot on the upside, there's no law -- regardless of book value -- that says stocks can't overshoot on the downside, as well.

How low can they go? Just look at charts for most of these companies a few years ago for a clue.
Just remember: Some of these analysts are so smart they were blindsided by the swift reversal in the industry's fortunes. To be fair, many of them were probably listening to company executives, many of whom didn't appear to see the slowdown until it hit. (meiner mienungnach waren alle komplett ahnungslos. auf dem peak im letzten jahr hab es so gut wie keine kritischen stimmen sondern jedes bubbleargument wurde mit abenteuerlichen begr├╝ndungen gerechtfertigt)

Wearing blinders will do that.



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