While I’m not a fan of negative, “gloom-and-doom” news, the responsibility I have to my readers is “tell it like I see it.” Nothing more, nothing less.
And right now, I see something happening in the housing market that look doesn’t look good at all. Here are just three newspaper headlines from this past week:
“Sales of luxury homes slump… Lockout by NHL doesn’t help.”
“Housing market cools off.”
“Rising rates take a toll on housing.”
Here’s some additional news about the housing market you might not read elsewhere:
— One out of every three buyers who signed a contract for a new Dominion home in Ohio walked away from their deals this past summer.
— Pulte has cut prices by 5% to 25% in some areas where it builds homes.
— The number of new listings on the MLS now outweighs the number coming off. Houses are taking much longer to sell now than they did just a few months ago.
— Most frightening to me, the Dow Jones Home Construction Index, which includes the biggest home builders in the U.S., collapsed over the past two weeks. We are talking about a 9% decline in only two weeks! Pulte and Toll Brothers, two very large American new home builders, got hit particularly hard.
The stock market is telling us trouble lies ahead for the new home builders–which will ultimately lead to softer demand and easing prices.
What’s causing the housing market to soften? Yes, higher interest rates ahead are making consumers worry. But it’s the economy that just isn’t performing. Planned job cuts jumped to 41% in September 2004 from September 2003. U.S. companies have now announced a total of 724,000 job reductions since the beginning of 2004.
While some readers, especially in California, may comment on how hot the housing market is in their area, Pulte and Toll Brothers build in numerous areas, so they are a good gauge of the general U.S. housing market. And it doesn’t look good. The coming glut of homes is just starting to get underway.