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Homebuilder Mood Worst Since 1995

? Katrina Has Been Very Good to Brokers in N.O. |


| Is $75 Million Too Much for a House? ?

May 15, 2006

Homebuilder Mood Worst Since 1995

Peter Coy

Growing pessimism among builders. Today the National Association of Home Builders announced that in May its index of builders' perceptions of sales conditions dropped to its lowest since mid-1995.

To quote the press release:

Rising mortgage rates, deepening affordability issues and the retreat of investors/speculators from the marketplace ...

NAHB Chief Economist David Seiders calls it an "orderly cooling-down process."

Here's the history of the NAHB/Wells Fargo Housing Market Index since the start of last year:

2005 Jan 70

Feb 69

Mar 70

Apr 67

May 70

Jun 72

Jul 70

Aug 67

Sep 65

Oct 68

Nov 61

Dec 57

2006 Jan 57

Feb 56

Mar 54

Apr 51

May 45

01:36 PM

Home builders

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The real estate sector is going down hard. Nothing can stop it now.

I've lived through a few booms and this one (like all the others have) will revert to trend or may even overshoot on the downside slightly. We are probably looking at 50% drops in values in hot markets, in real terms. But, if you happen to live in the middle of the country where things didn't get wild then reverting to trend won't be a big deal.

This is also happening now in other places like Australia and New Zealand. Its also happening in the eastern half of Canada but the west is being propped up by a commodities bubble temporarily.

Though, it is the US market that is important as the real estate bubble has been proping up the whole US economy. An economy that has become a house of cards with debt at its foundations. In turn, US imports have been propping up Asia and other places. Now that the real estate bubble is popping there will be a domino effect on the US economy and then on the world economy.

Although I'm not happy to say it. I can't envision anything but a global recession on the horizon.

Posted by: svender at May 16, 2006 11:20 AM

Not suprising since the Fed bumped the rate up by another quater point. Just when you thought they were done. May be a sign that the economy is still not right or to curb inflation. Either way the housing market as bound to be affected by both interest rates and inflated prices.

Posted by: Wes at May 16, 2006 08:14 PM

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