Housing Slowdown Appears to be Spreading Nationwide

[maxrandb]

http://online.wsj.com/article/SB114710606645746734.html?mod=yahoo_hs

Since the housing market appears to be the only thing that has propped up this economy, this could be devastating. Reverse mortgages, home equity loans, interest only loans, adjustable rate mortgages, etc... If the housing market takes a hit, it could get ugly. No wonder gold was at an all-time high the other day.

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.

[redqueen]

1. It was only a matter of time.

Stupid developers... stupid property flippers.

A parent of a kid in my daughters' class told me it was easier to get into a new home than a used one... he got into a brand new home for no money down.

WHY do lenders think this is a good idea?

[maxrandb]

3. It could get ugly

Lenders think it's a good idea because they make a ton of money, unless average Americans default on their mortgage, and the new bankruptcy laws just made that next to impossible.

Adjustable rate mortgages are also a killer. In some projections, Americans could see their mortgage payments increase substantially once the ARM's kick in.

They've also just debuted a 50 year mortgage.

I'm not being melodramatic when I say that all Bush and the Pubbies are leaving our children is DEBT!!

[redqueen]

4. Oh, I know...

And I know that's not melodrama... that's a fact.

So what do you expect? A quarter point today? Or will it go to 5.05?

[maxrandb]

12. Just heard on the news it was a quarter point

Isn't that what Nixon called "creeping inflation"?

Everyday, * and Nixon have more and more in common

[redqueen]

14. I think so...

I thought they were announcing at 1:30... ?

I heard the term 'stagflation' used to describe our current situation around here... that fits, too.

[frankenforpres]

18. stagflation normally means

high inflation high unemployment, i dont see that yet. one could argue that it is increasing inflation with increasing unemployment, but the data isnt too strong on that either.

i hope prices dont crash, a lot of people will be hurt.

[redqueen]

19. Housing prices?

I hope so too... a nice, slow correction would be better for all involved. Well, not all. There are speculators, I'm sure, who would make a killing. But other than those predators...

[Demeter]

20. The Only Reason You Don't See High Unemployment Is

Lies, Damn Lies, and Statistics! They cooked all the numbers to mush.

[frankenforpres]

23. maybe, maybe not

i do think wage numbers are pretty damned bad, but as for unemployment i dont think it is that bad. i remember in the Bush 1 recession that i knew loads of people who just could not find a job at all, and that matched up with the data. i now know way more people since i live in Fla but still have close ties to MA, and people are all working. i think it is pretty hard to cook the books a lot on unemployment. other stats can be cheated much more easily

[mike923]

26. You could make millions, have Bush thrown in jail, and virtually

guarantee a Democratic landslind in future elections if you prove what you wrote.

[TexasLawyer]

2. as interest rates rise and as

more and more speculators realize they are on the downhill side of the sellers' market, the downward pressure on housing prices is just going to intensify.

Get ready for negative equity and for people walking away from their bad housing "investments".

[orwell]

5. Will the last one out...

...please turn out the lights...

[callous taoboy]

6. Yep, my hippy brother-turned-MEpublican Bushbot realtor

had a very disappointing start of the 2nd quater. 1st quarter was so good he went out and bought himself a barely used Lexus SUV with all the trimmings. But they own stock in Haliburton so they aren't going to go hungry.

[catmandu57]

7. It hasn't turned here yet

Here being NWMO, They're still building Mcmansions on the outskirts of town. I have noticed that existing homes with for sale signs are staying on the market longer, and the people who are building the mcmansions don't work here that's for sure.
We are just a small farming community, they probably have to drive to kansas City an hour away to work, with the cost of gasoline I don't know how much longer that can be sustained.
I imagine that their choice will be biting them in the ass sometime soon.

[cantstandbush]

8. Household spending is the only thing that really drives our economy

NOT TAX CUTS TO THE WEALTHY! When households are buying things for homes and families that is when our economy soars. People are starting to STOP buying because of high gasoline prices and low wages. When they can no longer borrow because of high interest rates, the entire economy will take a dive. The smartest thing that could be done now for the economy is to lower interest rates on borrowing (not raise them as banks have done). There is absolutely nothing wrong with carrying debt AS LONG AS THE NO ONE CALLS FOR THE ENTIRE DEBT TO BE PAID AT ONCE. Borrowing and debt (which allows for household spending) is what has kept this economy afloat. Wealthy people only deal with exchanging money, they do not contribute significantly to the economy because they only amass wealth, they do not spend it.

[cliss]

16. You're right.

In a recent article, a researcher tried to figure out how much of the economy was sustained by the housing market. She discovered that fully 35% of the economy is driven by housing. Now, this includes real estate agents, remodeling companies, house painters, even stores like Home Depot, anything that had to do with housing.

She concluded that our economy is truly a "House" of Cards, ready to fall at any moment. Because it's so heavily focused on this one segment, it's vulnerable.

[mahatmakanejeeves]

25. Wealthy people ... do not contribute significantly to the economy

"Wealthy people only deal with exchanging money, they do not contribute significantly to the economy because they only amass wealth, they do not spend it."

What absolute nonsense. This is easily the stupidest thing I've ever read at DU. You should win a medal for foolishness.

[TexasLawyer]

9. The housing bubble fact sheet

Important to read and understand:

http://www.cepr.net/publications/housing_fact_2005_07.pdf

[ozone_man]

24. Excellent summary.

The real estate bubble will burst at some point soon. But this one is going to be much larger than anything in recent history. A huge bubble of debt to fuel the downward spiral. Unfortunately, those living on the edge will get caught in the implosion.

[sleipnir]

10. Meanwhile, occupancy in Manhattan is at an all time high.

Funny, whatever happens to the US, never seems to matter to Manhattan. Right now there is .75 percent vacancy on apartments. Values just keep going through the roof.

Manhattan really is "an island of the coast of America."

[HockeyMom]

27. My Mom's Manhattan 2 Bedroom Apartment

Chelsea. When Mom passed away in 1993, she was renting it for $450 a month (Rent Stabilization). The building was built in 1899. No, not a typo. I saw an ad in the paper the other day for an apartment in the same building. It was $4,250 a month. That's not a typo either.

Many people at the time told me I should have kept the apartment. Who knew back then?

Insane, absoultely insane.

[michaelwb]

11. "slowdown?"

So if I had a wage drop of 25-33% would that been a wage growth slowdown...

[AngryAmish]

13. I'm going to be buying in the fall

I hope prices go down - but I can see that lots of folks will be screwed.

[Jamison]

15. I would wait a while

Wait till after the shitstorm passes just to be safe. You might even end up getting a "deal."

[AngryAmish]

17. I gotta live somewhere

Plus the market isn't really crazy around here. I'm gonna stick to my schedule.

[Jamison]

22. Well ya gotta do what ya gotta do.

I just hope the market doesn't take a really nasty downturn after you buy & hurt you financially...best of luck to you.

[patcox2]

21. Does the Fed think they are controlling this?

Is the fed deliberately trying to deflate the bubble before it pops? Or is it the usual fed overdoing a correction (every time they decide to slow down the economy they seem to overdo it just a bit and slow it too much before its over)?