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| Rumors Are that the Sky Is Falling |
| Written by Jonathan Smoke | |
| 07.26.2007 | |
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Discuss this article on the forums. (0 posts) The news this week continues to be negative. Against a back drop of existing home sales and new home sales being down in June, the public builders’ quarterly earnings reports are painting an equally bleak picture that housing is getting worse. And the jitters over housing and the credit environment fueled a wide-spread sell off on the stock market, with the Dow Jones industrial average falling over 400 points during the day today to end down 284 points. While the news is negative, the reports I am hearing and reading in the media are building on people’s fear that it will get much worse before it gets better. The rumor mongers are in control now, so despite what really is going on, the perception matters more than reality. What have we learned this week? Annualized estimates of existing home sales were down 3.8% in June over May and annualized estimates of new home sales were down 6.6% in June over May. The months’ supply of existing homes for sale remained at 8.8 months, which is the highest level it has been since the early 1990s recession. )) The months’ supply of new homes grew to 7.8 months from 7.4 in May. The last time inventories were in this range was also during the early 1990s recession. But the level of new home sales is still relatively high, as in a higher level than the average annualized monthly new home sales pace for the last 20 years. So inventory levels remain the big concern and of course inventory matters most in local markets and local neighborhoods where real sales do or don’t happen. Also of concern are home prices and where they are heading. I will be parsing the public builders’ earnings releases and call transcripts to see if they are shedding some light on what they are experiencing. I’ll share what I find in future posts. In the mean time, I encourage our readers to keep some perspective. Yes, we are in a housing recession. And it’s not clear if we are at or near a bottom yet. None of us can change the market, but we can get ready to respond intelligently. 
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