Housing Bubble Headlines

Big news day for the Housing Bubblistas. Let's try to sort out the headlines. In the Wall Street Journal alone today we see (RR):

Housing Data Seen As Sign Market Heading For Hard Landing

Housing Slump Proves Painful For Some Owners and Builders

Housing Prices May Become More Volatile, Fed Report Says referencing this opaque report from April.

Toll Cuts Outlook as Profit Drops, Seeing No Sign of Market Bottom

Headline: Existing Homes Sales Fell again in July to their lowest level since 2004

Behind the news: This is the NAR's monthly report. The number came in below "expectations" and June was revised downward also.

Behind the news: Sales are down, prices are up fractionally. Of interesting note, condos, usually the canary-in-the-excessive-inventory-coal mine, actually rose vs. a year ago. Single homes sales fell 5%.

The real estate bubble crowd sees today's sign the bubpacalypse is upon us. David Lereah of the NAR sees the 'soft landing' he's been talking about for a year. From the NAR release

David Lereah, NAR’s chief economist, said
higher interest rates dampened sales but that price softening is good
news for the housing market because it is drawing buyers. “Many potential home buyers have been on the sidelines, some ‘kicking the tires,’ but mostly waiting for sellers to compromise on prices and terms,” he said. “Now sellers in many areas of the country are pricing to reflect current market realities. As a result, there could be some lift to home sales, but it’ll likely take some months for price appreciation to rise.”

Headline: Months of inventory hits "record"

Nationally, the months-of-inventory stands at 7.3 months. The highest level in 13 years, since emerging from the ugly recession of the early 90's.

Behind the news: The "record" mentioned is in how quickly we've hit these levels. Up from 4 months at the end of last year.

Headline: Toll Brothers cuts its earnings forecast

McMansion Builder Toll Brothers cut its full-year forecast for the third time this year.

Behind the news: In our opinion Toll missed a golden opportunity earlier in the year to get all the bad news out at once - anyone with a pulse could see this coming. We're not stock analysts but our guess is that Toll misses again in the fourth quarter. There just aren't many scenarios that imply robust new home purchases in the next few years. Toll should be forecasting as though they're facing a deep recession. (Even if no recession materializes, this market has lost its momentum for a few years.)

How to tally it all together? Well nationally, rising inventory is moving into the red zone. Our Bay Area, So Cal, and Seattle numbers point higher, but not into critical zone. Score 1 point for national bubble. The "painful slump"... is really a non-story. Some guy was moving up from the house he paid $225,000 for to one he wants to pay $900,000 for. He's having trouble selling the first one for $500,000. Toll Brothers, likewise, will face a few years of weak demand until a new economic catalyst emerges. But that's not related to home prices collapsing in a bubble burst.

Here's one silver lining that the eternal optimist in me picks out. The weak housing data may help keep a lid on Fed interest rate hikes. Already mortgage rates have unexpectedly dropped since these June and July deals happened. Mortgage applications are up this month. Low mortgage rates help avoid the perfect storm (recession + high rates) that will burst the bubble. So we got that goin' for us...