Risk—unabated and unregulated—takes its toll on a society that borrows to live.
This is the autumn of our discontent. Winter has arrived early for the home building industry. With house prices continuing to slide, inventories still high, and mortgage lenders pulling back, housing is in the deepfreeze. The fallout from aggressive subprime lending late in the cycle is just the latest wave to come crashing down. No one knows what may come next.
Home builders learned the hard way about how to clear an overbuilt market. Drop prices and trim production until new-home sales find a new equilibrium. Builders have been taking their lumps as they struggle to restore market balance.
This past spring has been the season of home builders' discontent. A hoped-for recovery in housing markets is little in evidence. Builders are erring on the side of caution. The publics keep yanking their previous earnings guidance and remain mum about what the rest of the year will look like for the simple reason that they just can't tell what is ahead.
Self-improvement programs normally start this way: Recognize that you have a problem. Clearly, the home building industry is facing the fact that during the past three years, credit got too easy. Sub-prime excesses are now a daily headline staple.
