Wednesday, July 19, 2006

A Crepe?

The Stockton Record reports that new home sales are down 40% in San Joaquin County. More importantly, Sean "Soufflé " Snaith ditches the soufflé for a crepe!

Snaith, who coined the phrase "housing soufflé" to describe the cooling down of the market, now says that the housing market is more like a crepe - relatively flat. "It will remain a buyer's market, but we won't see this unraveling, which would be the case if a bubble were bursting."
Speaking of Snaith, a reader sent in a link to this article which has more information about Mr. Snaith's upcoming move.
Snaith, known for his colorful metaphors to describe economic conditions, said he will be eating some of his own "housing soufflé" - a term he coined for his quarterly forecasts to describe an over-the-top housing market coming to a soft landing, like a soufflé that stops rising after it's pulled out of the oven.

He said he bought a local home in May 2004, so his house got one year's worth of bounding appreciation before the red-hot local housing market cooled off and flattened last summer. "If I lose money on this, everybody's in trouble," he said with a laugh.
Is that a nervous laugh I'm hearing?

In other news, The Record reports that existing sales are down one-third and "the number of listings reached nearly 4,400 last month, up almost 3.5 times the 1,291 homes for sale in June 2005." "'I thought that would have plateaued by now,'" says Jerry Abbott, president and co-owner of Coldwell Banker Grupe, Stockton. ABC 30 says that the Fresno/Clovis area has broken a record with over 5,000 homes for sale. The Fresno Bee also has a report.

Redding's newspaper thinks the building boom may be over. Meanwhile, the Sacramento Bee and Sacramento Business Journal report on Sacramento new home sales.
New-home sales in Sacramento were down considerably in the second quarter from the same period last year, but rose sharply from the first three months of the year...Second-quarter sales were down 24.6 percent from the same period last year, when builders sold 4,143 units. For the first half of the year, builders sold 5,187 homes, down 42 percent from the 8,955 homes in January through June 2005...The average incentive increased more than $2,000 to $15,263 in the second quarter from the first quarter.
Finally, is the HELOC gravy train coming to a halt?
After tapping their home values for $22 billion in consumer spending during the recent housing boom, Sacramento-area residents have slowed their use of home-equity borrowing at twice the rate of Californians as a whole, according to a new report. The use of home-equity loans or home-equity lines of credit for everything from buying new swimming pools to paying off credit cards fell by about 10 percent from January through April compared to the same period last year, reported DataQuick Information Systems, a La Jolla housing consultant. The pullback means consumers may curb spending on retail mainstays such as furniture, boats and cars, as well as expensive remodeling projects, all of which could impact the economy.

The cooling market is cooling spending jets. The pace of consumer spending will slow as the housing market recedes from its recent highs, according to the preliminary findings of a study conducted by the USC Lusk Center economists. Mortgage refinance activity had dropped sharply in recent years. There is every expectation that it will continue to drop leading to a downturn in consumer spending on discretionary items including foreign vacations, luxury furnishings and entertainment, according to the report.


David said...

People are drinking this soft landing Kool Aid.

drwende said...

People drank the "housing fundamentals will keep prices rising forever" Kool Aid, too. Didn't change the facts.

Snaith was one of those mixing the Kool Aid and filling the glasses.

When ARMs reset to much higher payments and investors get tired of losing money on too-cheap rent, the souffle will become a cookie that fell out of the oven, hit the floor, shattered, and rolled under the refrigerator.

rocklin renter said...

It is really scary that someone who apparently has little grasp on economics 101 is allowed to lead an economics "forecast" center.

Really scary.

drwende: can he have some milk with his nasty floor cookie?

ali, in cali said...

This is a very comprehensive post; well done, Lander!

Anonymous said...

"It will remain a buyer's market, but we won't see this unraveling, which would be the case if a bubble were bursting."

DUH! I just love acadamia...

Spacebär said...

It is crêpe with an accent circonflexe, not crepe.