Analysts say that the housing market has not recovered yet and that it will be next year before any improvement is seen.
The outlook for the home market dimmed this week as residential construction and mortgage applications fell and loan delinquencies reached a record.
"I don't think the housing crisis is over," Mark Zandi, chief economist with Moody's Economy.com, said in a telephone interview. "I think we’re going to see another leg down."
New home sales may begin to pick up by the start of the so-called spring selling season, said Toll Brothers Inc., the largest U.S. luxury homebuilder. Existing house sales may take longer. Residential construction and property sales led the way out of the previous seven recessions going back to 1960, said David Berson, chief economist of PMI Group, the mortgage insurer in Walnut Creek, California.
Mortgage applications for home purchases fell to a 12-year low last week and foreclosures rose to record highs in the third quarter, according to reports from the Mortgage Bankers Association.
An index measuring November homebuilder confidence came in lower than the median forecast of 45 economists this week. The Commerce Department on Nov. 18 said residential building dropped 11 percent in October to the lowest level since April’s all-time bottom.
Unemployment is at a 26 year high, which is driving more homeowners into foreclosure and keeping new mortgage applications low. The U.S. has lost
7.3 million jobs since December 2007. That is a record number not seen since the Great Depression.
Marketwatch reports that new home sales have fallen after five straight months of gains. New home sales fell 3.6% in September, 2009 compared to August, 2009 and 7.6% compared to September, 2008.
The decline in new-home sales to a seasonally adjusted annual rate of 402,000 was well below the 438,000 pace expected by economists surveyed by MarketWatch. New-home sales in August were revised to a 417,000 level compared with the previous estimate of 429,000. This is the first decline in new home sales after five consecutive monthly gains. New-home sales are down 7.8% compared with a year ago.
This news combined with yesterday's report of falling consumer confidence has sent stocks falling but it is not surprising considering that new jobs are not being created to pull the economy out of the recession.
The L.A. Times has an interesting article
about people with excellent credit scores who default on their mortgages. These are not people who can't pay their mortgages because of job loss or medical bills. This class of defaulters are sophisticated borrowers with prime credit. They know that defaulting on a mortgage will ruin their credit for ten years, but they see it as a business decision that's worth it when their houses become less than what is still owed to the bank. A new study found the following:
-- The number of strategic defaults is far beyond most industry estimates -- 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year's fourth quarter.
-- Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they've fallen behind on other accounts.
-- Strategic defaults are heavily concentrated in negative-equity markets where home values zoomed during the boom and have cratered since 2006. In California last year, the number of strategic defaults was 68 times higher than it was in 2005. In Florida it was 46 times higher. In most other parts of the country, defaults were about nine times higher in 2008 than in 2005.
*****
-- Strategic defaulters may know that their credit scores will be severely depressed by their mortgage abandonment, Tantia said, but they appear to look at it as a business decision: "Well, I'm $200,000 in the hole on my house, and yes, I'll damage my credit," he said of defaulters. But they see it as the most practical solution under the circumstances.
Strategic defaulting on mortgages is nothing new. Experts say that this new study by Experian-Wyman is going to be used by lenders to deny mortgages to people with perfect credit on the grounds that they might default. The mortgage lending world has truly gone nuts.
Bloomberg reports that Lowe's recorded a small profit in its latest quarter ending July 31st but it was a smaller profit than analysts were expecting. Lowe's sales for the quarter plunged 9.5% at stores open at least 13 months. It was the 12th straight consecutive quarterly decline for the home improvement retailer.
Lowe's and larger rival Home Depot Inc. are competing for shoppers, who are taking on fewer large remodeling projects during the housing slump. Sales at Lowe's in the three months ended July 31 fell 4.6 percent to $13.8 billion, also trailing estimates.
"This is worse than expected," Colin McGranahan, an analyst with Sanford C. Bernstein & Co. in New York, said in a telephone interview. "It's a disappointment, but it's obviously macro driven."
The housing market is still weak so it would be wrong to expect Lowe's to be doing well. Sometimes the threat of a hurricane can boost sales for retailers like Lowe's and Home Depot but a huge storm is not exactly something one should be hoping for.
The Wall Street Journalreports that Lowe's recorded a 22% decline in fiscal first-quarter earnings. The losses were not a surprise given the weak housing market. Lowe's thinks the housing market is going to improve. They released a more optimistic profit outlook for the rest of the year.
Lowe's said it now expects fiscal-year earnings of between $1.13 and $1.25 a share, up from February's reduced estimate of $1.04 to $1.20. "With consumer confidence having rebounded off its historic lows and some encouraging signs in housing, we may have hit the bottom, but how long we bounce along the bottom still isn't clear," Lowe's Chief Executive Robert Niblock said in an interview.
Mr. Niblock said he expects housing sales declines to bottom out in the first half of the year, housing prices to hit their lows in the first half of next year, and the unemployment rate to peak in the middle of 2010.
Lowe's first-quarter earnings and its guarded optimism about the housing market helped spark a rally in the stock market, with the S&P 500 index rising nearly 3%. Shares of Lowe's, the second-largest home-improvement retailer by sales behind Home Depot Inc., climbed 8% to $19.94 in 4 p.m. New York Stock Exchange composite trading. Home Depot reports results Tuesday.
Raising estimates is risky because if Lowe's is unable to match them its stock will take a hit when earnings are reported. Builders are optimistic that the housing market is about to rebound even though there is no sign that the pace of layoffs is slowing.
Stocks have been rising lately and a slight uptick in home sales has raised hopes that the housing market free-fall might be finally slowing down. Real Time Economics, a Wall Stret Journal blog, also has a post about a turnaround in California's housing market. Don't get too excited yet though. The job market is still worsening and there are analysts and experts who expect the market to swing back in the opposite direction again.
Book Titles Show Housing and Stock Market Hysteria
The Nobody's Business blog has gathered some book covers that show some overly-enthusiastic housing and stock market books that were being published before the housing bubble burst and the recession began. If you start seeing book titles like these again in the future you will know that another bubble is about to burst. (via Boing Boing)
Bloomberg 
