June 20, 2006 at 6:46 AM #6752June 20, 2006 at 6:58 AM #27209AnonymousGuest
Would this be an example of how it is “sticky” on the way down?June 20, 2006 at 8:19 AM #27211carlislematthewParticipant
It’s interesting that starts went up at the same time as permits went down. Perhaps the builders are starting to worry more so they are rushing to complete a bunch of projects in the hopper before prices come down and limit their profits. After all, I have to assume they already own the land.
This also could all just be a little bit of volatility in the mix, but 15.8% in the west is quite a number! Could just be weather, as mentioned in the article. Or perhaps the housing market, nationally, is not as weak as some propose.
Anyone know where we can get these figures, but specific to San Diego?June 20, 2006 at 9:28 AM #27215BugsParticipant
The Pacific Northwest markets are still on fire and there are still some builders more locally who are too far into the process to turn back. They know they need to build and get out ASAP.June 20, 2006 at 11:51 AM #27222CarlsbadlivingParticipant
George Chamberlin was actually discussing this this morning. He couldn’t wipe the smile off his face. I hate that guy. He doesn’t have a clue. Housing starts doesn’t mean anything. If anything it means that plenty of projects were started during this boom and they are now coming to fruition. The entitlement process (especially in So Cal) can take up to 5 years. Developers aren’t going to walk away from projects after spending many years and million of dollars just because the market starts to change. They’ll rush to build what’s finally been approved, discount if necessary, and get out.June 20, 2006 at 11:58 AM #27225SellandWaitParticipant
This dispels the myth that builders are not over building this time around. The planning, design, and infrastructure that goes into their projects and the greed factor will always prevailJune 20, 2006 at 12:31 PM #27229
It’s all been in the pipeline. What would you expect them to do? They are builders…that’s what they do. Did you expect them to open produce stands on their land?June 20, 2006 at 2:29 PM #27240BugsParticipant
I hate to keep reverting back to the cars analogies, but this looks just like when the automakers were canibalizing their future sales volumes in order to book the volumes for the current quarter. Adding to the inventory imbalance right now is only going to make it harder to recover.June 20, 2006 at 2:40 PM #27242mrquoiParticipant
A large chunk of that is probably Utah, where the market only warmed up about a year ago and is currently on fire. People are paying $400K for A-frame shacks with a woodburning stove and tin roof on .5 acres in the middle of nowheresville (where my relatives live), not near a ski resort, grocery store, anything nearby. IIRC the same thing happened last time around in the 90s — the money sloshed out of California, into Arizona and up to Utah and Idaho. And then the bust followed the same path.June 20, 2006 at 7:25 PM #27254
from the webpage of Bill Fleckenstein, 6/20/06
“Holy Sheetrock, Commerce Dept!
Today’s economic data, in the form of housing starts, illuminate a point I’ve touched on recently, which is the sad reality that government data are nearly useless. The Commerce Department would have us believe that housing starts actually increased 5% last month — when virtually all publicly traded homebuilders have discussed the serious weakness in their orders.
While I suppose it’s possible that the homebuilders have essentially said: Damn the torpedoes, full-speed ahead and continued to start new homes, even as orders drop, that will only make matters worse. In either case, today’s starts data do not accurately reflect the current reality of the homebuilding business.
Were it not for the fact that government data — distorted as they are — matter to those who trade markets that I care about, I would ignore these statistics altogether. So, for folks who are making decisions based on government data, be forewarned.”June 21, 2006 at 10:15 AM #27271
Funny but Bill sounds oddly like me. I have been saying all along that the data is a joke. What I find interesting is how an individuals bias impacts their interpretation of information. Another poster had a term for it but it’s escaping me right now.
It reminds me of an old joke.
A guy walks into his CPA and asks him what does 1+1=? The CPA walks over to the window, lowers the shade and says “Whatever you want it to!”
Use caution in interpreting any data…that which you don’t agree with as well as that which you do agree with.June 23, 2006 at 9:28 PM #27335
Barry at the Big Picture (bubble blogger link) explained that the housing starts only make a trend with 6 months of data. This one month is considered an outlier. I expect to see a much lower starts figure for June.
sdr, if you don’t believe in data, what are you doing over here? What do you think of Rich’s data?June 24, 2006 at 9:43 AM #27349
I beleive in data just not RE data self report by realtors and containing numerous flaws and complexities. I think Rich does a very nice and thorough job of analyzing flawed data. I think what I see very day in action is a far more accurate and up-to-date picture of what’s happening. For eaxample, I saw numerous 50K+ price reductions in prime neighborhoods this week. While the old prices were too high, the new prices are below comps and peak prices. Sellers are starting to get that the peak selling season is almost over along with their best chance at getting the best price they will see for a while. I have a handful of very grateful clients that sold for great prices in the current market as well as a few stubborn ones that wont listen. I also have many clients comfortably sitting on the sidelines and waiting until late Fall (perhaps later).
As I’ve said many times before, I’m here to learn what is in the heads of the lay public particularly those that are at the forefront of following the housing market like most of the participants here. I have learned alot and appreciate the participation of all of you including those that disagree with me (perhaps even more so!)June 24, 2006 at 10:40 AM #27350AnonymousGuest
SDR – It is refreshing to me to hear from a realtor who is being completely honest about the current state of things. My best friend, who I have alluded to in the past, is a commercial RE broker in Newport Beach. I have nicknamed him Sunshine due to his dire predictions for RE in the future.
He tells me “blood is going to be in the streets in a couple of months.” He is a guy who deals with the really big money, having been involved in over 1 billion dollars of RE transactions last year. I know it sounds like a ridiculous number, but he is one of the top brokers in the country. He does transactions nationwide due to his notoriety. I cannot reveal his name. He does business with the Simon brothers and these types of people.
He has a good pulse on the institutional buyers, pension funds, etc.. as this is who his clients are. He tells me the underwriting of large RE transactions has changed dramatically in recent months. This is the beginning of the end in his opinion. In fact, here is an interesting statement he made recently. “The commercial real estate business is already in a recession, people just do not realize it yet.” I find that comment amazing when I drive around and see all of the new construction going on. Time will tell if he is right or not, but he is a tough guy to bet against. I have known him for many years, and he has never been wrong about anything RE related that I can ever remember.
He also has an interesting take on Donald Bren’s buying of properties. He is of the belief that Bren thinks his siblings are not capable of carrying on the legacy properly. As a result, he is using his 2 Billion dollar annual cash flow on his portfolio, to build a huge RE trust. This trust will fund many charitable things going forward, and cement his legacy for all time. Over paying for a property is irrelevant to him, he just has to get them at any price, now. Therefore, do not read into his actions, a bullish view on commercial RE.
I for one wish we could somehow eliminate the squabbling that goes on in here, but it somehow is the nature of the beast in online forums like this. Many trading chat rooms have blown up over personality conflicts. It appears we have weathered the storm here. I hope so. Thanks to everyone for the good postings.June 25, 2006 at 5:12 PM #27377
I have an idea for preventing squabbling. Let’s rely on the community to monitor its members. When Member1 writes an inappropriate remark about Member2, Member3 will write, “Member1, please stay on topic”, or some other polite request. Only one person would make this request, so there is no ganging up on Member1.
This strategy uses the power of group pressure to keep everyone behaving, knowing any fighting he starts will not be tolerated by the group. Member2, the offended person, trusts that the group is there for him and won’t retaliate, preventing escalating of squabbles.
Social behavior of anonymous internet forums is new to us. We’ve mastered social interactions in kindergarten, work, family, neighborhoods, and pleasant exchanges with other shoppers in the grovery store. We learned social cues and signals, proper responses. We sought to be be nice and polite, so people would like us.
Yet in this anonymous forum, being right often triumphs being nice. We intelligent and otherwise considerate adults are less clear about getting along online.
No hurt feelings if better ideas are offered…
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