Economy poised to shake off housing slump (except Lennar)

Tuesday, January 02, 2007 | 07:48 AM

The WSJ reports that the U.S. Economy is poised to shake off the housing slump and regain momentum by year's end. That's the  positive economic consensus that has formed as we begin the New Year. (see WSJ: Economy Poised For '07 Rebound, Forecasters Say; and NYT: Economists Cautiously Optimistic About 2007)

Hardly any of the dismal scientists expect Housing to be an appreciable drag on economic growth. Indeed, quite a few observers believe that the Housing sector has bottomed: Last week, the WSJ had two separate very optimistic columns on the subject:  End of Housing Slump Seems to Be Drawing Near (free) and Home Sales Bode Well for Big Picture (no pun intended).

The fascinating thing about these articles is that included charts that seem to belie the content of the column: I read these charts and simply do not reach the same conclusion as the author. As we discussed Saturday, sales remain in a downtrend, with inventory still near record levels:

20061228_sales_inventory

Charts courtesy of WSJ

>
~~~

Speaking of stabilizing Housing, since the Bottom is already in, I wonder what to make of this pre-announcement by Lennar, the  $8.3B homebuilder. This morning, they released preliminary numbers for the quarter ending Nov. 30 -- and they are a doozy:

"Lennar Corp., the fourth-largest U.S. homebuilder by revenue, will post a fiscal fourth-quarter loss after taking a pretax charge of up to $500 million to write down land it no longer intends to buy.

The loss in the three months ended Nov. 30 will be 88 cents to $1.28 a share, the Miami-based company said today in a statement.

When the company released its third-quarter results in September, Lennar warned it expected below-forecast earnings of $1 to $1.30 a share. Wall Street consensus was for lowered to $1.07, Not counting the $1/2B writedown, the
projected fiscal Q4 earnings are 70 cents to 75 cents a share.

"Market conditions continued to weaken throughout the fourth quarter and we have not yet seen tangible evidence of a market recovery,'' Lennar Chief Executive Officer Stuart Miller said in the statement.

I am once again forced to ask the question: You call this a bottom?

~~~

On a related note, here's a multiple choice question: Who is sleazier, Lennar releasing the news this morning, or the SEC, waiting until the day before the Christmas vacation to back away from their previously announced executive compensation disclosure plan?

>







Sources:
Home Sales Bode Well for Big Picture
Second Consecutive Rise Points to Limited Fallout From Market Slump in 2007
By CHRISTOPHER CONKEY
December 29, 2006; Page A2
http://online.wsj.com/article/SB116731180162761474.html

Lennar to Post Loss on Charge of Up to $500 Million
Peter Woodifield
Bloomberg, Jan. 2  2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=af8b3N2J7pqU&

End of Housing Slump Seems to Be Drawing Near (free)
Signs of Stability Emerge In Mortgages, Home Sales, Buoying Economic Prospects
By CHRISTOPHER CONKEY
December 28, 2006; Page A3
http://online.wsj.com/article/SB116722992975360513.html

Tuesday, January 02, 2007 | 07:48 AM | Permalink | Comments (37) | TrackBack (3)
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Listed below are links to weblogs that reference Economy poised to shake off housing slump (except Lennar):

» Lennar Posts Loss from TAM Money and Finance
Lennar (LEN), the big home builder announced a fourth quarter loss after it wrote down property investments and relinquished part of its stake in a company that controls 15,000 acres in southern California. Barry Ritholtz wonders aloud, ... [Read More]

Tracked on Jan 2, 2007 11:40:52 PM

» December auto sales from Econbrowser
Auto sales data released today look just great, as long as your name is Toyota. [Read More]

Tracked on Jan 3, 2007 7:57:22 PM

» Phantom Rebound in the Housing Market from The Big Picture
Dan Gross had a good Sunday Times piece on a favorite subject of ours: The Phantom Rebound in the Housing Market. Not surprisingly, it was on cancelled new home contracts. Which brings us to this morning's news:D.R. Horton orders tumbled 23%, and cance... [Read More]

Tracked on Jan 10, 2007 7:17:10 AM

Comments

Barry,

Do you know ECRI has flipped bullish and is calling for a soft landing? That's nothing to sneeze at. ECRI has a great record of predicting the US economy.

And Paul Desmond is also bullish for 2007.

Oy VAY! Get long & stay strong ;-)

The market climbs your wall of worry.


~~~

BR: ECRI never called for a recession -- they have been consistently in the soft landing camp . . .

Posted by: Mike S | Jan 2, 2007 9:42:47 AM

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