‘It’s Now Every Greater-Fool For Himself’
Desk clearing time for this blogger. “With some 30,000 to 40,000 hotel rooms planned for the Strip by 2010, Las Vegas is about to undergo its biggest growth spurt in history. That doesn’t include the more than 50,000 condominium units planned across the Las Vegas Valley, though many doubt whether most of those projects will actually be built.”
“‘Anything less than a high end condo project will not get built in our opinion,’ Dick Rizzo said. ‘There’s no market for it, there’s no capacity to build it and the numbers don’t work.’ As for the demand side of the equation, experts are debating whether there’s enough luxury buyers who can afford these $1,000 per square foot units. Paying $800,000 to $1 million for an 800-square-foot suite is a lot of money outside of New York or San Francisco. Those who may have the money may not want a condo with a kitchenette, anyway.”
“Marc Falcone reported a ‘dramatic slowdown in residential sales,’ from 4,000 to 5,000 units per month during the peak of the condo frenzy to about 400 to 500 units per month.”
One big story of the week was the mortgage layoffs. “A major transition is underway in the U.S. mortgage lending industry, with consolidations and lay-offs at the forefront as companies try to deal with waning demand for home loans. This shift is expected to pick up steam in 2006 if the housing market, as widely expected, cools off from its record-breaking five-year run.”
“‘There are some very important signals emerging in that we have seen some pretty good companies go on the block for sale or have been sold recently, which is a clear sign that consolidation is seriously underway,’ said Douglas Duncan, chief economist at the MBA.”
“Even the larger firms are poised for a downturn. Countrywide Financial Corp., the largest U.S. mortgage lender, recently announced it plans lay-offs for sometime this year, partly in response to lower profits on sales of mortgages.”
“According to Duncan, lenders have been holding ’slowdown’ meetings with their employees, a move he said historically coincides with a turn in employment.”
Inman News, “So, what’s the chance that housing will slow enough to bring true the PIMCO prediction, and knock interest rates back down? A few early signs are right on slowdown track: new-construction condos are the traditional favorite of speculators, and it’s now every greater-fool for himself on both coasts. Inventory-to-sales ratios are deteriorating in most of the used-to-be-hot markets.”
“Psychological shock is unfolding in slow motion: since the rollout of ARMs in 1980 there has never been a sustained rise in ARM rates. PIMCO’s slowdown case is built on the simultaneous impact of flattening home prices, no new equity to extract, rising house payments, and still-high energy costs.”
Here’s a snippet from the report on Fannie Mae. “Mr. Rudman said his team had not uncovered evidence that Mr. Raines deliberately embarked on a course of violating the accounting rules to win larger compensation, although the report found that Mr. Raines had met with Ms. Spencer and Mr. Howard in early 1999 to discuss the plan of deferring $200 million in expenses.”
“‘For 1998, I’m reasonably confident there’s enough in the ‘non-recurring earnings piggy bank’ to get us to $3.21,’ Mr. Small wrote. ‘While that number should satisfy investors, you should be aware that last year the A.I.P. paid out just short of the maximum. This year, the maximum is $3.23, so at $3.21, the bonus pool will be noticeably lower than in 1997, a fact which will, of course, be rapidly observed by officers and directors come January.’”
“The Houston Association of Realtors revealed to HoustonRealNews today that the strength of the Houston market may be directly attributable to the increase in real estate investor activity. The number of available homes (active listings) at the end of January was 40,814 properties, which was a decrease of 1.3 percent versus last January. The figure was an increase of approximately 900 properties from last month though. Total property sales for the month totaled 4,584.”
From the Business Journal. “It seems that the real estate buying frenzy in the Central Valley and in other parts of the state is beginning to slow down. The long lines of buyers at new housing subdivisions aren’t that long. In fact, some developers are offering buyers special incentives.”
“In California as a whole, a total of 38,300 new and resale houses and condos were sold statewide last month according to DataQuick. That’s down 27.5 percent from December and down 9.5 percent from January 2005. The housing trend in the Bay Area where median house prices are some of the highest in the state, could be a sign of what’s to come for the rest of California. Last month DataQuick reported that sales dropped in the Bay Area to their lowest level in five years, where sales were down 20 percent this January compared to January 2005.”
“‘We won’t know for another couple of months if this is a lull in the market or part of a longer-term downturn. The March numbers will tell us much more about what’s going on,’ Marshall Prentice said.”