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Bloomberg TV

Thursday, September 08, 2005

Draconian Hovnanian

The US housing market is overripe and bound for a considerable slowdown. Witness one Hovnanian Enterprises, which has lots of activity in New Jersey and more in superhot California and Arizona. Today it sent the whole housing sector kaboodle reeling after announcing lackadaisical earnings and forecasts. Sooner or later, some sense was bound to creep into the real estate market which has owner/renter and income/house price disparities that are nearly beyond belief. Is this the start of rationalization? I think so; current events seem to have put the fear of God into people who spend well beyond their means. I Pulte da fools who Toll all day just to make ends meet paying off loans that KB adjustable rate or interest-only mortgages.

To reiterate, housing-related jobs have accounted for 40% of jobs created post-recession. If the housing sector stagnates, there's a good chance that more jobs aren't needed in an industry that's just treading water. Hence, even if housing prices don't diminish significantly a la the housing bubble scenario, considerable economic fallout will befall the US economy as a big part of it increasingly dependent on the housing craze peters out. For those who made a killing these past few years, I congratulate you, but all things must come to an end. (PS: Hovnanian common stock's ticker is HOV, so the Yahoo Finance! graphic is a bit misleading.)


Posted by Emmanuel |


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2 Comments:

At 5:27 PM, Blogger Professor Bear said...

Look around for a recent report out of Lehman Bros which estimates 70% of jobs & 70% of household networth gains since 2001 are due to the housing bubble.

 
At 5:43 PM, Blogger Emmanuel said...

Shall do, Professor Bear. I read a lot of the Morgan Stanley stuff for it's more readily available though this is definitely worth looking for.

 

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