Even Dead Cats Bounce!

Wall Street uses this phrase for a sudden positive change in market numbers. Today the U.S. Commerce Department and the U.S. Department of Housing and Urban Development reported new home sales were way up in April, but prices dropped dramatically.

Sell more (up 16% April 07 over March 07) by offering a lower price. (The median price is down 11% at $229,000.) This sudden and dramtic change, amounts to the biggest change in 14 years and is probably an abberration. The quarter-to-quarter and year-to-year numbers will be more indicative of really sustainable market behavior.

Many industry watchers believe many home builders are genetically programmed to go out of business by often demonstrating a blindspot for caution signs and just build themselves into a hole. The public companies are particularly prone to "window dressing" by carefully maintaining numbers for stock analysts. Analyst insight can positively or negatively influence stock price that often drives how executives are compensated.

Day Two - "Honey, I love the house, but hate the commute"

Building and selling their way out of a slump is laudatory, provided the contracts stick, buyers are satisfied and the neighborhoods develop over the long term as places people want to live. If so great, if not, the buyer not the developer, lives with the result.

Sadly many of these new build neighborhoods are remote and offer a long and costly commute. The home may have been deeply discounted, but does the total cost and convenience of home ownership make this low price irrelevant. Thirty miles one way to work in a major city means the best part of two hours a day in a car and 50 dollars a week in gas. This Day Two realization is a reason for a higher incidence of resales and deep resale discounts in remote city neighborhoods, especially where the builder is still actively selling.

Homebuyer be aware. God Bless and great investing

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