Thursday, July 26, 2007

Bad news keeps on coming

The Dow was down as much as 390 as I wrote this. I think we've been seeing lower-priced Westside sales already slow from tightening credit, and a falling stock market will finally rein in higher-priced sales. (The clouds are for variety to Wile E.)

The LA Times today covered two main issues (familier to us but good to see vividly in the MSM). Also see Market Ticker for vivid commentary, Calculated Risk for their usual insight, and Paper Money for detail on the new and existing home sales reports.

"[Housing] Industry's foundations get shakier"

For the housing industry, the bad news just keeps on coming.

Three major home builders reported quarterly losses Wednesday, and a real estate trade group said that nationwide sales of existing homes fell to their lowest level in nearly five years. ...

... some analysts ... expect inventories to rise again as adjustable loans reset to higher rates and many homeowners find themselves unable to make the payments.

"We expect inventory levels to increase based on the credit issues with the increasing level of mortgage resets in the coming months through spring '08," building analyst Daniel Oppenheim of Banc of America Securities wrote in a note to clients.

"We think inventory is the best indicator of future pricing trends — excess inventory equals lower prices ahead," he added. ...

Meanwhile, the supply of unsold homes nationwide was at 8.8 months in June, the same as May, but that was up 40% from a year ago, the Realtors said.

"These higher prices did not allow the market to absorb the excessively high inventories, which stand at levels not seen since 1991," said Carl Reichardt, an analyst with Wachovia Securities who said affordability is one of the most significant roadblocks facing the industry as it struggles to recover.

Southern California has a 12.6-month supply of unsold existing homes, about double the inventory from a year ago, according to a sampling of for-sale listings taken by the California Assn. of Realtors. ...

"Another possible phenomenon that we cannot get our hands around is whether these are financially troubled home sellers leaving the [multiple-listing service] environment because they are being foreclosed on," Veling added. "Some of these homes are not in the MLS now but will come back as bank-owned." ...

During the worst of the Southland's last housing downturn in the mid-1990s, inventory maxed out at 19 months of supply, with foreclosures accounting for about a third of the homes, Veling's statistics show. Today, the proportion of foreclosures or bank-owned properties on the market is less than 10%. ...

"Chrysler sale financing is reworked"

Chrysler Group's sale to Cerberus Capital Management will be completed after banks agreed to keep $10 billion of loans that investors refused to buy....

Cerberus and DaimlerChrysler, the German parent of Chrysler, agreed to assume an additional $2 billion of loans, the investors said. In the event of a bankruptcy, the private equity firm and the automaker will be repaid on those loans before the banks get their money back. ...

Cerberus ... couldn't find buyers for the Chrysler loans even after twice raising interest rates.

Auburn Hills, Mich.-based Chrysler joined almost 40 companies that have reworked or abandoned debt offerings in the last three weeks. ...

1 comment:

Anonymous said...

For those familiar with the San Diego market, Coronado is one of the most expensive and high end areas. It is an island across the water from downtown so they certainly aren't making any more land. The way people talk about Coronado (and La Jolla/Del Mar) is similar to how they talk about the westside (SM, Palisades, etc). Well, here are some examples of that "bulletproof" market showing stress. It is important that people understand that high end areas will very likely suffer large declines.

http://bubbletracking.blogspot.com/