New Homes Sales 2007 & Mr. Mozilo

Two bits of information caught my attention today. 1) That new home prices declined over 26% year over year. Marking the largest drop in four decades. 2) Angelo Mozilo is forgoing both his severance, consulting fees, and plane rights that we was granted by Bank America when they bought out Countrywide.

The first bit of news is not a new piece of information. We all have known that prices were sagging and that year over year numbers would decline. What I do think is a surprise is that December numbers showed an annualized amount of 604,000 sales. Over 40,000 homes less than anticipated annualized amount of 645,000. Prices also feel 10% in December alone year over year.

At the current pace of sales there is STILL an inventory of over 9.6 month supply of new homes on the market. Wow. Being in the market and seeing how much builders have cut back on new homes, that 9.6 month supply is staggering.

2008 is still new, but don't expect any substantial change in these numbers. Many analysts are forecasting further price declines in home prices, though not nearly as severe as 2007. Even with rates dropping, activity is not increasing. The issue is twofold. Tighter guidelines for mortgage qualification and fear on buyer's behalf concerned that the home they purchase today will be worth $10,000 or $20,000 less in six months.

As for our friend Mr. Angelo Mozilo...good for you. It is one of the only good, humane, and decent things that you have done within the last 2 years. Though this is only a small gesture for a man that has seen his company's stock falling over 80% in less than one year. At the start of last year Countrywide account for 1 out of every 6 mortgages completed in the country. Today, the company was bailed out by Bank America and is considered the dirty word of the mortgage industry. He sold out huge portions of his stock holdings while shareholders were left waiting to be delivered with a grip on the bag.

By turning down his GIVEN severance, consulting fees, and place rights was a just and needed move. It probably wasn't his idea. In fact, I'm sure that he didn't give up his money easily. His quote about his move,

"My primary focus today -- as it has been for the past 40 years -- is to do what is in the best interests of Countrywide's employees, customers and shareholders," Mozilo said in a statement.

"I believe this decision is the right thing to do as Countrywide works toward the successful completion of the merger with Bank of America."

Yep...no one can fold like Countrywide...no one. But don't feel too sorry for Mr. Mozilo if you think I am being too harsh on the man. He does get to keep his deferred compensation and his retirement benefits. It will total into the millions, even with the price of his stocks company under $6 per stock. He won't be hurting for money.