Apocalyptic Days for Homebuilders

Some truly apocalyptic comments from Don Tomnitz, CEO of homebuilder D.R. Horton, at the Credit Suisse Homebuilders Symposium today. He is expecting 2007 to be worse than 2006, and maybe stabilization by 2008:

“We have never seen housing prices and demand slow as quickly as they have during this downcycle,” said the CEO of the nation’s largest home builder when measured by 2005 deliveries. “Demand has evaporated to the extent of about 20% to 30% for the industry, and in a tighter timeframe than we’ve seen before.”


  1. Statements like that are gifts. It is a full-blown endorsement for buying alcohol stocks — you can’t go wrong.

  2. Alcholol stocks? You mean homebuilders, don’t you? Classic market bottom comments, in other words?

  3. Yet the stock, while trading off its 2005 highs, is still far far above it’s pre-2004 levels. Same for Toll Brothers, etc. There is still lots of downside in this market.

  4. No I actually mean alcohol stocks.
    If I were the CEO of a homebuilder, I would say every thing negative under the sun to make sure the class action vampires couldn’t come after me. Don’t blow any smoke on “bottoms” or such.
    There is still a long way down for these guys and he’s smart enough to play it straight.
    Alcohol because there is gonna be a LOT of drinking before this all over — especially in Sand Diego…..

  5. Paul, what do you think about this graph:
    Does the disproportionate boom mean a rapid fall? Does the disproportionate boom mean anything?

  6. I’ll go with the first comment. You need tequila or vodka if the housing market goes down any further, but you’ll be breaking out the champagne if it recovers. Long LVMH.

  7. Parand;
    Assuming there is an correlation between the RATE of growth in home values and home builder’s earnings (intuitively I’d say that there is) then one would have to believe a large correction is due … it doesn’t seem possible that values will continue to grow like this, esp. given that substantial portion of these gains can be directly attributed to historically low real interest rates.