Monday, May 18, 2009

Truly Silly Headline from CNN on Homebuilder Sentiment Numbers: Who are They Kidding?

"Homebuilders' confidence rose in May - the second consecutive month - boosted by first-time homebuyer tax credits and a more affordable housing market, according to a report released Monday.

The National Association of Home Builders/Wells Fargo said its monthly index rose two points to 16 after having jumped five points in April."

To read the rest of the article from CNN, go here.

Um, excuse me but any score under FIFTY on the NAHB sentiment index implies more builders than not believe conditions are POOR. A rise from 14 to 16 points is not just statistically insignificant, it implies conditions are truly bad. Spring is the ideal buying season for homebuilders and the index is stuck below 20???

But check out CNN's headline on this article. BEST CONDITIONS IN A LIFETIME. For what? Building a home? There is so much excess inventory in most cities a sponge the size of the moon would not soak up all the surplus housing. Best time to buy a home? REALLY? With prices of housing still falling, tight mortgage money, and rising unemployment I don't think so.

The media needs to stop cheerleading markets and accurately report the news. Their job is not to make us feel better about the world but accurately describe it. The financial press is pretty good at what they do. The mainstream press, on the other hand, is often a joke when reporting on economic and financial matters. They seem to say what they believe we want to hear rather than what really needs to be said.

Speak to homebuilders like I do every single day. Their businesses are struggling. Excess inventory is choking them. Credit crunch issues abound. The Obama first-time homeowner tax credit is not drawing NEW buyers into their model homes, just the same buyers who would be looking for a home anyway. Profit margins are still falling---the key indicator to their business success.

Invest on the facts, the statistics you can see with your own eyes. Get investment ideas from the media but understand most of what they say is either biased, half-wrong, or just plain silly.

Robert J. Abalos, Esq.