Re: [CANSLIM] Worley's Weekend - New home sales

From: "Bill Triffet" <btriffet@earthlink.net>
Subject: Re: [CANSLIM] Worley's Weekend - New home sales
Date: Sat, 22 Dec 2001 11:40:41 -0800

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Hope this doesn't go too far off topic but...
I would think there are other factors affecting home builders. A big one for
many is driving distance. In the most populated areas of the country
"affordable" housing in generally built on the outskirts. Here in Los
Angeles, that means a 50-60 mile commute. Most folks here buy existing homes
(as I just did 3 months ago).

On a personal note: I consider most new homes to be quite inferior in
regards to construction compared to the older ones (no disregard for your
families business btw). My last house was built in the 40's. It withstood
every earthquake since then. My "new" home was built in the 50's. Same
situation. Plus, the big feature - character.

My main point is that existing home sales may have a larger impact on the
economy just by the shear volume. I will still need (need???) new furniture,
paint, carpet, and lets not forget my new financing I did as well. Add to
that, I sold my last house to someone coming from an apartment so there lies
more economic stimulus as well. Besides, I don't think homebuilders were a
good indicator of the 90's bull market.

- -Bill Triffet




- ----- Original Message -----
From: "Katherine Malm" <kmalm@earthlink.net>
To: <canslim@lists.xmission.com>
Sent: Saturday, December 22, 2001 10:02 AM
Subject: Re: [CANSLIM] Worley's Weekend Weeview


Hello Tom,

At last, I am compelled to comment on your excellent WWW...

The normal figure bandied about on spending related to new home purchases is
6 to 1. If I spend $100K on a new home, these dollars will recirculate 6
times into the economy. (Wonder how many times your pentium purchase
recirculates?!) So, seeing a marked downturn in the home figures would
really worry the economists. Greenspan, in particular, focuses on this and
was quite worried when long term rates remained sticky, despite the lowering
of short term rates. I still see the strength in recent home sales
reflecting the "hurry up and get it done before the rates go up again
syndrome." In Austin, for example, the homebuilders have been in aggressive
selling mode for quite some time. Every day, the deal is sweetened. $10,000
in extras! First two years financing at 4%! Cash at close to cover your
moving expenses! Free maid for life! (Well, I made that one up.) Bigger
homebuilders make most of their money not on the home, but on the financing.
If they are having to lower mortgage rates to lure the customer, their
margins are going to be squeezed going forward. That means in the coming
year, the homebuilders will have more difficult Q over Q or Y over Y
comparisons. Also, my own family owns a construction business, so I have
seen these cycles first hand. You are right that the consumer seems willing
to take on the additional debt and I think that, along with other economic
indicators, says that the economy is far from plunging into the depths. But
these things don't necessarily translate into good equity investments.

Happy Holidays,
Katherine



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