So all of those CEOs who say that they expect the spreads on their levereged bubble products to narrow in the (near) future, I suggest they surf on over to the Calculated Risk blog.
This year saw the smallest increase in sales from the Winter doldrums, to the Spring selling season, since the Census Bureau started tracking new home sales in 1963.
Note: Please see my earlier post for more on new home sales.
This graph shows the Not Seasonally Adjusted (NSA) new home sales for the last 45 years.
Usually sales increase in the spring - but not this year. The previous worst spring on record was 1982 - in the midst of a severe recession, with 30 year fixed mortgage rates at 17%, and close to double digit unemployment.
In 1982, sales picked up late in the year as interest rates declined sharply (30 year fixed rates fell from 17% to about 13% at the end of the year).
As far back as September of last year, I have been alleging that the real estate drop will be much, much worse than most pundits, analysts and investors were assuming. This was apparent as far back as the fall of 2004. The following graphics were from a post I made in October of 2007, to amplify points that I made in September.
I still stand behind these predictions, and if anything they were too conservative. When I made them, many thought I was too aggressive. Does it seem that way now? Wait until you see my opinion on what this will do to the global banking system.
As you can see, the homebuilders are tied by the nipples to residential real estate values. This just doesn't bode well for the leveraged public builders and for those will try and bottom fish in a dying industry that didn't have a publicly traded following just a few years ago.
These numbers seem to have been projected fairly accurately as well. Thus far, we're on track and pretty much exactly where I thought we would be - although I am still honing my investment thesis - its time to go global!