Wednesday, August 09, 2006

Interesting Quote
From, Robert Toll, of homebuilder Toll Brothers trying to explain the companies third quarter sales:

Robert Toll, chairman and chief executive, expressed some surprise at the weakening.

"It appears that the current housing slowdown ... is somewhat unique: It is the first downturn in the 40 years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors," he said in a statement.

The Madness of Crowds is now working in reverse. The prices of homes went too high on nothing fundamental. People bought because others were buying, which led to a frenzy that drove up prices. Low interest rates helped and exotic mortgages enabled people to buy homes they could not afford. The buying has slowed and will slow further as the frenzy works in reverse. Interest rates are still low and exotic mortgages are still available, plus the economy and employment are strong, so there are no fundamental reasons why the frenzy has stopped. It is time to save cash to take advantage of future buying opportunities.

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