Here we go again: another big difference of opinion between those who think they know what is going on and those who actually do.
In one camp are equity traders, who keep claiming to see a bottom in all manner of markets. The other group includes those on the ground, who have to deal, first hand, with the ugly fallout from a plethora of bursting bubbles.
While no one can say for sure what will happen next, I'm pretty convinced I know which ones are the real experts as far as the housing market goes -- and by extension, what that likely means in terms of where homebuilders' shares are headed in future.
Feel free to check out the following Bloomberg report, "KB Home's Broad Says Home Prices May Drop Another 20%," as well as the little graph I've put together, and decide for yourself.
Eli Broad, a philanthropist and co- founder of KB Home, the fifth-largest U.S. homebuilder by revenue, said he expects home prices to drop another 20 percent.
"I don't think we're anywhere near a bottom in housing," Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. "We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.''
Homebuilders, hurt by banks' stricter requirements for granting home loans and concern over the rising number of homeowners failing to pay their mortgages, have begun work on the fewest number of houses since 1991, according to the U.S. Department of Commerce.
"People were using their home equity as really an ATM machine,'" Broad said, referring to an automated teller machine. "They were spending more money than they were earning by taking equity out of their home. That couldn't go on indefinitely. We're now paying a price for that."
The number of mortgage borrowers behind on their monthly payments rose to a 22-year high in December, according to the Washington-based Mortgage Bankers Association. The trade group estimated that 16 percent fewer mortgages will be issued this year compared with 2007.
Los Angeles-based KB Home fell 25 cents to $23.72 at 4:15 p.m. in New York Stock Exchange composite trading. Shares have dropped 9.8 percent since the beginning of the year.
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