"Altruistica": Seeking a return to full financial disclosure and regulatory oversight. A financial market analysis blog for "entertainment purposes" only by an experienced CFA seeking new hedge fund engagements for investment writing and analysis. The author has experience investing internationally, running a hedge fund, making angel investments, and helping launch five startup companies. Investors should do their own due diligence.

05 January 2007

Homebuilder Q&A for the in-crowd

Q. When will homies get to similar yields as SJT (nat gas) and NTE (electronics)?
A. NEVER. They'll cut dividends in panic first. Already engaged in aggressive write downs (see earlier posts on LEN & HOV) Fed Gov Gramlich warned of sub-prime mortgage pain in 2004 when then Fed Chair Greenspan urged all borrowers shift into ARMs.

Doug Kass the Bear is very homie bearish... 4 of his top ten predictions are:
5. More signs of an imbalance in the residential real estate market are appearing. For example, there's been a surge in vacant homes because of foreclosures, owners who bought another home and await sale of their first home, and homes that are for rent because they can't be sold. In certain regions of the country, such as California, vacant homes represent nearly 50% of annualized sales (triple the levels of four years ago).

6. A medium-sized private homebuilder and two more prominent subprime mortgage originators/servicers will shortly announce bankruptcy.

7. HSBC (HBC - news - Cramer's Take) is considering the sale of its Household Finance subsidiary because of the hemorrhaging of profits in its mortgage business.

8. The falloff in subprime lending and the tightening of standards at traditional originators has caught the eye of the now Democrat-controlled House. There will be an attempt by the Democrats to introduce legislation that will subsidize first-time homebuyers, who because of affordability issues and less availability of subprime loans are having trouble getting mortgage financing.


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