At Least the Headline is Positive

The AZ Republic has an article in the business section today with the positive-sounding headline "New-home sales rose 4.1%" (as long as you don't read the glaring "but" underneath: "But U.S. median price down 1.3% in August"). The rest of the article is filled with statements followed by the hope-killer "but":

Sales of new homes, after falling for three months, rose in August.

But the gain was expected to be temporary as the battered housing industry struggles with a near-record level of unsold homes across the country.

And:

The U.S. Commerce Department reported Wednesday that home sales in the nation increased 4.1 percent last month, the best showing since an 8 percent jump last March.

But even with the increase, the median price of a new home fell to $237,000, a drop of 1.3 percent from August 2005. It was the first year-over-year price decline since late 2003.

And more:

Sales of new homes were up in every region except the West, where they dropped 17.7 percent.

Comparable sales figures for the Valley are unavailable.

But new-home permits have been falling for months as builders try to sell their inventory of new homes.

No doubt this reporter is a fan of "Garbl's Myths and Superstitions of Writing" where the author disputes 11 rules of writing, including "never begin a sentence with But and And" - a rule that I feel guilty about breaking every time I do it, even though blogging is supposed to be informal. But I digress. (Do you feel my guilt?)

The Mister and I were applauding the appearance of the article, wondering if the press corps has decided to lay off the doom and gloom scenarios about the housing market. Our applause was as ill-placed as the appreciative parent's clapping after the first movement in their high school child's concert. In other words, too early. Thus enters the time-worn phrase, "if you can't beat 'em, join 'em."

We were at lunch with our residential broker a few days ago, and he was telling us anecdotes of various homebuilders' behavior throughout the valley. Behavior like defaulting on contracts (which we unfortunately experienced back in March), buying land without infrastructure like water and sewer, unloading (viable!) subdivisions so as to meet corporate earnings forecasts, and in general making decisions that don't seem like great business sense, even to someone who isn't deeply educated in that industry. For example, they are willing to sell houses for little or no profit, just to beat the builder who is selling across the street, or just to prove to Wall Street that they are still selling houses. A logical person might note that there are plenty of re-sale homes on the market right now, and what makes economic sense for the builder would be to be willing to slow down sales -still making a reasonable profit, but just slower - until the market catches up to the inventory. They seem incapable of that course. I made the comment, "Gee, they are acting like they've never gone through a downturn before!" The Mister and our broker looked at me, surprised.

"They haven't!" they both said at the same time. They proceeded to explain that the normal housing market in Arizona generally runs on about a 7 year cycle, with housing demands peaking and then the market correcting itself. But we have seen 15 years of growth in the housing industry, and given the fact that many of these VPs in charge of land procurement are youngish, like in their thirties and forties, of course they've never managed a down cycle in the market! Self-preservation is the overarching concern, and it must be immediate, whatever the long-term cost. The builders who have some cooler (older, perhaps?) heads at the top will weather this season just fine; it's the builders who made foolish purchases that one wonders about.

Morrison Ranch, looking from the viewpoint of the landowner, is somewhat insulated from this frenzy. The land has been in the family for years, so there are no carrying costs, and thus there is no pressure to unload the land. We will continue to farm the land that isn't being developed. We have the cachet of a Master Plan, and we have infrastructure. Oh, and by the way, we are positioned in the middle of a fast-growing town, no longer on the edges of suburbia.

Beyond all that, we have folks in our office that are committed to completing the vision, or coming as close as is humanly possible.

Oops, I don't think I held my gloom and doom pose long enough. I guess that's why I'm a blogger, not a reporter.