Homebuilders Get a Reality Check

 | Aug 23, 2013 | 12:55 PM EDT
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Can you believe those horrendous new-home sales? So much for builder confidence. I know I was fed up with builder after builder telling you that despite rate increases, the industry was going great guns. I don't want to single out any one builder, but you knew they were cajoling you and hyping themselves, because a quick, disorderly rate rout is the kiss of death if you are trying to sell new homes. The process is hard enough. Now it is just on hold.

Let me just say, sure, it can come back. There is certainly more "pent-up" demand than for 394,000 new homes after what this nation has been put through. A 13.4% decline to a level not seen since October will, I believe, become the new norm unless rates come back down or at least steady themselves. This is the kind of report that makes a Fed tapering seem downright stupid -- hence the move in bonds and the dollar.

Of course, it is also the kind of report that tells me that home prices will be under pressure at the same time that the raw materials that go into homes are rising. That's a very difficult situation for a homebuilder, and it could lead to lowered expectations.

I don't know about you, but I am tired of these builders blowing smoke, and I think that they have chosen to ignore the facts in order to keep selling homes. They know that if they say that the market has paused, that will keep people away. All I ask is that they shut up and don't say it hasn't. I am not asking for a "traffic is horrendous" update. I just don't want a soul to believe that things are any good in the housing market right now, except for people who want to put money into their houses that have held up. And even then, the reaction to Home Depot's (HD) quarter shows that that's coming to a close, at least for now, too.

Random musings: Many thanks to both Doug Kass and Matt Horween for helping me see through this matter.



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