October 16, 2007

Wake Me When It's 2010, Please

A COUPLE of new reports on the state of the housing industry piqued my interest today. The first article looked at homebuilders' expectations about market conditions for the next six months, as well as data about new home sales. The second article is a more positive look -- for builders, anyway -- at the dynamic between those building new homes and potential buyers.

The first article, from the Associated Press, reports homebuilders' confidence is at an all-time low, at least since the index tracking it started up in 1985. The National Association of Home Builders said its confidence index, on which 50 is a neutral indicator, fell to 18 in October, which I suppose is somewhere between "despondent malaise" and "Biblical lamentations." Along with that news comes word that home sales in Southern California have dropped to their lowest level in two decades, which only adds to the gloom.

With all this grim news, a corresponding article from Forbes seems a bit oddly upbeat. Here's the gist of the story:

“Builders in the field are reporting that, while their sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values,” said NAHB President Brian Catalde.

Consumers are still trying to get the best deals they can, said NAHB Chief Economist David Seiders, and many may have unrealistic expectations as to prices for new homes as well as what they can get for their existing homes.

The good news Seiders said is that builders expect sales conditions to remain stable in the next six months instead of decline further. NAHB’s housing forecast indicates the second half of the year will show significant improvement.

Now that's an interesting assessment. Mr Seiders seems to suggest that buyers are overly optimistic about what they can get for their own homes, while overly optimistic about how much cash they can squeeze out of the homebuilders looking to dispose of inventory. Well, if that ain't human nature, I don't know what is.

Of course, I realize much may change over the next several months -- few people want to buy homes in winter, after all -- and spring may dawn with a renewed confidence in the markets and the economy, and God may smile upon the land, and the people may march forward into the future with renewed optimism and hope. That would certainly boost the housing market.

Still, I'll believe it when I see it. One reason I have not actively pursued buying a home is because I don't want to catch a falling knife, and buy an asset that keeps dropping in value. If I must buy property, I would much rather buy on the upside. (Of course, there's also that no wife-no kids thing, which is the overriding thing at this point).

But another big reason is my own uncertainty about the future. Will I meet a girl and get married? Will my job still exist in the same fashion five years from now? Will the dynamics of the market change? Will my own circumstances change? Will I find myself here in Manchester in five years' time, or in Memphis or Ann Arbor or Rochester or Tucson? Those are a lot of things to keep in mind. They change that home-buying dynamic from a matter of watching a teakettle slowly move to a boil to a matter of watching several pots on a range, and hoping one of them doesn't spill over its top. If a lot of other people feel the same way I do, then one can expect continued turbulence in the market ahead.

That's a big if, I suppose, and only a fool would rule out completely the idea of the housing market suddenly roaring again in six months' time. As the proverb goes, brag about next year and the devil laughs. Still, at this point, I think I'm better off staying put until 2008 or 2009 or even 2010 -- or about the time I buy a ring, whichever comes first.

Posted by Benjamin Kepple at October 16, 2007 11:15 PM | TrackBack
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