No Bubble Here
May 10th, 2006 at 12:13 pm by Susie
From the Wall St. Journal:
NEW YORK — There are signs a housing slowdown that has gripped certain high-growth markets during the past few quarters, is now spreading nationwide.
Preliminary reports from builders Hovnanian Enterprises Inc. and Toll Brothers Inc., whose quarters ended April 30, indicate demand is falling faster and more sharply than previously thought, and that the pullback is no longer confined to hot markets that had seen sharp home price run-ups in the past few years.
Hovnanian’s orders fell 20% in its fiscal second quarter — an about-face from the 5.5% order growth reported in its fiscal first quarter. Toll’s orders declined 32%, which is steeper than the 29% dropoff posted in its fiscal first quarter.
On top of this, some builders, such as Centex Corp. and Hovnanian, have started taking writedowns in connection with land options. In general, when builders take writedowns to walk away from land options, it is a sign that either land values are falling or demand in that market has dried up. In past cycles, declining land values often were a sign that a market was falling fast.
And in the meantime, we now have a 50-year adjustable-rate mortgage!
