What's the icing on the bankruptcy law changes, predatory lending & eminent domain law cake?
NEW YORK -- Homebuilder Toll Brothers said the current slump in residential construction is unlike any it has seen in 40 years as it became the latest to warn of a glut in new homes for sale and a slowdown in the closely watched real estate market.
The builder of luxury homes also reported weaker than expected preliminary results for the just completed quarter and cut its outlook for the homes it will sell in the current period. Toll Brothers (Charts) shares fell 4 percent in premarket trading.
The housing and homebuilding markets have helped drive the national economy during the past few years. Any downturns in these critical sectors could add to the problems of an already unsteady situation.
How bad are the signals coming from the housing sector? As a recent news headline clearly put it: it is simply UGLY. Indeed, all the indicators from the housing sectors - including the latest housing starts and the homebuilders (NAHB) forward looking business conditions - indicate a housing sector that is literally in free fall.
For quite a spell now, we've been preaching a similar sermon. The logic seems inescapable: The greatest housing boom this fair land has ever seen is over and is due to be followed by one big bust. All by itself, housing has been a mighty prop to the economy, and its crumbling can't help but have widespread and unmitigatedly ugly repercussions.
Bubble or not, the housing market looks to be deflating rather rapidly. Sales of new and existing homes both plunged beyond Wall Street's already pessimistic forecasts according to data released this week, raising fears that consumer spending will falter.
Analysts say much of the consumer boom that characterized the most recent period of economic expansion was driven by a draw on equity from rising home values. Many fear that as this sort of cash dwindles, consumers could falter and economic growth would suffer in the process.
Sleep well.
