Catherine at the Arizona Republic has a blurb on what the bottom might look like.
• The number of resales on the market falls below a seven-month supply.
The Valley has 55,000 existing homes for sale, a 14-month supply.
By the time we get to 7 months supply, everyone and their brother will have long known the market has turned. We just need to see the supply starting to fall to see the “recovery” is beginning.
• Home sales need to stop slowing.
Resales rebounded slightly in October, according to the realty-studies group at Arizona State University. New home sales have held steady since summer, according to RL Brown’s Phoenix Housing Market Letter.
The number of home sales should be a bit better in 2008 (my guess) because prices are lower and there is a lot of pent up demand, but the increase won’t be enough to stop the downward price pressure caused by the huge inventory of homes for sale.
• Affordability improves dramatically.
The median Valley home price fell to $242,000, its lowest level since 2005. That’s definitely an improvement for fledging home buyers, though most homeowners are still cringing at the drop.
Look for further declines in 2008. That does NOT mean every home is overpriced. That means you need to buy at the 2008 price today.
• At least one major home builder goes away.
This hasn’t happened yet, though market watchers say some builders are about to consolidate.
Wow! I thought I was the only one looking at home builder bankruptcies as a good thing.
He saw Taylor Woodrow and Meritage merge but none of the big boys have gone over the edge yet.
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Cbass 12.03.07 at 11:59 am
It looks like Lennar knows how to move property? Drop the price!!!
“NEW YORK (CNNMoney.com) — In another sign of the collapse of the market for new homes, builder Lennar Corp. has dumped a portfolio of 11,000 properties for 40 percent of their previously-stated book value. ”
money.cnn.com/2007/12/03/news/companies/lennar_morganstanley/index.htm?postversion=2007120310
John Wake - Real Estate 12.03.07 at 1:39 pm
There’s been a lot of machinations from homebuilders lately as they try to stack as many of their losses into this current fiscal year so next year and they can say they’ve turned it around.
Better news would be a homebuilder going into bankruptcy.
Brian McMorris 12.04.07 at 8:44 pm
Lennar is just one of the eligibles for bankruptcy. There are many more: Standard Pacific, Hovnanian, Beazer, WCI, Pulte, I am sure other smaller builders I don’t read about. The Q3 financials on the above are dismal. And the Q4 promise to be worse.
I don’t think they are doing window dressing for 2008 as you suggest. I think they are nearing negative net worth in many cases, so should be preserving capital, not dumping it for the sake of stock price. But they don’t have an option and do whatever they can to keep cash flowing to pay their bills.