Housing Market: Desperation Is Setting In

A colleague of mine who has a second residence in Arizona told me today that he received a card in the mail from Toll Brothers.  TOL was offering to reimburse up to $2,000 in travel expenses if the person receiving the card bought a new home in Arizona.   Toll must be getting desperate because the only way to get the information needed to mail my colleague was to physically go make copies of the property tax rolls at the County admin offices.   He said he had not seen something like this in the 15 years he’s owned a home in AZ.

This is in addition to the massive amount of incentives that these new homebuilders are already offering:  free pools in warm States, price discounts and other “value-added” incentives that these companies are throwing in to try and move homes.  This is in addition to the fact that they underwrite most of their own mortgages, which enables them to build in subsidized financing.

The housing market is deteriorating quickly, along with the rest of the economy.  I wrote an article for Seeking Alpha which documents several confidence/outlook indicators which reflect the rapid deterioration in the underlying fundamentals.  You can access that article here:   Housing Market Update:  It’s Getting Worse.

The homebuilders have staged a bounce along with the rest of the stock market, although this bounce has been primarily driven by declining volume.  The S&P 500 and Dow continue hit new all-time highs but the homebuilders can not even bounce back to recent highs.  This tells us that the market is starting to understand just how quickly the fundamentals for housing are fading.

Every single one of my new homebuilder short reports are still valid.  You can access those reports here:   Homebuilder Stocks:  Why They Are Great Shorts.

The stock market is bounding higher on Fed hot air and unbridled investor optimism.  The hot air will eventually get cold and the optimism, in my opinion will soon fade.  The risk in this market is to the downside.  In case no one noticed, Ukraine is heating up again and the Middle East gets more violent by the day.  The recent economic reports, rigged and manipulated as they may be, show a U.S. economy that weakens by the day.

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10 thoughts on “Housing Market: Desperation Is Setting In

  1. Y not ask Fabulous Flavio?

    i see he’s making the rounds again–he supposedly manages some kinda ream estate fund, yet is spouting off like he’s one of the connected upstairs types like rickards.
    going on & on about a new reserve currency.
    maybe he’s moonlighting, apprenticing & prepping for another job after RE implodes? LOL.

    it’s on u tube interview nov 4 greg hunter.

  2. What direction do you seeing mortgage rates going? If you were of a mind to refinance would you do it now or wait until next year? Love your website and insight therein.

    1. Thanks. No clue on mortgage rates. Probably lower. With refi volume dropping quickly, if you wait 3 months you might find unbelievable deals being offered.

      1. Thanks. I will wait. You confirm what I have thought. The only bump would be the GOP riding herd on the FED causing them to truly pause or stop QE.

  3. You really are a gloomy sort, Dave, and you’re not very PC either. Thank God for that, because the sugar coated crap the MSM continually rams down our throats is beyond nauseating. In other words, keep up the excellent work, sir.

  4. Lennar Extends
    By GARY MORROW | NOV 10, 2014 | 11:46 AM EST
    Lennar is moving further into new high ground this morning. Strong sales gains for Toll Brothers and upgrades from B of A are sparking a powerful rally for the sector. LEN is up over 2.75% as it extends Friday’s breakout move. The stock is now trading at its best level since the summer of 2007 putting major pressure on the bears. Other big movers include HOV(+6.5%), PHM(+3.25%) and BZH(+3%). Toll Brothers is up just shy of 4% after breaking out of a three week bull flag. The stock is set up well for more upside and will likely challenge very heavy supply near its downward sloping 200 day MAV($35.00)soon. LEN likely has more upside as well in the near term. It may move past $47.00 before it returns to overbought territory. I expect the $44.50 to $43.00 area to provide solid support in the coming months.

    1. TOL’s report was unaudited hogwash. I’ll have more to say on that later this week. Notice they only talked about revenue and orders. We don’t have the rest of their income statement. I’m sure they pumped up sales with very heavy promotions per my colleagues email he received from TOL offering to reimburse up to $2k in travel expenses to go to AZ and buy a TOL home (he already has on in AZ).

      Also their UNIT backlog was flat from Q3 year over year.

  5. One strong clue I had on the post card received from Toll was it was in the name of my wifes Trust which is how we own real estate.

    What is selling out there is the good stuff, nice homes with extremely good locations and views. Much of that is well heeled seniors who trade up who then sell the existing place and if they have to compromise a bit on the price its not a big deal.

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