This excellent article from the Wall Street Journal covers the national situation well, although it is journalistic (negative). The lead off is again Toll Brothers slumping sales.

“It would be difficult to characterize the position of home builders as other than in a hard landing,” says Robert Toll, chief executive of luxury home builder Toll Brothers Inc., which reported yesterday that net income fell 19% in the third quarter ended July 31.

In his 40 years as a home builder, Mr. Toll says, he has never seen a slump unfold like the current one. “I’ve never seen a downturn in housing without a downturn in employment or… some macroeconomic nasty condition that took housing down along with other elements of the economy,” he says. “This time, you’ve got low unemployment, you’ve got job creation, you’ve got a stable stock market and relatively low interest rates.”

But then again, home builders had never raised their prices as fast as they did in 2004 and 2005.

On the other hand, if you as a home builder raise a model’s price $10,000 in one month and sales don’t decline, then you raise them another $10,000 the next month and sales still don’t decline, what are you going to do? Continue raising prices, of course… until people stop buying.

The run up in prices was demand driven. Now, at today’s higher prices and interest rates, demand is less. No rocket science there.

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