New home market stalling?

posted at 6:30 pm on March 25, 2012 by Jazz Shaw

After showing some fresh signs of life in recent months, new home construction took a bit of a tumble this past week. As Joe Weisenthal reports, construction starts had been climbing for some time, but at least one major builder – KB Homes – suddenly turned in a worse than expected earnings report.

homebuilder-sentiment

So what explains the stumble?

On Friday, shares of one major homebuilder, KB Homes, fell 8.5% after disappointing earnings.

Why the huge whiff?

We read the earnings conference call transcript at SeekingAlpha, and it makes for some interest reading for anyone interested in thes tate of the housing market.

The story spelled out by CEO Jeffrey T. Mezger is not a bad one. The company is seeing more traffic and a change in buyer confidence. In some zip codes, Metzger is confident that the market has turned around.

But there’s one thing that really slaughtered KBH this quarter: A surge in cancellations of previously placed orders, almost all due to denials by mortgage companies.

As Joe goes on to explain, KB had a sizable number of orders for new home construction on the books, but an unexpectedly large number of the prospective buyers failed to qualify for their loans from lenders other than KB’s preferred lender, MetLife. Further, in January, MetLife “suddenly” announced that they were immediately shutting down their retail mortgage lending business which further complicated the positions of buyers.

The conclusion to the article indicates what appears to be something of a dichotomy in the housing market. Consumer confidence is improving in terms of belief that home prices have finally begun to stabilize and will not plummet further. But at the same time, lender confidence appears to remain shaky at best, with mortgage brokers keeping a tighter hold on investments. I asked one of our contacts in the banking industry (who wished to comment anonymously for professional reasons) what could explain this apparent disparity.

Obviously every case is unique and we can’t speak to the specifics of what’s going on with KB’s individual customers. But in general terms, lenders have specific criteria they examine when deciding to approve a mortgage. Two of the big ones you need to consider are employment and the debt load being carried by the applicant. We’re coming out of a period of high unemployment, so many of these people applying for a mortgage may have a job now, but not a long history on that particular job. Also, people sustaining long periods out of work can run up a lot of empty debt, and until that gets paid down, it could be seen as a negative by a lender.

Add those factors together and you could have a surge in confident buyers who are looking to build new homes, but on paper they may not be passing muster. In this way, recovery in the new housing market can easily be seen as lagging behind consumer confidence, so it will take a while before the market evens out to earlier loan approval rates and new housing starts.

So what does this mean for the coming year? (I’m honestly asking here because I’m obviously no economist.) Is housing in a sustainable period of recovery and this month’s plunge is just a glitch? Or is the market going back into retreat?


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Debt load?

How many college and professional school graduates will be able to buy a new home in the next decade?

Wethal on March 25, 2012 at 6:35 PM

It’s a slow process. Unfortunately it will take sometime before the economy fully recovers although the general consensus among leading economics and politicians like Romney believe it is getting better.

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

leading economists**

liberal4life on March 25, 2012 at 6:36 PM

I don’t know why anyone would build a new home right now when there are so many great deals on existing homes.

steel guy on March 25, 2012 at 6:36 PM

Considering that there are empty houses all over the US, some being used by squatters, why would anyone be building more capacity?

keep the change on March 25, 2012 at 6:36 PM

We need better economic schools. It’s always something other than “expected” for these geniuses.

msupertas on March 25, 2012 at 6:37 PM

It’s a slow process. Unfortunately it will take sometime before the economy fully recovers although the general consensus among leading economics and politicians like Romney believe it is getting better.

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

What flavor today? Cherry, limeade? Grape is good.

msupertas on March 25, 2012 at 6:39 PM

It’s a slow process. Unfortunately it will take sometime before the economy fully recovers although the general consensus among leading economics and politicians like Romney believe it is getting better.

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

Judging by your handle, you must believe that. The economy will never be as good as it was before Bush and Obama, not that it was great then. It has been permanently diminished by dramatic increases in government. Only when a new revolution in freedom takes hold, that leads to a proper downsizing of government, will the economy begin to be truly strong again.

rickv404 on March 25, 2012 at 6:40 PM

The expectations are years ahead of the reality, and home sales are likely to bump along at this level for years to come. Of course the housing market will recover eventually, but if you have to put a date on it, 2020 is going to be a lot closer to that recovery than 2013 will.

Tom Servo on March 25, 2012 at 6:41 PM

House prices still too high.

albill on March 25, 2012 at 6:41 PM

So what does this mean for the coming year? (I’m honestly asking here because I’m obviously no economist.)

Well, as (I think) Milton Friedman once said, “If all economists were laid end to end, they wouldn’t reach a conclusion”.

i.e., for every economist, there is an equal, but opposite economist.

i.e., Jazz, your guess, after evaluating the available facts, is as good as anybody else’s.

AZfederalist on March 25, 2012 at 6:41 PM

Considering that there are empty houses all over the US, some being used by squatters obama voters, why would anyone be building more capacity?

keep the change on March 25, 2012 at 6:36 PM

I’m sure you just hit the wrong keys

msupertas on March 25, 2012 at 6:42 PM

I have read that building permits are up in many places, but starts the slowest since the depression. Banks won’t lend on new construction, on raw land, or for that manner, anything. I think they are very comfortable borrowing from the Feds at zero interest and lending it back to the Treasury for 3.5%.

pat on March 25, 2012 at 6:42 PM

I’ve always wondered why the “leading economists” are not multi-millionaires. They claim to know how the economy works, the effect of particular policies, and the prospects for certain sectors.

You’d think they’d do some shrewd investing. They’re full of predictions, but rarely act on them. One might almost conclude they don’t believe their own predictions….

Wethal on March 25, 2012 at 6:43 PM

Libtard
It wasn’t such a ssllooww process when Mr Reagan took over, you are so brainwashed its pathetic!

angrymike on March 25, 2012 at 6:43 PM

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

Just in the wrong direction…
Of course….we will eventually get there…
Time….
And a new administration wouldn’t hurt either.

Electrongod on March 25, 2012 at 6:44 PM

an unexpectedly large number of the prospective buyers failed to qualify for their loans from lenders other than KB’s preferred lender, MetLife. Further, in January, MetLife “suddenly” announced that they were immediately shutting down their retail mortgage lending business which further complicated the positions of buyers.

This would indicate that KB was relying on MetLife as sort of an “in-house lender”. In over 30 years in the mortgage sector I’ve seen this countless times with new construction, especially in regards to new condo projects and new residential subdivisions.

But MetLife was different because they didn’t even get into the mortgage business until 4 years ago. I’m guessing that they didn’t fully appreciate what they were getting into, and they were getting into that business just as the bottom was falling out of the market.

My guess is that it is entirely possible that MetLife’s mortgage underwriting standards were not as strict as those of the outside lenders. Which would explain so many of the applications to “outside lenders” being rejected.

Del Dolemonte on March 25, 2012 at 6:45 PM

High gas prices are stifling the economy…

If we get another 30 to 40 cents in the gas price Q2 GDP might go negative…

We won’t see that number until the summer…

Gap up in risk on assets tonight and oil is going up with it…

RBOB gasoline futures hit another new high Friday…

MGardner on March 25, 2012 at 6:45 PM

leading economists**

liberal4life on March 25, 2012 at 6:36 PM

Name some of them.

Del Dolemonte on March 25, 2012 at 6:46 PM

I’ve always wondered why the “leading economists” are not multi-millionaires. They claim to know how the economy works, the effect of particular policies, and the prospects for certain sectors.

You’d think they’d do some shrewd investing. They’re full of predictions, but rarely act on them. One might almost conclude they don’t believe their own predictions….

Wethal on March 25, 2012 at 6:43 PM

“Leading economist” Paul Krugman earned his fortune the exact same way the “senior Senator” from MA earned his-he married it.

Del Dolemonte on March 25, 2012 at 6:47 PM

There was a huge miss on new home sales figures last week. Estimates called for a gain of +1.3% but were actually down -1.6%. But what was worse was the revision to January’s new home sales data:

From a -0.9% ‘modest’ fall, January’s data was revised to a massive 5.4% drop MoM – the largest drop in 13 months! This is the largest downward revision since March 2009. Perhaps KB Home is not the outlier and the 80% rally in the Homebuilder ETF was a little overdone, eh Bob?

As Zero Hedge points out, the horrible new home sales figures make 12 out of 14 macroeconomic indicators that have fallen short of expectations. So far 2012 is tracking closely to 2011, so I would expect some more volatility in the market as those who are saying “all’s good” are shown to be over optimistic. Really, this administration (as well as part of the previous administration) has done more damage to this economy than good.

Finally, here’s a chart on the housing “recovery”. Yeah.

Weight of Glory on March 25, 2012 at 6:50 PM

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

Well, we’re going to be walking on a path, because we can’t afford the gas to drive there. What was gas per gallon in 2008?

What did Obama say the price of a barrel of oil was nowadays? $1.20? Gas should be so cheap at that rate….

Wethal on March 25, 2012 at 6:50 PM

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

Heh. Down?

Weight of Glory on March 25, 2012 at 6:51 PM

KB had a sizable number of orders for new home construction on the books, but an unexpectedly large number of the prospective buyers failed to qualify for their loans from lenders other than KB’s preferred lender, MetLife. Further, in January, MetLife “suddenly” announced that they were immediately shutting down their retail mortgage lending business which further complicated the positions of buyers.

Is housing in a sustainable period of recovery and this month’s plunge is just a glitch? Or is the market going back into retreat?

The answer to both quandaries is obvious: the flaring-up — as so often occurs — of America’s inherent racism (h/t Derrick Bell, Baraka Obama, and “Critical Race Theory”) … /

ShainS on March 25, 2012 at 6:52 PM

There is a “natural” top in this market due to the correlation of oil and stock prices over the past few years and until we break this correlation there will be no massive bull run that takes us out of this 12 year range…

In addition, the debt is a natural drag on the economy because it creates uncertainity about the future, the $16T in the red makes employers and consumers uneasy and eventually will become a cancer as our interest payments chew up more and more of the budget…

IMHO, until these issues are addressed we will be stuck in this long term range…

MGardner on March 25, 2012 at 6:53 PM

“Leading economist” Paul Krugman earned his fortune the exact same way the “senior Senator” from MA earned his-he married it.

Del Dolemonte on March 25, 2012 at 6:47 PM

The same way NYTimes reporter Tom Friedman did. And Supreme Court Justice Stephen Breyer. I detect a trend here….

Wethal on March 25, 2012 at 6:55 PM

By the way, I think another home builder is supposed to report Q1 earnings and guidance on Monday. That should give investors a better guide to the new home market. Should be able to tell if KB is an outlier.

Weight of Glory on March 25, 2012 at 6:55 PM

From December 2011, Voice of America quotes some “leading economists” on what they foresee for 2012:

Economist Mark Vitner at Wells Fargo Bank said that in many ways, 2012 will probably look a lot like 2011.

“The first half of the year, growth is likely to come in below expectations. We’re likely to see fears of recession crop up, particularly if things in Europe get a little dicey [troubled], but by mid-year or certainly by late summer, the data should turn a little bit more positive,” said Vitner.

And with an economy projected to grow too slowly to reduce the unemployment rate of 8.6 percent, economist Beth Ann Bovino at Standard and Poor’s said jobs are likely to remain scarce.

“I’m expecting the unemployment rate to go up a little bit more, stay at 9 percent through the year, and then start to come down as the recovery gets a little bit more momentum,” said Bovino.

Economist George Perry at the Brookings Institution takes a more optimistic view.

“Unless the Europe situation blows up, or if I’m wrong on the China situation and China doesn’t speed up, I think the U.S. unemployment rate will be lower at the end of the year than it is now,” Perry.

(Of course it will, because O’bama will have his own “leading economists” manipulate the Data)

And MSNBC also asked “leading economists” their ideas:

Dean Maki, chief U.S. economist at Barclays Capital, says the U.S. economy remains vulnerable to an outside shock. A big threat is the risk that Europe’s debt crisis will trigger a worldwide credit freeze like the one that hit Wall Street in late 2008.

A shock to the U.S. economy, he says, might not be as dangerous if it were growing at a healthier 4 percent to 5 percent annual pace. But when growth is stuck at 2 percent or 3 percent, a major global crisis could stall job creation and raise unemployment.

Even without an outside jolt, the economists expect barely enough job creation in 2012 to stay ahead of population growth and the return of discouraged workers into the labor force.

“I just don’t know if it’s going to be enough to bring the unemployment rate down,” says Chad Moutray, chief economist for the National Association of Manufacturers.

The AP economists expect the unemployment rate to be stuck at a recession-level 8.4 percent when voters go to the polls in November. Unemployment was 8.6 percent in November.

Del Dolemonte on March 25, 2012 at 6:56 PM

Hmmm…Florida is #2 in the housing crisis. Only thing going on here is short sales. Homes 60% underwater. After the building boom, we have entire neighborhoods here new and empty. Also, apt complexes bought and converted to condo’s. Empty. A friend of mine just went to buy a condo..lenders here don’t want to touch them..hard to even get a company to finance one.

We won’t be building here..doubt NV will either.

Lib4life, the soup kitchens are calling you.

bazil9 on March 25, 2012 at 6:56 PM

No jobs, no equity means no credit, no buying. It’s an Obama world.

ray on March 25, 2012 at 6:56 PM

“Leading economist” Paul Krugman earned his fortune the exact same way the “senior Senator” from MA earned his-he married it.

Del Dolemonte on March 25, 2012 at 6:47 PM

And that “senior senator” from MA married into it from someone else who married into it from a capitalist named Heinz. Libtards, they’ll twist into pretzels to get their hands on someone else’s money.

msupertas on March 25, 2012 at 6:57 PM

I think, under the Obama regime, they want to own the housing market and make people rent from the government. They are not interested in home ownership.

Kini on March 25, 2012 at 6:58 PM

By the way, I think another home builder is supposed to report Q1 earnings and guidance on Monday. That should give investors a better guide to the new home market. Should be able to tell if KB is an outlier.

Lennar(LEN) reports on Tuesday which is about 5x the size of KBH…

MGardner on March 25, 2012 at 6:59 PM

As long as we have a suffocating blanket of government, the economy will grow slowly, if at all in real terms. As the full awfulness of Obamacare becomes plain, businesses will not be able to hire, or possibly even afford to maintain employment at current levels.

The money supply has expanded greatly, portending even more rapid price inflation than we’ve seen. Interest rates are unlikely to rise much, but as real-dollar corporate earnings are eroded by inflation, unemployment will stay high or even rise — there is no free lunch with “quantitative easing”.

There is a large stock of empty housing in many areas, and, while the worst of the foreclosures are over, builders will be under intense margin pressure as they compete with the banks who are selling foreclosed homes. Next come the homes that aren’t in default, but are squeezing the owners on cash flow; they will be looking to dump them for whatever they can get that leaves them still able to get out if it without default — there are still people who can’t bring themselves to walk away from their obligations.

It’s a grim picture, and any “improvement” in the housing sector is likely to be noise, soon offset by a drop as the trend seeks the mean.

mr.blacksheep on March 25, 2012 at 7:02 PM

No jobs, no equity means no credit, no buying. It’s an Obama world.

ray on March 25, 2012 at 6:56 PM

+10

bazil9 on March 25, 2012 at 7:04 PM

Is housing in a sustainable period of recovery and this month’s plunge is just a glitch? Or is the market going back into retreat?

Come on, you already know the answer to this.

Let me quote from memory the real estate agent on the first episode of the hit TV Show “American Horror Story” who was explaining to the family why they wouldn’t be able to unload their haunted house anytime soon: Nothing will get better until we get that failure out of the White House.

Nothing else matters, nothing. If we give that nincompoop another 4 years, the way the media covers FOR him, it wouldn’t surprise me if we were (very secretly) calling him Barack “Chavez” Obama.

Housing prices will be the least of our worries.

Jocon307 on March 25, 2012 at 7:05 PM

I think, under the Obama regime, they want to own the housing market and make people rent from the government. They are not interested in home ownership.

Kini on March 25, 2012 at 6:58 PM

Something interesting along the lines of renting. Bank of America is trying out a pilot program in the three major distressed home markets in the country. It’s only for 1000 home owners, and you can’t apply, they will select you. What this program does is allow a home owner, whose behind on their payments, to give the title over to BofA who then allows the home owner to rent the house from BofA. The property will then be treated as a rental property complete with sub-contracted property management companies taking care of the lawn and such. If it works out, then BofA may do a nationwide roll out. Just keep that in mind, along with the implications of our new “too big to fail” world of bailouts. Draw your own conclusions…

Weight of Glory on March 25, 2012 at 7:05 PM

“Leading economist” Paul Krugman earned his fortune the exact same way the “senior Senator” from MA earned his-he married it.

Del Dolemonte on March 25, 2012 at 6:47 PM

The first Mrs. Kerry came from money, too. When he was between wives, he sometimes slept in friends’ apartments because he was so skint.

In the in-between years, he was so willing to take anything from lobbyists they called him “Cash N’ Kerry” around D.C.

Wethal on March 25, 2012 at 7:06 PM

Lennar(LEN) reports on Tuesday which is about 5x the size of KBH…

MGardner on March 25, 2012 at 6:59 PM

Ah! Thank you. For some reason I was thinking DR Horton, and Monday.

Weight of Glory on March 25, 2012 at 7:06 PM

http://imageshack.us/photo/my-images/13/gdpgrowth.png/

Chart I made of GDP growth with 20 SMA to smooth things out…

MGardner on March 25, 2012 at 7:08 PM

KB Homes – suddenly turned in a worse than expected earnings report.

racists!

Eren on March 25, 2012 at 7:12 PM

O/T: Know what else just stalled? UNC lost it’s final regional game to Kansas and is out of the Final Four. They lost their experienced point guard, Marshall, to injury on Friday.
.
Øblama picked UNC to win it all and UNC self-destructs with injury and inexperienced guard play.
.
Thank you, President Øbama! Everything you touch turns to sh!t! Way to go, Loser!

ExpressoBold on March 25, 2012 at 7:14 PM

Well, as a residential designer in Maryland, I can tell you that in my area, new home construction has remained flat for about 4 years now; little if any movement either way. And we’re relatively insulated given our proximity to DC money; two counties prop (Howard and Montgomery) prop up the whole state.

But my guess as to the reason for permits going up is that there is a real push to persuade the public that worst is over, and getting in on the ground floor of prices is the way to go. For publicly traded companies like KB, they’ve got to show movement in order to fund their operations.

Since most new home communities are planned, “track home” developments, a builder knows there are only a limited number of home designs available and often they’re preassigned to a specific lot. That means they can file for a building permit even if the lot hasn’t been sold without having to modify the permit ap at the time of sale, AND in most cases, they don’t have to pay until they actually pick up the building permit. An application for a permit is not a housing start by any means, though it may fool investors into thinking so.

BKeyser on March 25, 2012 at 7:15 PM

Don’t believe the media narrative. That’s Step One.

tuffy on March 25, 2012 at 7:21 PM

All depends on the day of the week and who you read. One day AP is all over itself about how GREAT things are in real estate. Two days later it sounds like the end of the world.

I DON’T THINK THE FREAKING “EXPERTS” EVEN KNOW.

The clown in the White House sure doesn’t.

GarandFan on March 25, 2012 at 7:21 PM

leading economists**

liberal4life on March 25, 2012 at 6:36 PM

Got any names?

chewmeister on March 25, 2012 at 7:23 PM

I don’t think you can call a bottom just yet..maybe some really beaten up areas but there’s a larger portion of the country who will see new lows..

1) there’s a trillion dollars of student debt debt that has to be impacting the first time home buyers market

2) 30% of mortgages are either underwater or have less that 5% equity which has to impair the trade-up or repeat market

3) real wage growth is either flat or most likely negative ..depending on what u think inflation really is(something tells me bobby boy here thinks it 3%

4) home prices are down 4% YoY, this despite mortgage rates 1% lower than last year, supposedly 2.2 million jobs added and an very mild winter

5) credit remains very tight with 1/2 the banks not even giving quotes for anyone with a fico score less than 620( about 25% of the country)

galtg on March 25, 2012 at 7:25 PM

leading economists**

liberal4life on March 25, 2012 at 6:36 PM

Got any names?

chewmeister on March 25, 2012 at 7:23 PM

1. Paul Krugman

2. bayam

Del Dolemonte on March 25, 2012 at 7:32 PM

Doubtful that the housing market is going into retreat, and this is one report from one home builder. The backlog of mortgage foreclosures needs to be cleared, but that process is now happening with the deal reached last month. Elsewhere, all signs continue to point towards a strengthening economy – we’ve been seeing strong reports for the past several weeks. Of course, if the bull run continues much past Dow 13K, it may be time to start taking some profits; it’s been a heck of a 3-year run so far, and now it is time to fight the greed factor. But overall, we remain bullish …

TouchdownBuddha on March 25, 2012 at 7:35 PM

As a land surveyor I deal with mortgages and home construction. Here in NW Florida, it appears the market has hit bottom but the large amount of defaults means there is still a large inventory of reasonable priced used homes. The new home market needs prices to rebound not bottom out for it to return. The high end beach houses are still selling and being built but your average homes need the price per square foot to increase so that construction is profitable until then I expect to see many more remodels.
The mortgage companies have increased their requirements and I have also seen a higher than usual denial rate. But that was needed and we still are not back to the historical 20% down that disincentives foreclosure.
I have seen an increase in large commercial projects being planned for the coming years but they are 2014 or beyond for completion dates and most do not break down till after the election.

Grunt on March 25, 2012 at 7:35 PM

House prices still too high.

albill on March 25, 2012 at 6:41 PM

Only to those who can’t afford to buy one, or shouldn’t be given a loan to buy one they can’t afford in the first place. That’s what caused the housing bubble.

chewmeister on March 25, 2012 at 7:35 PM

Del Dolemonte on March 25, 2012 at 7:32 PM

Thanks, I needed a little comic relief tonight.

chewmeister on March 25, 2012 at 7:36 PM

TouchdownBuddha on March 25, 2012 at 7:35 PM

Are you on drugs?

chewmeister on March 25, 2012 at 7:38 PM

Or is the market going back into retreat?

My brother is a bank exec and another relative runs a title company.

Housing is going down the drain. Unless and until Obama is removed from office, there will be no sustainable recovery.

Key West Reader on March 25, 2012 at 7:40 PM

At some point I expect banks to start tearing down homes to get out of an inventory load, consolidate properties and see if they can’t make up some of the losses by removing the glut on the market. Perhaps even doing some in-depth deconstruction salvage, to squeeze every last cent out of inventory that isn’t going anywhere.

Too bad about that being too expensive to do in Detroit, though.

ajacksonian on March 25, 2012 at 7:41 PM

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

Yeah, if you are a lemming looking to jump off of a cliff.

tommy-t on March 25, 2012 at 7:43 PM

Will Debbie Brillo Pad show up on the threads tonight?

Shine that golden aluminum image of your dear leader, Debster!

Key West Reader on March 25, 2012 at 7:44 PM

the greed factor.

TouchdownBuddha on March 25, 2012 at 7:35 PM

Please define.

CW on March 25, 2012 at 7:45 PM

Too bad about that being too expensive to do in Detroit, though.

ajacksonian on March 25, 2012 at 7:41 PM

Nothing a little aerial firebombing practice couldn’t clean up.

ray on March 25, 2012 at 7:46 PM

ajacksonian on March 25, 2012 at 7:41 PM

Great point, but think about the fact that most of these homes were built into subdivisions, or sold within existing subdivisions. Hard to just knock them down.

And, then again…. Obama’s occupoopers are planning to infest the foreclosures, so it might just be a long, hard slog.

/Don’t tell me banks aren’t thinking about the Occupoopers, cuz they are!

Key West Reader on March 25, 2012 at 7:47 PM

Weight of Glory on March 25, 2012 at 7:05 PM

I owned 2 homes.I spent plenty keeping them up and modern for years.Taxes and insurance went up every year.Sold them both and leased a 4 year old home in a 6 year old hood.I went thru a mgt company and they do all of the maintanance.When an A/C unit goes out or the roof goes bad it’s not on my dime anymore.I don’t miss the deduction.All I was doing was keeping my property nice for them to tax me more.If you don’t keep up the taxes they foreclose and take it.You never really own a house.

docflash on March 25, 2012 at 7:52 PM

ray on March 25, 2012 at 7:46 PM

Have you seen the cost of gasoline lately? Termites are cheaper…

Key West Reader on March 25, 2012 at 7:47 PM

The concept is ‘densification’. It is part of a strategy to get rid of suburbia… my guess is that Detroit is just an accident waiting to be densified.

ajacksonian on March 25, 2012 at 7:56 PM

Under Obama, a lot of people can’t afford even from the plethora of existing homes waiting to be sold, much less build/buy a brand spanking-new one.

whatcat on March 25, 2012 at 8:02 PM

Elsewhere, all signs continue to point towards a strengthening economy – we’ve been seeing strong reports for the past several weeks. Of course, if the bull run continues much past Dow 13K, it may be time to start taking some profits; it’s been a heck of a 3-year run so far, and now it is time to fight the greed factor. But overall, we remain bullish …

TouchdownBuddha on March 25, 2012 at 7:35 PM

Dude, I don’t know what you are smoking, but it sure ain’t legal and it must be some gooood stuff.

AZfederalist on March 25, 2012 at 8:04 PM

Someone has got to remind politicians that getting a home does not put you into the middle class.

Getting into the middle class means you can afford a home.

The braniacs in Congress wanted to reverse that and see where it got us?

ajacksonian on March 25, 2012 at 8:11 PM

HOTGAS = ONLY THE BAD NEWS

0bamaderangementsyndrom on March 25, 2012 at 8:15 PM

getting a home does not put you into the middle class.

Getting into the middle class means you can afford a home.

The braniacs in Congress wanted to reverse that and see where it got us?

ajacksonian on March 25, 2012 at 8:11 PM

That is a very insightful statement.

AZfederalist on March 25, 2012 at 8:20 PM

I just find it hard to believe that people have so much trouble getting credit. Me and my wife has access to about 5 times as much credit as we need. When we bought our house, the bank was begging us to look at houses close to 3 and 4 times the price of the one we decided to start out in. I would rather buy a lower cost house, make the same payments, pay very little in interest, turn around, sell the house, use that money to buy another house with the same total loan value and do this once ever 8 to 12 years.

That said, if it really is that hard to get a loan, the reason is simple. The government has taken control of the banks through TARP bailout funds, and now is forcing them to buy U.S. Savings Bonds instead of putting the money to use building America up. Not direct control, just enough control to guide their investment decisions. Either through threats, or the threat of the likely impending second recession due to government activities.

astonerii on March 25, 2012 at 8:23 PM

Everything in the way of “improvement” since 2008 has been nothing but one giant kick the can down road play. In fact, the statistics that indicate a paltry “recovery” are highly suspect themselves.

The short answer, NO it’s not sustainable and the day of TSHTF is nearer than the mainstreamers think.

voiceofreason on March 25, 2012 at 8:28 PM

AZfederalist on March 25, 2012 at 8:20 PM

Until the asinine lending requirements and NINJA regulations go away, until the CRA is junked, until the FHA is disbanded and GNMA tossed into the ash-heap, there will not be something we will recognize as a ‘recovery’. The regulations that got us to this point are STILL in force.

They all need to go.

Roll back the regulations to where they were about, oh, 1960. Before the huge involvement of the federal government in securitizing loans, forcing changes in lending practices, putting requirements to lend to those who can’t afford it and threatening audits if the money didn’t go out the door. All of that shinola needs to go away, now.

ajacksonian on March 25, 2012 at 8:30 PM

I can tell you exactly why people don’t want to build new homes. Several reasons….

- The minute you finish the home it’s instantly worth less than half what you just paid for it. The market needs adjusting badly.

- Property taxes just went up while assessments didn’t go down, even though the value of the house did, the assessors kinda sorta purposely ignored that and assigned the value according to a healthy market even though you’d never get the price = screwed blue and tattooed.

- You can’t get a loan unless you’re filthy rich or have a pot of cash and excellent credit, and are willing to pay 200% + what the house is worth.

All this spells bad times ahead until we see a major correction.

Bank of America is going DOWN.

Wolfmoon on March 25, 2012 at 8:35 PM

One thing is for certain, we are heading towards the right path.
liberal4life on March 25, 2012 at 6:35 PM

Don’t you mean the left path?

LegendHasIt on March 25, 2012 at 8:39 PM

It’s a slow process. Unfortunately it will take sometime before the economy fully recovers although the general consensus among leading economics and politicians like Romney believe it is getting better.

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

@liberal4life – Getting “better”? Please pass me the kool-aid.

Better is relative. A few pieces of good news and you’re ready to celebrate? News flash – even a broken clock is right twice a day.

Let’s see what’s better? Fewer layoffs? Sure, because there is not many more people you can lay off before your business actually tanks.

I am self-employed. So are my four closest friends. We all see the same thing. A new normal. An economy that will always limp along because incomes will remain stagnant for the next decade and fuel prices will continue to soar with the current energy policy ensuring no growth in spending power by the average family. Ask them if they feel better off now than 3 years ago. They don’t. They realize they are slowly headed for a cliff.

Each new regulatory burden requires us to invest in more legal and accounting fees, not workers. We can’t expand so we don’t hire. We don’t see an end to this. The current administration is making sure of this, or they are simply completely stupid.

Housing will remain flat until lenders decide to loosen standards. Given current debt load by the average family, and stagnant incomes, that is a long way away. Unfortunately, the government will get tired of waiting and once again step in and force the issue, by subsidizing bad mortgages, leading us again down the road we went before. That’s not real growth. It’s a new disaster waiting to happen.

Most of my business owner friends cannot get their commercial lines extended due to fuel price and debt-service uncertainty, as well as slow receivables. Try running a business, let alone hiring new workers with that problem hanging over your head.

This President is an idealogue who has no real interest in policy that will allow a robust economy. He simply hopes the sheeple will believe whatever the MSM tells them.

No, the we are not on the right path. Not by a long shot.

goflyers on March 25, 2012 at 8:41 PM

HOTGAS = ONLY THE BAD NEWS

0bamaderangementsyndrom on March 25, 2012 at 8:15 PM

That’s all there is under oblunder, you freaking dolt.

msupertas on March 25, 2012 at 8:43 PM

…….we’ve been seeing strong reports for the past several weeks.
TouchdownBuddha on March 25, 2012 at 7:35 PM

Reports. Yeah.

Not reality.

Reports made by bureaucrats that want to give people Hope that things are going to Change.

If you get my drift.

LegendHasIt on March 25, 2012 at 8:43 PM

That’s all there is under oblunder, you freaking dolt.

msupertas on March 25, 2012 at 8:43 PM

Actually, Yellowstone didn’t erupt today.

Everyday that is the case there is always that as good news.

Nor did the New Madrid Fault Zone let loose… or the Cascade Thrust Fault… or the Cumbre Vieja…

See?

Lots of wonderful news!

We just tend to ignore these things and assume a day without any of them happening is guaranteed.

That is not the case.

ajacksonian on March 25, 2012 at 8:56 PM

Someone has got to remind politicians that getting a home does not put you into the middle class.
Getting into the middle class means you can afford a home.
The braniacs in Congress wanted to reverse that and see where it got us?
ajacksonian on March 25, 2012 at 8:11 PM

That reminds me – what front groups are being used by ACORN these days? Or did ACORN just change it’s name in hopes of avoiding being caught in more “Fraudien” slips?

whatcat on March 25, 2012 at 8:59 PM

That reminds me – what front groups are being used by ACORN these days? Or did ACORN just change it’s name in hopes of avoiding being caught in more “Fraudien” slips?

whatcat on March 25, 2012 at 8:59 PM

They broke into a number of sub-groups… but you can use the old staffing structures for ACORN, ID the people who were in them and with that you can connect the new organizations back together.

Look for groups supporting OWS and other grievance mongers, and you will find the new and stealthified ACORN.

ajacksonian on March 25, 2012 at 9:03 PM

“$270 Billion In Student Loans Are At Least 30 Days Delinquent”

Maybe some of these prospective buyers and borrowers have student loans in arrears?

“as many as 27% of all student loan borrowers are more than 30 days past due.”

“Recent estimates mark outstanding student loans at $900 billion – $1 trillion”

http://www.zerohedge.com/news/first-crack-270-billion-student-loans-are-least-30-days-delinquent

Viator on March 25, 2012 at 9:04 PM

It’s a slow process. Unfortunately it will take sometime before the economy fully recovers although the general consensus among leading economics and politicians like Romney believe it is getting better.

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

LOL>..We thought liberals and therefore Obama said the economy was improving ? Are liberals aware that the economy CANNOT improve without the housing market improving in some material way ? Are YOU aware of how the housing industry effects almost EVERYTHING else in the economy ?

Those are rhetorical questions you couldn’t possibly hope to answer.You haven’t the wherewithal. I wouldn’t expect you to be able to see the real issues underneath that burden this economy. That would take real analysis by you. You are incapable, inept and ignorant.

Banks are materially adversely affected. They don’t want to admit this to the general public. They are basically zombies. This is why MetLife exited the business.

The bottom line is the economy will NEVER recover with Obama spending money on things that don’t actually make a difference. The economy will never recover with Obama’s job killing regulations, and the economy will never recover until EVERYONE recognizes that our financial system is STILL BROKEN( and needs to be FIXED)

Why do you even bother coming onto this board ? You’re brain dead.

DevilsPrinciple on March 25, 2012 at 9:39 PM

Anybody would be stupid to buy a new home today with all of the cards stacked against them. Shoddy work by the builder? Good luck suing them. Part of that mountain of paperwork you sign at closing is a binding arbitration agreement. Basically, it takes away your right to take a builder to court. You go to an arbiter, who is….shockingly…contracted by the builder. Never buy new. You will regret it when shoddy workmanship rears its ugly head. And it will.

john1schn on March 25, 2012 at 9:40 PM

It’s a slow process. Unfortunately it will take sometime before the economy fully recovers although the general consensus among leading economics and politicians like Romney believe it is getting better.

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

leading economists**

liberal4life on March 25, 2012 at 6:36 PM

…you’re THE slow process! We can’t wait until 2020 for you to be potty trained, your leading “economics” to get out of junior high school, or for the economy to hit 2006 levels again

KOOLAID2 on March 25, 2012 at 9:41 PM

Here’s a nice starter link for you liberal 4life

http://www.zerohedge.com/news/first-crack-270-billion-student-loans-are-least-30-days-delinquent

That’s over 25 %. Are you starting to get it now?

DevilsPrinciple on March 25, 2012 at 9:41 PM

HOTGAS = ONLY THE BAD NEWS

0bamaderangementsyndrom on March 25, 2012 at 8:15 PM

That’s all there is under oblunder, you freaking dolt.

msupertas on March 25, 2012 at 8:43 PM

…(amongst his group of acquaintances…the big O is probably known as “The Deep Thinker!)

KOOLAID2 on March 25, 2012 at 10:00 PM

It’s a slow process. Unfortunately it will take sometime before the economy fully recovers although the general consensus among leading economics and politicians like Romney believe it is getting better.

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

Really, you have to give this guy an A for effort. On process, not substance.

DDay on March 25, 2012 at 10:01 PM

Further, in January, MetLife “suddenly” announced that they were immediately shutting down their retail mortgage lending business

Jazz, I would think theres a real story in this one. Del Dolemonte provided more info, that Met was only in this biz for 4 years? Well that blows my idea that they had lots of toxic assets dragging them down.

Why would a multibillion dollar operation, with likely very few toxic assets, exit what almost always appears to be a lucrative operation?

Impending Gov regulations? Impending Gov takeover?
Complete implosion of retail real estate?

orbitalair on March 25, 2012 at 10:02 PM

$6 trillion plus in less than four years, Uncle 0bama Suga done sucked all the money out of the market.

jukin3 on March 25, 2012 at 10:10 PM

That’s all there is under oblunder, you freaking dolt.

msupertas on March 25, 2012 at 8:43 PM

Actually, Yellowstone didn’t erupt today.

Everyday that is the case there is always that as good news.

Nor did the New Madrid Fault Zone let loose… or the Cascade Thrust Fault… or the Cumbre Vieja…

See?

Lots of wonderful news!

We just tend to ignore these things and assume a day without any of them happening is guaranteed.

That is not the case.

ajacksonian on March 25, 2012 at 8:56 PM

If any of those things happened, it would be blame Bush.

msupertas on March 25, 2012 at 10:19 PM

Happy days are here again.

This is going to work out just like FDR’s 20 year plan of pain and misery…then a world war to get us economically sound again.

jukin3 on March 25, 2012 at 10:20 PM

…(amongst his group of acquaintances…the big O is probably known as “The Deep Thinker!)

KOOLAID2 on March 25, 2012 at 10:00 PM

Not a deep thinker, but he does have us in some deep doo doo, if that counts.

msupertas on March 25, 2012 at 10:22 PM

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

…since this thread is about the housing market dumb diaper…how are basements selling?

KOOLAID2 on March 25, 2012 at 10:47 PM

Further, in January, MetLife “suddenly” announced that they were immediately shutting down their retail mortgage lending business which further complicated the positions of buyers.

I would say “suddenly” isn’t quite appropriate. Maybe more like “finally” MetLife announced in October that they were looking to do this:

“NEW YORK, Oct 12, 2011 (BUSINESS WIRE) –

MetLife, Inc. (NYSE: MET) announced today that, in addition to its previously announced decision to explore a sale of MetLife Bank, N.A.’s depository business, the company will now also explore a sale of the Bank’s forward mortgage business.”

They didn’t even get into forward mortgages until 2008, just at the start of the decline, so they probably couldn’t compete. Interestingly they are keeping their reverse mortgage business, and now that Wells Fargo has gotten out of it, one of their major competitors is gone.

I think KB Homes either didn’t do their due diligence or who knows what they were up to.

Anecdotally, in my area existing homes sales have picked up quite a lot. In the low end – 100K – 200K there was a report that 30+% of all those sales were all cash.

An independent builder that has been building on the lot next to my office has sold one house for 1Million and is building another one next to it on spec for over 1 million. Some bank lent him the dough so I think banks may be easing up on lending as well.

What’s the old saying – All real estate is local – no kidding.

It’s been a heck of a 3-year run so far,

TouchdownBuddha on March 25, 2012 at 7:35 PM

You aren’t kidding – anyone got in the market March of 2009 – Huge gains, huge.

Impending Gov regulations? Impending Gov takeover?
Complete implosion of retail real estate?

orbitalair on March 25, 2012 at 10:02 PM

Yes most likely to the first, no to the second, no to the third. My take anyway :-)

DoubleClutchin on March 25, 2012 at 10:59 PM

It’s a slow process.

liberal4life on March 25, 2012 at 6:35 PM

Actually, historically speaking, no, it’s not. The Obama Recession is unique in this regard.

spinach.chin on March 25, 2012 at 11:32 PM

Actually, historically speaking, no, it’s not. The Obama Recession is unique in this regard.

spinach.chin on March 25, 2012 at 11:32 PM

I don’t remember any short Democratic recessions.

john1schn on March 25, 2012 at 11:35 PM

bel air maryland is a perfect example

we have here the festival shopping center, a great location with a strong anchor

many empty stores, upscale ham left, upscale kitchen left, carpet left, upscale seafood left, mattress left, too many to count or even remember all sit empty

then 2 miles or so down the street they build a new wegmans, so they get another panera, a new joes crab shack, pnc bank, etc.

to housing i got a perfect house down my street that sits empty
in agreat location

but who builds new homes right now as I write, the chain builders in at least 3 locations around this town which ios close to baltimore.

empty ugly used up land is left vacant and more treest are cut down for what, the ugly cycle continues

i think the county like the hook up fees and new taxes?

losarkos on March 25, 2012 at 11:42 PM

The economy WANTS to grow. That is its natural state. There is a tremendous amount of pent-up demand in this country now, and it is like the air in a balloon, pushing out to make it grow. But the skin of the balloon has been reinforced by the most anti-business administration in our history, which is also in the process of crippling our energy security for the longer term if their plans are not soon crossed.

But the regulatory excesses of the Obama regime are not the only things threatening our ever-nascent recovery. Europe is going down, the euro is not sustainable, and there will be reduced worldwide demand as the Eurozone deals with its own excesses – in this Obama is innocent, although a stronger and more knowledgeable leader might have been able to avert the crisis.

Then his feckless foreign policy of taking our allies for granted and reaching out to our enemies only shows weakness to the world’s despots, now emboldened to take more risks against a weak and vacillating American President.

We can make a good first step towards repairing the damage by ridding ourselves of these Democrats in November. Unfortunately, we are too “enlightened” a society to send them all into permanent exile, which would help safeguard future generations.

Adjoran on March 25, 2012 at 11:47 PM

Forgive Student Loan Debt to Stimulate the Economy

The Student Loan Forgiveness Act of 2012 (H.R. 4170)

Congress finds the following:
(1) A well-educated citizenry is critical to our Nation’s ability to compete in the global economy.
(2) The Federal Government has a vested interest in ensuring access to higher education.
(3) Higher education should be viewed as a public good benefitting our country rather than as a commodity solely benefitting individual students.
(4) Total outstanding student loan debt officially surpassed total credit card debt in the United States in 2010, and is on track to exceed $1,000,000,000,000 during 2012.
(5) Excessive student loan debt is impeding economic growth in the United States. Faced with excessive repayment burdens, many individuals are unable to start businesses, invest, or buy homes. Relieving student loan debt would give these individuals greater control over their earnings and would increase entrepreneurship and demand for goods and services.
(6) Because of soaring tuition costs, students often have no choice but to amass significant debt to obtain an education that is widely considered a prerequisite for earning a living wage.
(7) Amidst rising tuition rates and stagnant grant funding, many students are forced to supplement Federal loans with private loans, which frequently feature higher interest rates with fewer consumer protections.
(8) A borrower who experiences an extended hardship for whatever reason, or a borrower who experiences a series of separate hardships over a longer period of time, will often have no choice but to default on his or her private student loans. Opportunities to put such private loans into forbearance are limited.
(9) During the period of forbearance on private student loans, interest continues to accrue and is capitalized, and once the borrower comes out of forbearance, he or she owes significantly more on the principal of the loan than before the hardship period began.
(10) A Democratic Congress and the current Administration have already diminished the meaning of contracts through TARP, so screwing with the loans of private banks will merely continue this trend of well intentioned meddling.

J_Crater on March 26, 2012 at 1:23 AM

It’s impossible to generalize about the retail real estate market in a country with 300 million+ people and a land mass this huge.

Here the bottom end of the market (100-200k) and the top end (2m-20m) are very buoyant. But people who want to build their ‘dream house / mcmansion’ with their ‘builder’ (and that term does deserve scare quotes)…well they’re pretty much SOL.

CorporatePiggy on March 26, 2012 at 7:59 AM

One thing is for certain, we are heading towards the right path.

liberal4life on March 25, 2012 at 6:35 PM

That is true…many of the polls are showing that Obama will not be re-elected…

right2bright on March 26, 2012 at 8:26 AM

Most of these deals are caving when the appraisals come in. Typically the hard costs (before any profits) are significantly more than the appraised values. People that don’t bring a ton of cash to the deal have no chance whatsoever. Folks that can build now are a rare breed.

The saving grace as of late is the recent collapse of property values in my area (suburbs of Chicago). Banks have taken on a new “clear the books at any cost” attitude and we’ve seen land values drop by as much as 90%, likely due to the obscene real estate taxes levied on empty lots, (which in some cases are nearly $500.00 a month).

Builders are working overtime to create ways to reduce numbers. Most are running near profitless and dangerously close to margins. With material prices inflated much higher than several years ago the main burden falls on labor which is typically exclusive to those workers void of a social security number. No American jobs are being created in new construction.

Bottom line, the construction industry is horribly tortured at best and will remain so for some time.

Hornet on March 26, 2012 at 9:56 AM

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