Hope for Housing? Nope...not yet.

Today's housing starts number was met with the proper amount of cynicism on Wall Street. Sales are the most meaningful metric. Housing starts, particularly starts related to builder spec activity, are counter-productive to stability in pricing.

CNBC had a discussion about the housing numbers and "hope for housing". I think the assessment that the "usual suspects" are likely to continue dragging down the market is spot on. It gets tiring to repeat the "every market is different" mantra but it is true. Certain areas have not gone into recession, others are on their way back, and others have dark days ahead.

The health of the overall economy, the employment numbers, and sales of existing inventory are the "holy trinity" of housing recovery. Robert Shiller (of Case-Shiller index fame) and Nouriel Roubini (aka Dr. Doom) continue to be the "piss in the punchbowl" for all who are hoping for a return to the party days of 2005.

Here is what CNBC had to say earlier today...

Green Shoots or Green around the Gills?

The stock markets were down over 2% today mostly due to increased pessimism about the near term economic prospects. Many are skeptical about the recent wave of "green shoots" sighted on the economic landscape. Today we had two interesting posts that show just how "murky" this bottom may be.

The first video and posting from "Tech Ticker" at Yahoo finance talks about positive news regarding housing...

Housing Is Recovering, Fast, Jeff Matthews Says
Posted Jun 15, 2009 03:27pm EDT by Aaron Task
Related: DHI, HOV, LEN, PHM, MAS, XHB, CTX

Home prices continue to tumble, and have further to go to get back to pre-bubble levels, according to the bears. Another wave of foreclosure is coming down the pike, especially as another big slug of Alt-A mortgages start resetting to higher rates in 2010 and 2011. Plus, inventories remain elevated and now rising mortgage are putting a crimp in refinancing activity.

But Jeff Matthews, founder of Ram Partners takes a variant view: "What's happening in the real world is this: the housing market is recovering, fast," the fund manager recently wrote on his blog.

Matthews' optimism on housing is based on the following factors, as discussed in the accompanying video:

• The inventory of unsold homes is coming down rapidly from the peak levels of last year. Hovnanian has even sited shortages in some previously saturated markets, Matthews notes.

• Housing affordability has improved dramatically from its all-time low levels in recent years.

• Buyers are emerging and markets are "clearing" in some of the hardest-hit areas, like Phoenix, Sacramento and Las Vegas. Don't dismiss these buyers as mere speculators looking to get back what they lost in 2008, Matthews says.

The current bottoming process may, indeed, prove to be the proverbial eye of the housing hurricane when all is said and done, Matthews says. Still, he believes it's a mistake to dismiss the improvements and says too many observers are busy looking in the rearview mirror vs. focusing on the reality in front of them.

Please note...the first comment on this posting as seen on Tech Ticker's blog was "BULLSHIT"...I guess every green shoot needs a little fertilizer.

The next indicator was the homebuilder sentiment index as posted by AP...I guess the only appropriate comment would be..."No rain, no rainbows"? I think we are still looking at a very unstable bottom.

Homebuilder sentiment index slips 1 pointHomebuilder sentiment index drops by 1 point in June

• Alex Veiga, AP Real Estate Writer
• On Monday June 15, 2009, 1:10 pm EDT

LOS ANGELES (AP) -- The National Association of Home Builders says its housing market index slipped by one point in June, reflecting many builders' uncertainty about when their business prospects might improve.

The Washington-based trade association said Monday the index fell to 15 -- the first decline since January, when the index dropped to an all-time low of 8.
Index readings lower than 50 indicate negative sentiment about the market.
The report reflects a survey of 548 residential developers nationwide, tracking builders' perceptions of market conditions.

The index readings for current sales conditions and traffic by prospective buyers remained unchanged from May. The reading on expectations for sales over the next six months dropped by a point.

How Will New Homes Change after "The Bottom"?

Hanley Wood's website, HousingCrisis.com devoted an article to discussing how homebuilders were re-imagining the "value" of their product. It is obvious that most homebuilders are looking for a solution. Some are looking to go "back to basics" while others are looking at this crisis as an opportunity for a real "transformation". I believe that there is a business model that projects well into our unsure future. It is likely that we have not yet perfected that model however.

I had the opportunity to spend a couple of days in Omaha last week to meet with Hearthstone Homes, one of the builders mentioned in the article. They are a real success story in the midst of this housing collapse. I get a sense that they may very well be on the path to leading the way toward that "transformation". Keep your eyes on them!

Home builders rework how they offer value

Home building’s leading business executives have a message for the public. The message is this: We’ll meet you there, where you can feel confident in a new-home purchase right now.

Several dozen of those executives met this week in Chicago for the annual Builder 100 conference. If any of them had spent time in the fetal position during any part of the last two-plus years, you would never have been able to tell. A resilient bunch, although one whose ranks are sorely diminished and still shrinking.

For those who were at the conference, a shining, if symbolic, moment of resilience was Pulte chief executive officer Richard Dugas braving a public appearance as Builder’s Executive of the Year despite an angry crowd of labor union protestors clamoring on the street outside the conference venue. Protesters brought their signature oversized inflatable pig and stood it among them as they picketed the hotel on East Superior Street. Dugas stood tall and talked of the determination of his company’s people to weather the balance of the economic storm and emerge an even stronger firm.

For those who were unable to attend the conference, it should be noted the mood was realistic; the consensus was that traffic and sales are up; there’s lots more work to do; and bigger opportunities are beginning to reveal themselves.

For two solid days, they talked about their message to the public: “We’ll meet you a good part of the way there.” They talked about what they want–mostly good headlines–and what they’re going to do about it next, give new meaning to the word “value.”
Value has been the missing link in the real economy and the housing economy. Loan-to-value. Cost value. Time value. Never missing a beat, however, has been the value of people. People, home building’s thought and practice leaders refrained over and over, are where you get value. It’s the one and only way to get home builders’ house offerings a good part of the way there for the public to feel confident about buying right now.

Builder 100 executives talked over and over about people, about ones they’ve lost, and ones they have fought to keep. People are where smarter processes and better margins and more persuasive selling occur. People are positive cash flow versus the incessant erosion of hard assets like land and invested capital. People are the only difference between sheer price reductions and value.

Every home builder there was talking about offering value. It’s practically a euphemism for offering lower cost products to home buyers who are stuck in a Catch-22 credit environment. The industry’s most dramatic gesture to date–the Pulte acquisition of Centex–is strategically a play for value. Pulte’s acknowledging, in part, that it needs a value brand in its portfolio, not just for now, but especially now as a ramp to recovery.

Pulte’s not alone. We’re seeing practically every company, from KB Home, to Meritage, to D.R. Horton, to Jagoe Homes, put greater emphasis on value. This means killing frills, figuring out smarter ways to buy materials and manufactured goods to put in the homes, and building faster yet with higher quality to cut down both on trades time and warranty issues.

The third key part of the new value proposition home building executives were focused on at Builder 100 is green. Clearly though, green as a business issue versus green as an altruistic motivation. More and more home builders, most of the bigger enterprises and an increasing number of regional and local companies including Artistic Homes in Albuquerque, and Hearthstone Homes of Omaha, are building energy efficiency beyond code into their homes.

There are a couple of reasons for this right now, and they’re related business objectives. One is the struggle to find any possible point of difference from competitors in their marketplace, and the other is to strike potential home buyers with a money-saving and emotional reason to buy, and get them to regard the “total cost of homeownership”–mortgage payments plus payments for utilities and other regular maintenance costs–as a new-home benefit. We learn at the Builder 100, of course, that the mortgage finance sector has apparently never heard of or been regardful of the “total cost of homeownership.” So when a buyer can get approved for a $200,000 home, but pays through the nose for utilities and other costs, the bank is unaware. But the same lender would scarcely approve that same buyer for a $250,000 loan for a new home that would save more than $50,000 in utility and maintenance costs during the term of the loan.

People, value, and green. These are the issues we’ll continue to focus on in the months ahead. Cracking the code of value–which home builders have begun to do with their new entry-level and other segment offerings–is how home builders can be confident in their simple message to the public: We’ll meet you there.

To read this article and more, please be sure to visit http://www.HousingCrisis.com to view Hanley Wood's website on the "Construction Pulse".