Update on US Home Markets

Saw this article on MSN.

Hard landing for the housing market

• Housing starts tumbled in October, the government said Friday, falling to levels not seen since July 2000....
  
  Housing dive is a shocker
  The government said starts fell to a seasonally adjusted annual pace of 1.49 million new homes, down 14.6% from September and 27.4% from October 2005.
  
  Bloated inventories and weakening home sales contributed to the drop. Economists had been looking for a 5.6% fall to a 1.67 million annual rate.
  
  Home-building permits fell for the ninth month in a row, dropping more than 6% to the lowest pace since December 1997. The drop in permits, which are often a measure of builder confidence in the real estate market, is a signal that housing starts could continue to fall -- and a sign that the slump isn't over yet.
  
  "This is a shocking number," Phillip Neuhart, an economist at Wachovia, told Bloomberg News. "The market is going to remain weak well into next year."
  
  Other economists said the decline was not such terrible news. "The faster builders address their bloated inventories and bring the pace of home construction down, the quicker the housing correction will play out and the economy can return to a more normal footing," Stephen Stanley, the chief economist for RBS Greenwich Capital, told MarketWatch.com.
  
  The sharp slowdown in housing this year stands in stark contrast to the past five years, when the lowest mortgage rates in four decades powered a housing boom that pushed sales of both new and existing homes to five consecutive records.
  

And on the FSO write-up, Michael Hartman has the following remarks. ( Housing Numbers, Inflation & Interest Rates, Options Expiration and Gold )

• Though the rate of construction has declined, the big problem is a rising inventory of homes for sale as actual sales decline. New home sales are expected to fall to 1.06 million units this year from an all-time high of 1.28 million units in 2005. Notice the discrepancy in the number of homes being built on an annualized basis at 1.5 million units versus the expected sales of 1.1 million units.
  
  Supply and demand dictate that prices should continue to move lower. Eric Green, Chief Market Economist at Countrywide Financial made it clear by saying, “Inventories of unsold homes are off the charts.” Robert Toll, CEO of Toll Brothers said revenue for the current quarter is down 10%, but more alarming is the fact that their orders are down by more than 50% from the same period a year ago. According to a Bloomberg article today, Mr. Toll said in a conference call on November 7th that there are no signs that the U.S. housing market will recover soon. I have spoken with three mortgage bankers in the last week that I know personally. In candid conversations, they are saying it doesn’t look good, and all three expect foreclosures to increase next year. Increasing foreclosures will only add more inventories to unsold homes. In the minutes of the Federal Reserve meeting from October 24-25, the Fed-speak language uses the wording, “Further adjustment in the housing market appear likely.”
  
  Rather than continue beating a dead horse with more quotes and data on the weak housing numbers, if you care to look into more detail from a bigger-picture perspective, please see Chris Puplava’s Wrap-up posted two days ago. Chris went into great detail with economic charts covering the last 20-30 years, with some of the data going back to the Fifties. Looking at the longer-term picture, it does appear we have a long way to go to absorb the massive run-ups in residential real estate over the last few years.