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Friday, September 08, 2006

National Association Of Realtors: It's Not That Bad, Really

Stocks: (HOV)(KBH)(BZH)

You have to love industry trade groups. In the midst of the larges housing sales and price drop in over a decade, the NAR wants everyone to think that it won't be too bad. According to the Wall Street Journal, NAR's chief economist says not to worry: "Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory."

The NAR's problem is that they have no concrete rationale or data to support that the dip is "temporary". They did not offer a single definition. Of course, if you consider "temporary" as a description of a period that could last three or fours years, then it's fine.

Perhaps someone should tell the management at Hovnanian and KB Homes that the dropped is temporary. Two days back KB cuts its earnings projections and Hovnanian said earnings dropped 34% in it fiscal third quarter. Beazer Homes also cut its earnings forecast for the year.

If home building stocks are a good proxy for the future of residential real estate, then Wall St should look at the numbers. Hovnanian's stock has dropped from a 52-week high of $58.82 to $27. KB Homes is down from $81.99 to $40.40. Beazer is off from $82.14 to $37.33.

But, it's temporary.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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