“We’re In The Very Early Stages”: CEO
Some housing bubble news from Wall Street. MarketWatch, “D.R. Horton Inc., the nation’s largest home builder, said Tuesday that net income fell about 65% as the company took land charges and write-offs on options it plans not to pursue. The company’s quarterly net income included charges of $40.9 million of inventory impairments and $36.8 million of write-offs on land options.”
“‘We’re in the very early stages’ of the current housing slowdown,’ CEO Donald Tomnitz said. ‘Most of these downturns are longer and deeper, and right now we don’t see anything on the horizon that would change that opinion,’ the CEO said. ‘We continue to see a very challenging industry environment for fiscal 2007,’ he added. ”
“‘We continued to focus on improving our strong balance sheet and reducing our inventory while managing our business profitably,’ said Chairman Donald Horton, adding conditions in the home-building industry ‘remain challenging.’”
“He said the company reduced its lot position by 25% from its March 2006 peak to 297,000 lots owned and controlled. It also cut the number of homes under construction to about 26,000, down 35% from a high reached in June 2006.”
From Reuters. “Home-building revenue stayed the same at $2.8 billion, as margins deteriorated 9.2 percentage points to 18.6 percent. Earlier in January, Horton said orders during the quarter fell 23.5 percent to 8,771 homes, with the drop the most severe in the Northeast. The value of the homes on order declined even more, down 28 percent to $2.3 billion, as the company used incentives to lure buyers.”
“Would-be buyers canceled orders at a rate of 33 percent, down from 40 percent the prior quarter, but still higher than its normal range of 16 percent to 20 percent.”
From Bloomberg. “Another homebuilder, Centex Corp., the fourth-largest by revenue, will report earnings after the close of trading today. The Dallas-based company said on Jan. 16 it would report a loss from continuing operations of $2 a share in the fiscal third quarter after recording about $450 million in land writedowns and expenses to cancel property options.”
Modern Distribution Management. “BlueLinx Holdings Inc., Atlanta, GA, distributor of building products, reported revenue for the fourth quarter 2006 declined about 29% to $945 million from the same period a year ago. The company’s business that is tied to new home construction was negatively impacted by the slowdown and depressed wood-based structural product prices. BlueLinx reported a net loss for the quarter.”
“‘The fourth quarter was one of the most difficult building product environments related to new home construction that we have experienced in decades,’ said CEO Stephen Macadam. ‘A 25% reduction in new home construction from year-ago levels and low wood-based structural product prices combined to severely pressure our business related to this sector. Our business was further impacted as customers reacted to this environment by reducing their own inventory levels.’”
The News & Observer. “Stock Building Supply, one of the nation’s largest building-material suppliers, is cutting 1,500 jobs as the U.S housing slump depresses sales and profit.”
“Raleigh-based Stock said in November that it was cutting 2,000 jobs. The latest round of layoffs was announced Monday by the company’s British parent, Wolseley Plc, which also is closing 22 Stock branches and cutting 500 jobs at its Ferguson plumbing division, which is headquartered in Virginia.”
“Officials blamed the company’s worsening financial condition on builders starting fewer new houses and a decline in lumber prices. ‘We’ve responded swiftly to the challenging market conditions as a significant amount of our business is in residential construction,’ Stock VP of finance Jim Major said.”
“‘The jury is still out,’ said Kevin Lapwood, an analyst at Seymour Pierce in London. New home sales in the U.S. appear ‘to be leveling out, but there may be some more pain before there’s gain,’ he said.”
“The housing industry needs to rid itself of a huge number of unsold homes, suggesting that new residential construction will continue to drop through the middle of the year, said Greg Geiber, a housing analyst for A.G. Edwards.”
“‘We’ve never had so much inventory in the industry,’ Geiber said, adding that homes are still priced too high to sell quickly. ‘A lot of people think buyers will be back, but I don’t think so until there are more meaningful cuts in house prices.’”
“Freddie Mac’s retained portfolio of mortgages shrank by an annualized 1.2 percent in December to $703.6 billion, the second-largest U.S. home funding company said on Tuesday.”
“‘Sales, net of other activity, continued to be depressed as the market has slowed for structured product, while the purchases during December fell as mortgage-to-debt spreads continued to tighten,’ said Freddie Mac spokesman Michael Cosgrove.”
The Journal Sentinel. “How homeowners who have adjustable-rate mortgages cope with the coming increase in their monthly payments will play a role in whether consumer spending slows in the new year, the former chief economist for the National Association of Realtors said.”
“Economist John Tuccillo said that with more than $1 trillion in adjustable-rate mortgages set to reprice upward this year, homeowners are looking at a 25 percent rise in the amount of house payments unless they refinance. If the burden of bigger payments is substantial, it will be felt in the rest of the economy, Tuccillo said.”
“‘The degree to which consumers react to that repricing by absorbing higher mortgage payments will determine how consumption spending goes for the rest of 2007,’ said Tuccillo. ‘If they have to eat large increases in their mortgages, they are going to reduce spending on other goods and services, and that is going to have an impact on the economy.’”
BTW, the new photo email address is on the sidebar.
‘ HMN Financial, Inc., the $978 million holding company for Home Federal Savings Bank, today reported net income of $2.7 million for the fourth quarter of 2006, down $807,000, or 23.2%, from the fourth quarter of 2005. The decrease in net income is due to a $1.2 million increase in the loan loss provision between the periods primarily as a result of an increase in the allowance reserve for a home equity loan.’
‘The provision for loan losses was $1.4 million for the fourth quarter of 2006, an increase of $1.2 million, or 658.1%, from $179,000 for the fourth quarter of 2005. The provision for loan losses increased primarily because an $825,000 specific loan loss reserve was established on a home equity loan that was classified as nonperforming in the fourth quarter of 2006. The reserved amount was based on an updated appraisal of the value of the property securing the loan and subsequent to year end the Bank foreclosed on the property.’
‘Foreclosed and repossessed assets increased $1.0 million primarily due to an increase in single family home loan foreclosures.’
The Commerce Board statement today said that they did not see the housing falloff deepening. Is this happening so fast that they cannot see it? What is the likely result if officialdom gets too far behind the curve?
ljaycox.
Officials from government or interested parties never, ever forecast bad news. they only sugarcoated past bad news. so expect no truth from them.
I have also been reading more in the media about “buyer’s market.” actually, this is the worst time to buy for two simple reasons: 1) interest has gone up 2) the effects of that increase have not manifested in the market enough ie foreclosures, decrease in prices. so to buy now is to get screwed twice. lol.
You are right, the buyers would be screwed and tattooed
Maybe they should just come clean and say “It is a very good time for me to have you buy.”
“‘We’re in the very early stages’ of the current housing slowdown,’ CEO Donald Tomnitz said. ‘Most of these downturns are longer and deeper, and right now we don’t see anything on the horizon that would change that opinion,’ the CEO said. ‘We continue to see a very challenging industry environment for fiscal 2007,’ he added.”
That totally clears up why GS is issuing “buy” ratings on HB stocks…
Actually, they just moved the sector to neutral. From the MarketWatch link:
‘ Analysts at Goldman Sachs in a research note Tuesday upgraded the home-building sector to neutral from sell ‘until we gain further conviction on the magnitude and direction of the next leg of the current housing downturn.’
‘The analysts said recent housing data suggest the sector’s decline is slowing, although the housing market’s fundamentals are ‘now very troubling.’ They cited high cancellation rates spurring more speculative building, profit margins being squeezed by home-price declines and high land prices that have triggered builder write-offs.’
‘ Goldman Sachs said it’s waiting to see how the spring selling season progresses for home builders. ‘Our home-builder coverage universe is down 4% since a recent peak on Dec. 6, reflecting investor concern about increasing write-offs at the companies,’ the analysts wrote. ‘We believe much of the write-off concern is in the stocks now, but negative investor sentiment could still get worse with new reports.’
Sorry for my usual inattention to detail. But let’s agree there is something odd about the divergence between homebuilder CEO remarks and analyst upgrades. And I don’t think the “forewardlooking investor” story quite explains it.
No, you were right, they upgraded MDC, TOL and DHI to buy.
They downgraded RYL, LEN, MHO, HOV and MTH to sell.
I wonder what leads analysts to believe that demand for Tol’s “product” (oversized McMillionaire faux chateaus) will thrive against a backdrop of a housing market where 50% of homes currently for sale are vacant and the subprime lending which fueled purchase demand seems to be rapidly subsiding? I guess it is all about plausible perceptions, but I personally am scratching my head…
Maybe it’s the fact that Toll’s product line (oversized McMillionaire faux chateaus) sells to the very well off, one of the few demographic sectors of the population that really is doing better. Which is not to say they aren’t blowing sunshine/whistling past the graveyard, but retail sales data tends to support this view. High-end “luxury” retailers are moving product (Neiman Marcus, Saks, Nordstrom, etc.) while working & middle-class retailers (Walmart, Target, Costco, etc.) aren’t looking so good.
“…sells to the very well off, one of the few demographic sectors of the population that really is doing better.”
Fair enough, but isn’t this top slice of the demographic pecking order already comfortably housed in something more distinctive than a cookie-cutter faux chateau? And, what’s more, if you go down the wealth distribution to the segment who would be just as well off in a Toll chateau as in the home they currently live in, where will they find a buyer for their current residence at a comparable price to what Toll chateaus currently cost, when 50% of all homes on the market today are vacant? I don’t see how the price-inventory equilibrium can resolve without further price decreases, and anyone who understands this would probably be reluctant to buy in the Toll quality tranch until further correction has played out. And then there is the likelihood that subprime lending injected a fair amount of upward price momentum through flipper bids on Toll McMansions (flip twice as expensive a house and pocket twice the gain).
In short, it seems like many of the supports for purchase of luxury McMansion at anywhere near recent price levels are gone for the duration of the current cycle, which puts the next comparable support level fifteen or more years into the future.
@GetStucco,
Agreed that “luxury” HBs will not be immune to the HB correction, which will ripple throughout the whole economy and –I believe– lead to recession in the very near future. Just playing devil’s advocate. And if Toll’s primary demographic is truly rich vs. wanna-be “debt=wealth” nouveaux riche, then they might weather the storm a little better than other lower-end HBs. But even assuming this is correct, they won’t get out completely unscathed.
“Just playing devil’s advocate.”
I was just playing the devil
“something odd” Nope, business as usual. Wall Street is an insiders game, anybody who thinks they can outfox these con men are fools. My motto, “When In Doubt, Stay Out”
This game is rigged worse than the Vegas,
Boy ! You did not know ?
Yep, the only way to make money is to be lucky or to follow around behind the big guys and pick their pockets occasionally. But you better wear ear plugs. If you listen to what they say, their siren song, you are on the losing side.
Analyst recommendations have a far stronger effect on share prices than gloomy remarks from homebuilder CEOs. What do the analysts know that is completely contradicted by builder CEO pessimism?
http://tinyurl.com/fzeuw
That in the end there will only be a few homebuilders left, and they think they know which ones?
Whoever is left will have to face the fact that the next several years’ worth of purchase demand has already been cannibalized. I would call that a Winner’s Curse.
“Whoever is left will have to face the fact that the next several years’ worth of purchase demand has already been cannibalized.”
I wish this fact would get more publicity. How anyone can believe there will be a spring bounce is beyond me. Oh well, its good news for folks like us.
No kidding. I believe that with the population growth in the US, that HBs may not be a bad long term bet, but their stocks are in no way a buy for me right now. There is way too much pain on the horizon.
Ben oui foutaise totale!
The population growth is mostly poor and uneducated illegal immigrants. Once the middle class is wiped out, who will be able to buy a house when the median on the coasts is $400K? The illegals live15-20 to a house. You would need 20 million MORE illegal immigrants than are currently over here to absorb those houses. I’m sure our wonderful politicians will find a way to get them a nice loans at taxpayer expense
Define “long term”. Demographic trends are definitely against housing for the next 10 to 15 years.
Early stage of COMA.
The housing market and the stock market are two completely separate things.
Stocks generally have future growth and earnings priced in. So now that many of the homebuilder stocks have bottomed, they’re considered very good places to put your money.
Homebuilder stocks are skyrocketing
http://tinyurl.com/fzeuw
Indeed they are… The worst the news the bigger the gains… Nice… Maybe when they declare bankrupcy they will be infinite dollars per share…
VERY VERRRRRRY FUUUUNNNY !!!!! ?
[shaking head]
Been trying to figure this out for a long time. Tanking performance = booming HB stocks? WTF?
Fair is foul and foul is fair
Hover through the fog and filthy air.
HB stocks look fair but feel foul.
Yeah, Apple stock went up 5-6% after the announcement of the iPhone, then it went right back down after a few trading days.
Mutual funds probably buying them and selling big oil? Just a guess though?
“Home-building revenue stayed the same at $2.8 billion, as margins deteriorated 9.2 percentage points to 18.6 percent. Earlier in January, Horton said orders during the quarter fell 23.5 percent to 8,771 homes, with the drop the most severe in the Northeast. The value of the homes on order declined even more, down 28 percent to $2.3 billion, as the company used incentives to lure buyers.”
With values of homes on order declining, expect their margins to continue to shrink (especially as cheap land that was purchased years ago is fully built-out, and a higher percentage of homes sold is on more recently acquired land). A stable housing market means margins of ~10% for builders. We should overshoot that on the way down.
IMO, they will chase that margin down to zero, and go on vacation for two years. They are stealing buyers from the resale market, and no one can stop them.
Ben –
I second your opinion. This is basic industrial organisation in action here, as a cartel of market-dominating national builders all face the same incentive to build and dump more quickly than the next guy before bubble prices are gone forever. This is a classic race to the bottom, concealed by a mainstream financial press which is either oblivious or complicit.
I third that opinion. The builders will build and lead the market down. Their recent land write-offs will allow them to reduce their land basis and still build profitably at much lower price points in most markets.
I fourth that opinion. The builders have all the advantages now. This is why I want to scream at the people I see walking into sales offices. They are going to be underwater this summer as the builder does whatever it takes to clear out product.
Don’t scream at them, CA Guy, thank them instead. These GFs are setting the new comps –all the way down. W/out them, there would be no sales data at all –and no lower comps. They are “taking a bullet for the team”, even though they are completely unaware of it.
“Don’t scream at them, CA Guy, thank them instead. These GFs are setting the new comps –all the way down. W/out them, there would be no sales data at all –and no lower comps. They are “taking a bullet for the team”, even though they are completely unaware of it. ”
This exact idea is lost on too many, the concept of setting the next lowest comp, then on and on down.
I don’t have a problem with people buying right now, but the ones who don’t hammer builders and resellers for significantly reduced prices are just idiots. Anyone and everyone should be lowballing bigtime.
I’ll add my voice to the chorus.
Buildlers will keep building. We’ll see relocations out of bubble markets to more affordable locations. Building won’t stop. It will slow and transfer locations, but it won’t stop. For example, Austin Texas and Huntsville Alabama are doing great jobs of attracting engineering firms from the bubble markets. (Don’t write them off like I did at first, they both have a lot to offer.) I expect building in both markets to continue.
The resale market is screwed for the next 6 to 16 months (market dependent) as the builders will sacrifice some profit to get out.
If the builders take writeoffs on land… they have a long way to go before reporting losses on sales (they’ll report the losses as land writedowns).
Got popcorn?
Neil
I think that the only two things that will save certain HBs from going into negative margin territory will be:
1. Reducing costs, either through land write-downs in prior quarters, or material costs going down; and/or
2. Large amounts of very low basis land inventory for some homebuilders.
It should be interesting to watch which homebuilders manager their writedowns most efficiently to keep that margin above water.
It will even get more interesting once the off-balance-sheet bodies start to float up to the top of the lake…
It will be very interesting. Some off balance sheet deals will surprise us all. That said, I think much of the off-balance sheet stuff will be fairly benign for the public homebuilders, but will whack private investors pretty hard.
To my understanding, this is how some of these deals worked…land is purchased by an outside investor/developer who holds title to the property. The arrangement with the HB is that they contract with the investment group in such a way where the HB pays for the entitlement process (and directs it so the mapping/design is done in a way that they like), and has an option to purchase the property from the investor/developer at a pre-determined price.
If it all works, the investor/developer does very well, as the HB buys the land at a mark-up from the original purchase, but potentially less than full market value.
If it does not work, the investor/developer is the proud owner of dirt with no buyers, and depending on when the HB stopped funding entitlements, potentially no entitlements. The HB wasted money on the entitlements and option payments, but they do not have the land albatross around their neck.
Of course, I’m sure there are other ways that HBs structure their off-balance sheet deals, some potentially far more difficult to get out from under, but to my understanding, some will be fairly pain free.
“That said, I think much of the off-balance sheet stuff will be fairly benign for the public homebuilders, but will whack private investors pretty hard.”
Many analysts would have made similar comments about Enron circa 1999…
Rental Watch,
Your description is pretty accurate. You just described my job. I get entitlements for a land developer, and we sell to the builders. The only flaw in your description is that the investor/developer is not hurt if the builder doesn’t take the land immediately. The very low basis and carrying cost of raw land allows investors/developers to wait for the market to come to them. Of course, for those who overpaid for the land, they are totally screwed, but that is the land development business.
There will be more off-balance sheet pain, just ask TOA USA. They first said that obligations to their big FL JV was minimal, then they changed their tune a couple of weeks later and now check out today’s annoucement. They may be responsible for much for much of that debt.
IrvineRenter,
I agree with you, that investors/developers will be OK if their land basis is right, and they are in the path of growth. Set up your development for a 5-10 year hold in a bad case, and you’ll be just fine with the right land basis.
Since it sounds like you are in the HB industry, you know that MANY people got complacent and overpaid for unentitled land, with the assumption that the HB that optioned their land would absolutely buy it, and that land values wouldn’t go down. If you’ve done residual land calculations, you know that land can go up and down very quickly in value.
IMHO, many of the most recent entrants into the land development business will be crushed due to a land basis that is too high.
“Set up your development for a 5-10 year hold in a bad case, and you’ll be just fine with the right land basis.”
Absolutely. My Realtor explained this to me: “Real estate always goes up in the long run.”
Land is far more volatile in the short term. Roads being built and other facilities being built in the vicinity have huge effects on it. Typically land is in an area that isn’t fully built yet.
Cool.
Cow_tipping.
The re-sellers have costs that are fixed or rising. The HBs are seeing their costs go down right now and as this slows they will see more cost reduction. The re-sellers are going to be crushed–unless they have something the HBs cannot duplicate.
“unless they have something the HBs cannot duplicate.”
Ha! That is funny. Some of these newer homes are so cookie-cutter it’s downright depressing. This even extends into the so-called “luxury” market. Re-sellers will be destroyed.
Actually they do here in the Bay Area, very little new development anywehere lass than 1 to 1.5 hours into the city. The question is what that location advantage is worth … folks in Marin County seem to think it is worth a whole lot.
It’s sickening, I knew this would happen back in summer ‘06 (and posted as much), but I didn’t think through the stock market implications. Homebuilders are up 50% since then.
Dang. Well at least i didn’t short em or buy puts.
On another matter, is CountryWide sufficiently diversified to survive 2007, or will they join the list of the imploded? Anyone know the CFC financials well enough to argue either pov?
I wonder if now would be a time to buy some puts, before it becomes widely accepted that there will be no 2007 recovery, margins shrink further, and pessimism mounts…
The P/E’s for the homebuilders are still on the low side. I doubt they go up another 50%, but I doubt they crash either.
The most galling aspect of the homebuilder recovery? Cramer was right, the builders were oversold. &^%#*&#^!!!
Now the subprime lenders are obviously an entirely different story, IMO. Looking at the implode-o-meter site, maybe Wells is above the fray, but CFC seems to be in the middle of some turbulent lenders. Still, maybe they are diversified enough (like Wamu, apparently) to survive the downturn relatively unscathed, I don’t know.
“The P/E’s for the homebuilders are still on the low side.”
Always has been, always will be. Too many investors were burned at the end of the last cycle, when lots of builders decided to take a couple of years’ worth of vacation time.
whoa LIErah said we’d be hokey dorey by mid 07
can we get all these fckrs in the same room like msnbc did last year ?
Very funny how the state or feds can find you if you owe taxes but while all this fraud and investor nonsense was going on they couldn’t send letters to lenders or major Real Estate corp warning them of loan practices that could lead to fines or prosecution.
I just heard a state offical say we didn’t know how bad it was? This reminds of New Orleans, all the gov’t had to do was turn on the weather channel and now they don’t know what to do with a city that sits and rots?
homeowners are looking at a 25 percent rise in the amount of house payments unless they refinance.
Pretty hard to refinance an NEG.AM. mortgage when your house is worth $100k less than you paid for it.
Of course this is where all the crooked appraisers come into play.
So…
Don’t expect investigation or prosecution of these slimebags any time soon.
They will be the only rats keepin’ the con game afloat.
This may be part of the game. Instead of lowering interest rates, they may just turn their heads away from the illegal appraisals that my get many of these people new loans. While this will not save everybody, it will save some and in politics you want to be able to point to the survivors not all the dead ones.
Raleigh-based Stock said in November that it was cutting 2,000 jobs. The latest round of layoffs was announced Monday by the company’s British parent, Wolseley Plc, which also is closing 22 Stock branches and cutting 500 jobs at its Ferguson plumbing division, which is headquartered in Virginia.”
Let’s not lose sight that its often those who try to carve a simple co-extistance within the confines of this vicious market,will face the full impact … boo hoo for the fat cats - throw a bunch of people out of work - like they are yesterday’s trash. The one’s who truely suffer in any downturn time and time again are society’s most vulnerable. So before some in here parade and cheer along that anyone who bought a house or related to any part of this monster should be tarred and feathered and finally boiled in oil … (maybe a few bitter renters in here who missed out on one of the biggest housing upswings in history which we won’t see the likes of again…like the old saying goes … those who complain the most usually are the ones who have lost the most to begin with!!)…roof over my head and no worries that the hord of cash I have stuffed in the mattress will one day be worthless ..
you forgot “jealous”
The correct phrase is jealous, bitter renters.
It’s the preferred insult flung by FBs at savvy, prudent renters now watching the carnage from the sidelines.
I am another jealous bitter renter who is absolutely terrified at all of the money I have saved up to help me swoop in and scavenge the meat off of all the poor victim FBs. It is hard to sleep at night just thinking about it.
At lease we renters are in good company. Even Warren Buffet knew when to bail out of his OC home near the top last year.
““Stock Building Supply, one of the nation’s largest building-material suppliers, is cutting 1,500 jobs as the U.S housing slump depresses sales and profit.”
“Raleigh-based Stock said in November that it was cutting 2,000 jobs. The latest round of layoffs was announced Monday by the company’s British parent, Wolseley Plc, which also is closing 22 Stock branches and cutting 500 jobs at its Ferguson plumbing division, which is headquartered in Virginia.”
These are only temporary cutbacks. The Beaver Creek Gazette has reported from reliable sources that the housing rebound will begin in mid 2007.
“‘We’ve never had so much inventory in the industry,’ Geiber said
—————————-
But, but, but, we were assured by so many prominent “experts” that the industry learned its lesson from last time and would not overbuild this time. It’s not different this time. It’s never different. The magnitude changes, but the result is always the same. It’s depressing to think that we don’t learn from our mistakes.
MSM and official denial of problems with overbuilding has the natural consequence of worsening the problem of overbuilding.
“the industry learned its lesson from last time and would not overbuild this time.”
The problem for the industry last time wasn’t just the overbuilding, it was being left holding the bag. This time over-leveraged FB’s are the bagholders. Oversupply can work itself out in most markets if prices drop enough; of course, “enough” can be really ugly for the resale market.
The problem for the industry last time wasn’t just the overbuilding, it was being left holding the bag. This time over-leveraged FB’s are the bagholders. Oversupply can work itself out in most markets if prices drop enough; of course, “enough” can be really ugly for the resale market.
Bingo! There is a kernel of truth to the “HBs learned their lesson from the early 90s crash” meme: most of them learned how to not be the main bagholders this time. As Ben mentioned above, even with cancelled land options and write-downs, their margins are still way above long-term average. They can keep cutting to zero, utterly destroying the resale market all the way down.
Sometimes, you just gotta love capitalism at work
.
Excellent observation.
No we did learn from our mistakes. Those that learned and practiced conservative policies were laid off or fired cos they weren’t producing enough.
Cool.
Cow_tipping.
After many years of saying I thought the system was fixed and the private banking {Federal Reserve} set this up, now a writer has finally shown in its simplicity any person with a IQ of 80 and over could understand. One look at http://www.financialsense.com and the article “connect the dots” can see. The middle class got snagged, hook, line, and sinker as most of these home owners will not be able to recover and will have lost everything. Those who knew the set up profited big time, the few rich who might have fallen for the trap can easily move on to their next venture while the majority of the middle class can not. Where were the press, our politicans independent of “private banking lobbyists” to set off any alarms? What few said anything were classified as being negative on CNBC, etc . Sad. Only thing left is that historians write what “really happened”. Retired mortgage broker
“The middle class got snagged, hook, line, and sinker
- as most of these home owners will not be able to recover.”
Sadly, there will be several hundred thousand that will be ruined. The Inland Empire / High Desert, San Diego .
“How homeowners who have adjustable-rate mortgages cope with the coming increase in their monthly payments will play a role in whether consumer spending slows in the new year, the former chief economist for the National Association of Realtors said.”
“Economist John Tuccillo said that with more than $1 trillion in adjustable-rate mortgages set to reprice upward this year, homeowners are looking at a 25 percent rise in the amount of house payments unless they refinance. If the burden of bigger payments is substantial, it will be felt in the rest of the economy, Tuccillo said.”
Do we know why he is the former chief economist for the National Association of Realtors? He speaks truth.
You can’t make this stuff up.
‘If they have to eat large increases in their mortgages, they are going to reduce spending on other goods and services, and that is going to have an impact on the economy.’”
They’ll be full after eating their mortgage, they won’t eat anything else.
There go the restaurants, the coffee shops, the economy …
OT: USA Today article, Retirees in Debt. So much for the boomer bailout.
http://tinyurl.com/ytee8e
I thought senior citizens were the only ones left with any financial sense. It is sad to see them burden their twilight years with debt stress.
They might have financial sense, but with the rapidly changing healthcare and insurance changes, they’re given the choice of die or borrow. In previous generations you died. Now, I guess you borrow until you’re tapped out… then you die.
Hence, the growing popularity of reverse mortgages. I have a very dearl friend who just took one out. Although I don’t know it for a fact, I strongly believe that her debt load was the reason.
This is the saddest thing one can read… and we are spending billions to fix up Baghdad…. nice……….
The worst part is that if we weren’t blowing it on Iraq, it would be going to free healthcare and housing for the shiftless masses and illegal aliens who are paid in cash and collect welfare. When the taxes on the middle-class hits a critical mass, we will see what America is made out of.
‘as margins deteriorated 9.2 percentage points to 18.6 percent.’
And this is mostly with the gimmicky add-ons, free cars, etc. that don’t show up in the official sales price. Now foreclosures have begun to hit the comps in the resale market, the public is aware of the excess inventory, and builders will have to aggressively reduce actual sales prices to offload their inventory.
A year or more ago in one of these blogs someone involved in building houses at Oxnard, CA posted the actual cost to throw up a stucco $hitbox on a pesticide laden former strawberry field/future gangland. It was something startlingly low, even when materials and commodities were skyrocketing. Seemed to be below $150/square foot in heavily regulated California but I don’t remember well. Anybody care to comment?
Around 1999-2000 builders in Santa Clarita were profitably selling 3000 SF homes for about $350,000.
I love the way all these quotes contain the word “challenging.” I use that word in my job as a euphemism for “you are totally f____d.” Kind of like a verbal soft landing.
Slightly off-topic, but not really: Anyone watching the bonds and/orinterest rates? Treasuries are getting “pounded” — both literally and figuratively — today due to surprisingly negative U.K. inflation news. This continues a trend that got underway in early December thanks to some hotter-than-expected economic data. This, in turn, is putting upward pressure on mortgage rates. I doubt sellers are very happy with the timing — if rates continue to rise into the spring, it could keep the pressure on affordability and home pricing.
Some additional thoughts at:
http://interestrateroundup.blogspot.com
Read about Is your realtor on your side?.
“A new anti-Realtor article in Money Magazine by senior writer Stephen Gandel titled, “How to make your realtor work for you,” suggests that most agents work for sellers, that sellers pay both the seller’s and buyer’s agent, and that buyer’s agents incentified by higher commissions may show homes to buyers in their own interest, not in the buyer’s interest, and that the buyer’s agent does not have to disclose the extra incentive.
As usual, the financial press gets just enough right and wrong to be dangerous. ”
I wish realtors would just go away…
Arizona Slim reporting in from Tucson. Speaking of Realtors going away, I just took one of my famous bike rides across town. Traveled several miles along a major street with numerous empty properties up for sale. Investors trying to unload them, I suspect.
Also saw an emptied-out cinderblock apartment complex that underwent condo conversion last year. Two different agencies tried to sell units in this complex. From what I’ve been able to see, neither agency was successful. Most of the units are still empty.
BTW, I know the owner of the second agency that attempted to make sales at this complex. I noticed that his agency’s sign has been replaced by one from Coldwell Banker. What that says to me is that CB is going to be leading this complex in a different direction, and that is back to being a rental property.
So, this is Arizona Slim with the latest Tucson Re-partment News.
Again, slightly off-topic, but I was wondering about zestimates on something like Zillow. Here in Cincinnati, I now see many, many homes priced at Zestiamte prices but not one of the them is moving. Obviously, there are some delusional sellers that have homes priced $100K over zestimates but forget them for a while. The question then I have is: how accurate are Zillow estimates? If they are reasonably accurate, then are all the buyers gone from the market? This is fun to watch and am sure glad I am not a seller in this environment.
Well, since nobody else has answered your question, I will:
Zillow “Zestimates” are not accurate. They are behind the curve on the housing downturn and therefore are too high. Pass it on.
Posted ““We’re In The Very Early Stages” ”
Of what a rape-a-thon?
“This time over-leveraged FB’s are the bagholders.”
Someone here said something last week about the transfer of wealth back into “more reliable” hands. J6P and the soccer moms dropped the ball, they proved themselves incapable stewards of all that hard won capital from previous generations.
Taken from citydata.com
“Hello I am a 38 yr old woman with a 26 month old son.
My husband has had a job offer that would bring us between Orlando and Kissimme.
His job is a guarantee contract..he will be over seeing a new community that is being built I am not sure where yet..just somwhere between Orlando and Kissimme
We will be looking to rent a home that the company will be paying for (up to 2200 a month)
They will be also paying for a car.
My husbands salary will be 300,000 US a year for 4 years.
I come from a big city born and raised in Toronto where we have a great subway system..I dont drive therefore I need to be close to grocery stores and malls ect..
Also I would like to be in a safe place as I have a young child..
Any advice with the information I have shared?
Thanks Joanne”
What?? They can not fill a position in the US to “over see” a new housing community with all of the job layoffs in this sector?
Or do they think the Cannuks can do a better job?
With a salary/perks like that you can see another reason housing has gone into the toilet.
SKB
It sounds to me like this bitch is just bragging –assuming it’s even true. I wouldn’t be too worried about this. $300K would probably put her husband in the top 0.001% for Florida.
Most “immigrant” jobs do *not* pay anywhere close to this. Think Home Depot parking lot.
I think this could be just a boast–on the web, anonymously, so nobody takes it seriously.
Maybe it’s a new version of the Nigerian “send me your account data” scam? Why would anyone tell about a salary in that range if they are looking for a $2200 rental?
ROFLMAO,
“the Nigerian “send me your account data”
I think that poster said that the company that will be employing her husband will be coughing that up as well for them as well as a car allowance too.
Most likely is a troll looking for attention.
I highly doubt that any company could prove their need for this person to Immigration for the work permit.
SKB
posted “Also I would like to be in a safe place as I have a young child..”
Hang out at Greyhound Bus Stations.
300k for 4 yrs comes to $75k/yr…that wont put you even in the top 1% in CFL. there’s nothing between orl and kissimmee…only the 192 hell road they been repairing it for 3 yrs now i think…typical florida style
Someone is willing to bet that San Diego’s RE future is less gloomy. San Diego RE futures:
http://www.cme.com/trading/dta/del/delayed_quote.html?ProductSymbol=SDG&ProductFoiType=FUT&ProductVenue=G&ProductType=hng
NOV06 prices:
9/19/2006: 247.40
10/12/2006: 248.00
11/13/2006: 246.60
FEB07 prices:
9/19/2006: 239.00
10/12/2006: 238.60
11/13/2006: 239.80
12/13/2006: 242.40
1/12/2007: 241.60
1/23/2007: 241.00
MAY07 prices:
9/19/2006: 232.00
10/12/2006: 233.00
11/13/2006: 235.60
12/13/2006: 236.20
1/12/2007: 237.40
1/23/2007: 239.40
AUG07 prices:
9/19/2006: 230.00
10/12/2006: 229.20
11/13/2006: 232.60
12/13/2006: 233.00
1/12/2007: 237.00
1/23/2007: 235.00
NOV07 prices:
12/13/2006: 230.60
1/12/2007: 232.60
1/23/2007: 233.60