September 25, 2008
U.S. New Home Sales Continue To Decline, Builder Angles For Bailout
The pace of new home sales in the U.S. were down 35 percent on a year-over-year basis last month (“the lowest annual rate since the 1991 recession”) led by a 36 percent drop from July to August in the West.
Lennar Corp., the second-largest U.S. homebuilder, this week reported its sixth straight quarterly loss and said the government must take measures to boost home prices that are down by nearly a fifth from their 2006 peaks.
"Consensus is building that falling home prices are not only detrimental to the economy at large, but in order to repair our failing financial system we will have to stop the decline," Chief Executive Officer Stuart Miller said.
No word on whether or not Mr. Miller would be willing to help fund such government “measures” by donating the record monies earned by Lennar prior to said decline.
∙ U.S. Economy: Home Sales, Durable Goods Orders Drop [Bloomberg]
First Published: September 25, 2008 10:30 AM
Comments from "Plugged In" Readers
why not give them the bailout? heck, give everybody a bailout.
I've noticed that the WhizBurger on south van ness has been looking a little run down of late. they have my vote for top bailout priority. if they close it'll be a national catastrophe.
Posted by: ex SF-er at September 25, 2008 10:49 AM
"the government must take measures to boost home prices"
It's called capitalism and a free market you twits. You build 4 times the number of homes then is needed in a local market, a la San Diego, guess what? Prices will decline, it's econ 101. Maybe, they should have read up on supply and demand before opening that construction biz.
Posted by: badlydrawnbear at September 25, 2008 10:55 AM
badlydrawnbear: you are so unAmerican.
what, do you want cheap houses so that Al Qaeda can move in next door to you? Because that's what'll happen. Al Qaeda loves cheap housing!
The only thing keeping Al Qaeda from being your neighbors is the $700 billion that Hank Paulson will benevolently give to Goldman Sachs.
whew! I'm glad that crisis is over. I hope they have a few hundred billion for Whizburger though... because I sure would hate to live without their Whizburger. (it really is great... big burger, avocado, mmmm....)
Posted by: ex SF-er at September 25, 2008 11:17 AM
Wow. That really takes Chutzpah. I see from Lennar Corp's filings that Mr. Miller was paid about $1,000,000 last year in compensation, not counting stock options.
Presumably, while he was a student at Harvard University, Stuart Miller took economics, and therefore understands the concept of 'price discovery'. Presumably he understands that the bubble of the last few years was built on an economically unstable basis of NINJA loans, Alt-A mortgages, etc. that need to be shaken out of the system before real prices for new homes can be determined. Stopping the decline by government fiat won't help the situation.
Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.-- Andrew Mellon
Posted by: Brahma at September 25, 2008 11:17 AM
Bartender - another round of bailouts for everyone...it's on me!
Maybe we should start a list of everyone who needs bailouts: banks; insurance companies; homebuilders; hedge funds (experiencing record redemptions); Ford, GM, and Chrysler; airlines; etc...
Posted by: Dude at September 25, 2008 11:19 AM
In all seriousness there is no reason to bailout home builders as there is justification with Banks and AIG
The barriers to getting into the home building business are quite low. Next upswing there will be no problem finding a new generation of hucksters to build McMansions for the masses. We really don't need them now anyway
Posted by: Zig at September 25, 2008 11:52 AM
call them a whaaaaambulance.
Posted by: waiting for the bottom at September 25, 2008 12:08 PM
Banks? I sure hope your not meaning portfolio lenders.
Posted by: Michael L. at September 25, 2008 12:15 PM
If all this comes to pass then the taxpayers will need a bailout funded by ... oh dash ! Scrap that.
Posted by: The Milkshake of Despair at September 25, 2008 12:16 PM
The only way to get housing prices to rise is to destroy housing. I wonder when someone will propose that the government pay builders to take buildings apart?
Posted by: Jay at September 25, 2008 12:31 PM
There are other ways to stop the decline. Fueling inflation is one, but that is not easy to do under present circumstances and appears to be off the table. Throwing out lots of cheap, easy, low-down loans a la 2003-07 is another. I don't see that happening any time soon, but it is one option that I don't think is clearly off the table in the bailout mindset -- this is what Stu is asking for. The better bet is for the declines to continue to accelerate.
Posted by: Trip at September 25, 2008 12:41 PM
Falling home prices are detrimental to the economy.
So are home prices inflated by easy loans, as recent events suggest.
Posted by: Malachy Walsh at September 25, 2008 2:03 PM
What are you talking about? In my estimation, fueling inflation is the ONLY way we are going to get out of this. Spending hundreds of billions of dollars will only put downward pressure on the dollar, upward price pressure on commodities and cause an inflation surge.
Besides cutting housing supply, the only way to maintain prices is to print money, more or less.
Posted by: jessep at September 25, 2008 2:25 PM
Jay: Actually I have read serious proposals to deal with the free fall of housing prices in some areas by bulldozing tracts of housing. In my view that is so absurdly wasteful, it makes no sense. But it has been proposed.
Posted by: NoeNeighbor at September 25, 2008 2:28 PM
A great place to track US housing stats is OFHEO. They publish a US Monthly House Price Index.
You can get on their mailing list and get it every month.
They group California in the Pacific Census Division with Hawaii, Alaska, Washington and Oregon.
Posted by: Katy Dinner at September 25, 2008 8:29 PM