Monday, July 10, 2006

Broader than Expected

Standard & Poor’s changed its outlook on Toll Brothers to stable from positive. I think many readers of this blog and others have known for over a year now that the downturn in housing demand would be pretty broad and sharp.

“NEW YORK, July 10 (Reuters) - Standard & Poor's on Monday changed its outlook on luxury home builder Toll Brothers Inc. (TOL.N: Quote, Profile, Research) to stable from positive, citing declining new orders in the housing market.

"The outlook revision is due to negative new order trends that have been deeper and broader than anticipated during the early stages of the overall housing market correction, precluding an upgrade in the near term," S&P said in a statement.”

Full article…

5 Comments:

Anonymous Anonymous said...

Toll cited a perception among buyers, fueled partly by media coverage of the housing market, that homes are a depreciating asset.

They are when you purchase a McMansion at full retail at teh end of a housing boom...

He also pointed to the supply of "speculative housing," as well as a national "malaise" caused by last fall's hurricanes.

The sort of general malaise that only the genius possess and the insane lament.

Monday, July 10, 2006 6:57:00 PM  
Blogger new 200 Mbps BROADBAND over POWER LINES said...

Home sales slowing in North Jersey
Inventories up as state mirrors national trend
Tuesday, July 11, 2006
BY SAM ALI
Star-Ledger Staff

The "For Sale" sign has been up for three months. You've had a handful of showings and open houses. But your four-bedroom colonial in your quaint middle-class suburban neighborhood is just not selling.

In America's cooling housing market, it's a story many home sellers in New Jersey can relate to these days.

Housing activity is slowing across the state, and the inventory of unsold homes is expanding.

"You have this standoff between buyers and sellers who tend to be as much as three-quarters of a year behind the market," said Jonathan Miller of Miller Samuel, a real estate appraisal firm in New York. "Sellers have been trained over the past five years to stick with their prices and be firm, and yet now you have buyers on the other side saying they want a deal."

As of June, the supply of homes on the 12-county northern New Jersey market is 69 percent higher than it was in June 2005, climbing from 23,584 homes to 39,829, according to Jeffrey Otteau of East Brunswick-based Otteau Appraisal Group, who also authors a series of widely followed quarterly market reports on the New Jersey real es tate market.

Middlesex County saw the largest year-over-year surge in inven tory, with the supply of homes on the market climbing 99 percent, to 4,739 homes, from June 2005 to June 2006.

The number of months it would take to sell the existing inventory of active listings at the present sales pace stands at seven months, up from three months a year ago, Ot teau said.

Historically, a 5 1/2-month supply of unsold inventory has been considered a "stable" market.

In the late 1980s, when the residential real estate market last hit the skids, that number ranged from nine months to 24 months.

"Certainly the record home prices achieved in 2005, when coupled with lagging salary increases, rising interest rates and slower population growth, are solid reasons for a market slowdown," Ot teau said.

But the changes that have enveloped the residential real estate market over the past 10 months extend beyond market metrics, he said.

Otteau also believes "the chorus of voices predicting this collapse and the attention they have received from the media" are playing a big role in bringing the housing market to its current state.

"As always, perception becomes reality," he said.

The market currently has a six- month supply of homes priced below $600,000. For homes priced between $600,000 and $1 million, there is a 10-month supply, and for homes priced above $1 million, there is a nearly 13-month supply.

Home-sales volume also is slowing in the state, declining 18 percent through May from one year ago.

In northern New Jersey, the slowdown has been more marked. Comparing the first six months of 2005 with the first six months of this year, sales volume declined 20.9 percent, falling from 3,682 homes in 2005 to 2,911 homes this year, according to the Garden State MLS, a listing database of homes for sale in Bergen, Essex, Hudson, Hunterdon, Middlesex and Morris counties.

It's a story that's being played out across the country

Last week, the National Association of Realtors lowered its forecast for home sales in 2006.

In its monthly forecast, the Realtors association said sales of existing homes should fall 6.8 percent, to 6.60 million this year, from the 2005 record of 7.08 million. Sales of new homes should decline 13.4 percent, to 1.11 million, from a record 1.28 million in 2005.

Experts believe the current situation -- fewer home sales and rising inventories -- will continue for the next several years and will ultimately start to hit sellers where it hurts.

As the supply of unsold homes continues to grow, Otteau ex pects some of the increases in home prices that occurred over the past few years will likely be reversed as motivated sellers make a trade-off: lower prices for quicker sales.

Ironically, this may not be good news for home buyers, be cause rising mortgage rates will likely offset any savings derived from lower home prices, he said.

In fact, some home buyers will actually lose purchasing power despite a downward drift in home prices. Thus, buyers should consider whether the current combination of rising mortgage rates, higher inventory levels and sellers willing to negotiate are reasons to buy now rather than wait.

Rates on 30-year mortgages rose to an average 6.79 percent, from 6.78 percent last week, the highest level since May 2002, according to a survey released by mortgage finance company Fred die Mac on Thursday.

"This is fairly consistent with our economic outlook, which continues to forecast that the interest rate for the 30-year fixed-rate mortgage will gradually drift upward but should remain under 7 percent for the year," said Frank Nothaft, Freddie Mac vice president and chief economist. Last week, the Fed raised interest rates by a quarter percentage point for the 17th straight time, from 5 percent to 5.25.







Home sales slowing in North Jersey
Inventories up as state mirrors national trend

Tuesday, July 11, 2006 11:27:00 AM  
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Thursday, July 20, 2006 4:38:00 AM  

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