Nothing 'new' here, other than the question of "is this really all priced in?"
I think on the surface the idea that "home sales are weak" is priced in, but its a matter of degree. Is the market truly understanding the depths of the situation? That without exotic mortgages than can no longer can be securitized and packaged to "innocent" hedge funds that homes are just plain unaffordable to most of the populace in most parts of the northeast, west, and parts of the south? Or is "all that" already priced in?
People keep focusing on the wrong issue - the main issue is and continues to be affordability. With a standard 30 year fixed mortgage home prices at these levels do not allow an influx of buyers. They just cannot afford it. Period. Now thankfully inflation is defeated so their real wages are rising astronomically so maybe in a few months this all goes away (sarcasm dripping).... also remember Hovnanian CEO told us the bottom is here... a mantra he has repeated quarterly for a year now.
The bottom line is the home builders are seeing the reality - they cannot move homes without severe price cuts - but existing home owners do not see the reality and in some cases cannot afford the reality to be true (see Chicago Tribune Story - "Here's a New One: Being Too Broke to Sell")
Folks, people are so leveraged they cannot afford the costs involved in selling their home - this is what the era of 0% down brought us. People don't save, they pull whatever equity out of their homes or go into homes (the past 3-4 years) with nothing down (heck the closing costs are rolled into the mortgage) - so now they cannot even find the money to pay the fees/costs that come with selling homes. It's bad. But this is "all priced" into the market.
- WASHINGTON (NYSE:AP) -- An index that forecasts near-term home sales fell in August to a record low as would-be homebuyers had difficulty getting mortgages. Economists said the housing market's woes show no sign of improving soon.
- The National Association of Realtors said Tuesday its seasonally adjusted index of pending sales for existing homes fell 6.5 percent from July and 21.5 percent from a year ago.
- Shapiro and other analysts expect prices to fall further before home sales rebound. Developers are already making big price cuts to move unsold new homes, but existing homeowners are more reluctant to do so.
- The problems, experts say, were seen especially in expensive areas where borrowers need to take out "jumbo" home loans above $417,000 that can't be sold to government-sponsored mortgage companies Fannie Mae and Freddie Mac
- In late August, the gap in mortgage rates between jumbo loans and "conforming" loans below the $417,000 limit widened to 0.93 percentage points, up from a typical level of 0.2 percentage points, according to financial publisher HSH Associates. That difference makes it harder for prospective buyers -- particularly in the pricey Northeast and West Coast markets -- to afford more expensive homes.
- In some areas, up to 30 percent of signed contracts fell through in August, said Lawrence Yun, senior economist at the real estate trade group.
- While the real estate trade group has forecast a recovery in home sales by next year, some investors see a long, deep housing market decline and a recession ahead. "The housing bubble has burst," said Peter Schiff, president of Euro Pacific Capital in Darien, Conn. "Prices are going to collapse and sales are going to fall through the floor."
Oh you pessimist you, Mr Schiff. The market has told us this is all taken care of. Helicopter Ben to the rescue. What's that? Pimco Bond uber god saying Fed has to cut rates to 3.75% - woo hoo! (read Bill's latest missive here) Remember, bad news is good news. Party on Garth!