Homebuilders on the mend?

Probably not, but they are showing signs of bottoming out. This is a chart of PHM, a US-listed homebuilder.
http://www.sharetrader.co.nz/picture...5&pictureid=10
http://www.sharetrader.co.nz/picture...5&pictureid=11
Note the rise on OBV (signalling accumulation) and the development of a basing formation.

I'm quite intrigued by this stock since it seems to be a good trading candidate. It was up 100% in around 3 weeks from it's bottom in Jan. Not quite an LMP, but far out, what a counter-trend rally!

AMR, who do you use to purchase your US and overseas stocks?

I have some spare cash in my CMC account that I cannot buy Aussie stocks with. So I'm looking to buy some overseas stocks and put my cash to work rather than give them the free interest. Loads of volatility in the overseas markets right now, great for trading.

I'm also not convinced that any revovery for homebuilders has started yet. More like a consolidation period off the lows, which may last for who knows how long, until everything has been economically digested...

Just my opinion.........

But I think US homebuilders are going to continue to get hammered.

Their building costs are exploding....

Their labour costs are exploding.....(but I think will be contained due to dramatically rising industry unemployment)

Their unsold inventory values are dropping.....

Their desperation to heavily discount to find cash will magnify the problem.......

I doubt it will be a "fun" industry to either work or invest in for a good 5-ish years

-------------------

In regards to NZ building industry......

I know a number of builders who's backlog of work has dropped dramatically or evaporated.....

I see projects like Pegasus Town Village north of Christchurch someday being a quite nice community to live in, but only after it has fallen over once or twice and resurrected out of insolvency at a steep discount.

Tui Creek is high end development in Canterbury that is down the gurgler.

Dave Henderson's development out by Queenstown Airport appears to have slowed or stopped.

Recently I visited a friend building two spec homes in a new development in Rangiora......one thing I noticed is the incredibly frantic pace of construction...very noticeable to myself and another builder I was visiting the site with.......nearly every home in the small development are being built on spec without owners signed up yet.

And lastly, anyone notice the increasing number and increasing size of new home advertisements in the newspapers lately?

I'm feeling extremely bearish about NZ building industry going forward.......

Just my anecdotal 0.02c

Probelem solved they suggest that the do the old Muldoon 80's grapevine dig up aka. bulldoze the homes flat.


http://online.wsj.com/article/business_world.html

How to Shake Off the Mortgage Mess
July 30, 2008; Page A13

Where are the hosannas for Congress's handiwork on housing? Nobody expected it to solve anything, but it's worth understanding why.
[How to Shake Off the Mortgage Mess]
Corbis

By CNBC's count, the federal government has already made roughly $1.4 trillion available to refinance mortgage debt since the housing meltdown began. That makes this week's bill, which adds another $300 billion to the pot, seem a mite anticlimactic. The key word is refinance. Even if this money helps prevent foreclosures, it's aimed at houses that people want and that would likely resell even if foreclosed. Hardly touched is the real problem of tens of thousands of houses financed during the subprime boom that are unoccupied, unwanted, falling apart, built on spec, mortgaged on spec and abandoned on spec.

Washington has practically monopolized the business of financing and refinancing home sales for willing buyers and sellers, but it does nothing about the homes going rancid on the shelf, souring the value of the nation's entire housing stock and mortgage debt.

Maybe that explains why we're finally getting some takers for a demolition strategy as the least-cost route out of the subprime mortgage aftermath. The Economist, in its July 10 edition, endorsed a "wrecking-ball response." Bill Gross, the Pimco bond king, says in an ideal world Washington would "buy one million new/unoccupied homes, blow them up, and then start all over again." Even Larry Lindsey, the former Reagan economist, concludes that a larger bailout is nearly inevitable -- though his fanciful solution is to recruit 100,000 immigrants who would agree to buy $10 million worth of housing each.
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A surplus of homes is the key liability dragging down much of the collateral underlying the financial system. Any Lindsey whimsies aside, have no doubt where many of these losses ultimately will land.

Take Fannie Mae and Freddie Mac, which owned 62,000 homes in the first quarter and were acquiring houses twice as fast as they could sell them. Fannie and Freddie now are statutorily backed by taxpayers, so taxpayers now are the real owners of nearly as many foreclosed houses as the rest of the country's 8,500 banks and thrifts combined.

And that's just the beginning. In seizing IndyMac, a California lender in subprime heartburn country, the FDIC put its fingers in its ears and simply declared a moratorium on new foreclosures. Taxpayers will end up owning a lot of derelict homes through FDIC too.

None of this is reason to disregard glimmers of a bottom in housing. Housing markets are local. Even with an unprecedented 19 million empty single-family homes, apartments and condos hanging overhead, some 500,000 new houses a year continue to be built and sold -- because people want houses where they want them.

The problem is the other places.

In California's Central Valley around Stockton, one household in 25 received a foreclosure filing last quarter. In the Inland Empire, one in 32 did. In greater Las Vegas, one in 35 households received a notice. We use household advisedly since nobody lives in many of these homes or collects the mail. Close to the ground, a growing suspicion is that the numbers even understate the troubles because banks see no point in foreclosing on empty, unsellable homes. Local governments complain of not being able to find anyone to dun for upkeep because the owner has absconded and yet no bank has filed foreclosure papers.

To be sure, the disaster is not entirely confined to vast tracts of exurban no-man's lands in the Southwest. The Star Ledger of Newark, where home prices once were rising 50% a year, describes 66 Norwood Street, financed by Countrywide for a speculative buyer who rented it out while never making a payment on her $325,000 mortgage. Fannie now owns the house, which burned twice between a final order evicting the tenant and Fannie's crew arriving to board the place up.

Multiply that by entire neighborhoods of brand new, large homes, built on cheap land far from town or amenities in the subprime ground zero of California, Arizona and Nevada. Failing an improvement on God's damp squib of an earthquake in subprime country yesterday, some sort of strategy is going be priority one for the next president.

So far, Washington has put its political capital into trying to refinance salvageable homes for unsalvageable homeowners, when a relevant policy would consist of judiciously buying unsalvageable houses and demolishing them. Fannie and Freddie's strength is housing market software: They could be put to work devising a least-cost, maximum-bang strategy for demolishing unoccupied homes to preserve as much value as possible for the homeowners and mortgage creditors who remain.

Of course, right now their overriding imperative is to avoid recognizing losses rather than rushing toward them -- which is why Fannie and Freddie should be nationalized (and later privatized). One way or the other, taxpayers will end up owning thousands of unwanted houses. It's not too soon to begin limiting our costs.

Any NZ streets like this yet?

http://www.telegraph.co.uk/money/mai...ccrisis105.xml

US property dream has turned into a nightmare

By James Quinn in Stockton, California
Last Updated: 9:29am BST 05/08/2008

Just five minutes walk from the lush green lawns that surround the city hall is a street on which each of the five houses lies empty.

For sale signs in Stockton, California
One out of every 30 homes in Stockton is in foreclosure

With boarded-up windows on two of the houses and no windows on the rest, the buildings would appear to be at odds with street signs which purport the area to be part of the "Historic Magnolia District".

A crumbling sign on the first house boasts it is "For Rent" but, given that it doesn't even have a door, it seems unlikely the owner, if there is one, will be getting too many inquiries.

From one of the other houses the sound of dogs barking becomes louder and, as the apparently ownerless hounds appear at the open door, I make a hasty retreat.

Welcome to Stockton, California, the foreclosure capital of the United States. Here, in this city some 80 miles to the east of San Francisco, one in every 25 homes is in the process of being repossessed by mortgage lenders, more than any other city in America.

Despite its largely desolate, unattractive and at-times dangerous downtown district, Stockton became popular with commuters pushed out of San Francisco's Bay area and Silicon Valley. The town, which was originally put on the map during the Californian Gold Rush in the mid-1800s, became popular again when new housing sprang up on the outskirts as builders took advantage of cheap land prices and potential homeowners sought refuge from price inflation in the major urban conurbations.

Today, that new gold rush is over. The city is hurting and the local economy is taking a nose dive. Just a fortnight ago, even the local Sheraton hotel - intended to be the centrepiece of a regeneration of its tired marina area - went into receivership.

The hotel was a victim of over-construction, notably the developer's desire to place 40 condo-style apartments on top of it and attempt to sell them for $750,000 (£380,000) each. The condos now lie empty and unfinished.

As I wander Stockton's inner districts on foot, the problems are clear. A classic American home with a white-picket fence and three bedrooms is up for sale for $99,950. It belongs to a local young family who over-extended themselves and couldn't afford their mortgage payments after the initial low interest rate was reset at a much higher one.

House prices here fell by 37pc in the three months to June, compared with the same period last year, according to the area's largest estate agent, PMZ Real Estate. It is questionable what value the banks are generating from foreclosing on homes rather than renegotiating mortgage deals. But foreclose they do, despite the fact that two of the banks in the city centre - Bank of America and Wells Fargo - continue to heavily plug new mortgages.

For Marian Norris, a local broker with Prudential California Realty, new lending remains a key part of the problem.

"There is no mortgage insurance," she says. "You just can't get it and so, without that, the customer needs to come up with 10pc down [deposit]. That might not sound like a lot but, when you're a family living on $35,000, it's an impossible amount of money."

But there is a glimmer of hope. She is seeing some evidence of prices bottoming in the sub-$250,000 market, partly because multiple buyers are now beginning to make offers on properties, a direct result of the exposure the city has received.

"There is a frenzy going on in some parts of town," she says. "The press says the market is bad but a buyer goes into a property and there are 15 other people standing in front of him."

However, such a disconnection between popular perception and reality is not the case in other parts of the market, where sales remain sluggish, she adds.

State Governor Arnold Schwarzenegger has recently given more funding to 39 Californian not-for-profit organisations to help those in trouble. One of them, Visionary Home Builders, offers counselling and assessment of the scale of individual problems. It helps people speak to their lenders to see if something can be worked out, which in many cases it can.

Visionary also builds houses and apartments that can be part-bought or rented at a reasonable rate, properties that are increasingly in demand as a result of the town's problems. A recent survey showed rents in Stockton last month rose 1.1pc as foreclosed former homeowners seek somewhere to live.

"Sure there's a problem," admits Robin, a local truck driver. "But locals are sick of talking about it. We all know it's a mess but we're fed up of hearing about it."

On an otherwise desolate street corner to the north of Stockton's downtown area sit three colourful buses in a car park. Some of the estate agents and mortgage brokers have started running bus tours of homes that are subject to foreclosure.

"Repo Home Tour" read the signs on the vehicles, which are daubed with pictures of people cheering and smiling - not quite the image one might expect given the grim subject matter in hand.

The business is run by two local mortgage brokers - Cesar Dias and Jorge Espino - whose business, Approved Financial and Real Estate, was simply a mortgage broker before the property market crash.

The previous night's tour visited Stockton's northern suburbs, with around 12 people on board, looking at 10 houses.

"It was great," smiles Espino, who explains the idea for the tours developed after their original business began to suffer. "There was a need to do some business; the market went crashing down and we needed to do something about it."

The Latino pair have become the unlikely poster boys of Stockton's foreclosure crisis, appearing on national television and in a cacophony of newspaper articles on the subject.

Many locals are clearly unhappy with the publicity they've received, criticising them as vultures who are preying off those worst hit. But the pair are helping Stockton by attracting buyers and clearing the backlog of properties which is keeping prices low.

Another estate agent says some sale prices are being inflated by buy-to-let investors but "the investment market is difficult because you need 25pc to 30pc down [in the form of a deposit], and to get a loan which is applicable for Fannie or Freddie coverage [the two main government-sponsored mortgage agencies], you can't own more than four or five properties.

"We need to get foreclosures out of the market; we need to get short-sales out of the market, and we need to get back to real buyers and real sellers, and some sense of normality. That is slowly beginning to happen."