Economic Denial From Home Builders

3 Comments

Logan Mohtashami, Benzinga Contributor
Today CNBC’s Diana Olick shared with her Twitter followers the point I had made about Economic Denial.   You can read her tweet and see the facebook  link below.

Diana Olick:  This is astounding proof of the disconnect between home builder sentiment and reality. Thanks to Logan Mohtashami for sending.

https://www.facebook.com/DianaOlickCNBC

So what was this point?

The chart shows the home builders’ confidence index has gone parabolic from single family starts. New home sales have recently taken a hit and the home builders themselves blame higher mortgage rates. However, the point I have always tried to make is that the home builders know in the back of their mind that there are millions of homes that will come to the market in the next few years. So, even though home prices and sales have been rising, total housing starts are nowhere near the 50 year average of total starts which is roughly 1.5 million. We are roughly at 900K so far for total starts.  We still have the housing bubble hangover and this is why residential construction hasn’t been booming. There is supply out there that is just not ready to come back to market yet.

The chart comes from Bill Mcbride http://www.calculatedriskblog.com/
As you can see there is a big disconnect between  confidence and economic reality.  While you’re at it,  take a look at the duration of the chart as well.

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3 thoughts on “Economic Denial From Home Builders

  1. I don’t believe it’s a disconnect with reality. I believe it’s the entrepreneurial spirit within the homebuilders…I believe after 7 looooooooooooooooooooooooong years of getting there asses handed to them year after year, quarter after quarter, month after month, it’s gotten to point that they HAVE to show, preach, sing, pray, shout POSITIVE otherwise the creeping feeling of what’s actually happening to their industry will take hold and the outcome of that is total devastation. Imagine the horror Thomas Andrews (the designer of the Titanic) went through after learning one to many water-tight bulkheads were breached and yet he knew their weren’t enough lifeboats to save all the passengers. He remained calm and steadfast and directed people to the boats knowing he was going down with ship. Now imagine what would have happened if he lost his mind at that moment….CHAOS.

    No…it’s not a disconnect….it’s a pep-rally cry!!

  2. Pingback: Confounded Interest | Homebuilder Sentiment Plunges In February Despite Massive Fed Intervention

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