Homebuilder Orders Down Over 50%
One homebuilder had this out after the bell. “Homebuilder Brookfield Homes Corp on Wednesday said net orders for the first quarter fell to 227 units from 517 units a year ago, saying the decline was primarily in the San Diego/Riverside and Washington D.C. markets.”
“In January 2006, the company forecasted 3,125 home and bulk lot closings for 2006. The company continues to anticipate bulk lot sale closings of 1,500 units during 2006, of which 386 units have been closed to date. With the current San Diego/Riverside and Washington D.C. market conditions, it will be mid-summer 2006 when a better assessment of the 2006 home closings will be made.”
“Our portfolio includes 30,000 lots owned and controlled in the San Francisco Bay Area; Southland / Los Angeles; San Diego / Riverside; Sacramento; and Washington D.C. Area markets. We design, construct and market single-family and multi-family homes primarily to move-up and luxury homebuyers.”
The balance sheet shows very little cash at year end of 2005 and $930 million in inventory, up from $592 million at the end of 2003. The cash-flow statement reveals some stock buybacks.
And all that inventory must be why the firm has so many reduced prices at this website, some as much as these in Bristow, Virginia: “Was $825,021! Over $225,000 in Model Home upgrades! Was $849,565! Save $150,000!.”
Update: “William Lyon Homes, which builds homes in California, Nevada and Arizona, on Wednesday said first-quarter new home orders fell 26 percent. The company said orders fell to 647 homes in the quarter compared with 873 the prior year. The Company’s cancellation rate for the three months ended March 31, 2006 was 28%, compared to 12% for the three months ended March 31, 2005.”
Great. I had to watch KBH go up 4% today on next to no news, but hopefully it will go back down tomorrow.
I hear you bruddah — you ever see that girl in the Kent State picture? That was me watching my HOV short today.
There was some nominal news today, which was really just an excuse to run ‘em up: the KC Fed guy came out and said something that everybody pretty much knows, and doesn’t really matter anyway, that the Fed is almost done raising rates. These Fed guys popping up and reading off a script to negate three or four days of losses in 30 minutes is getting as old and as transparent as the Abby Joseph Cohens and Joseph Battapaglias of the stock bubble coming out on those DJII-down-100 days back in 1999. “Oh my God, buy as much of the homebuilder stocks as you can get! They’ll sell as many houses as they can make because the only thing negative for them is the prospect of higher interest rates! The Fed guy just made a speech!” Yeah yeah…
Feepness /cabinbound:
Yeah Koneg..that marks the eiteenth time shortly after one of the rate rises (15 todate)that Wall Street has signaled the ENDfor the rate hikes…Once again!…When in fact, koneg statement was “we are in the upper end of nuetral”. Wall Street of course left out the balance of the March 28th comments…We are also in the upper end of acceptable inflation ( even with Hedonics) Since Bearded Ben is a “target inflationist, NOT a interest rate pegger….mark it done as the BLOW HARDs & talking head of WallStreet get the suckers to “cover” or buy on this 18 rally without a pullback for rate increases….
As for Shorts on the Housing stocks…I thought to cover last month…a) “Hope SPRINGS eterenal”..March April spring sales slope of hiope .b) oversold, and c)Bonds are in the process of putting in a MAJOR bottom….. due to stock crash / no GDP growth! - Again I don’t really know why bonds are about to rally but they are! Lookin go for low this week–I don;t think it is quite in!
Hah,
How many ways can the fed say nothing. Fedseak is the ultimate political gibberish.
The way they are printing money I have no trouble believing in 14-17% interest rates and gold in the thousands. I remember old timers in the 70’s talking about rolling their bonds over into rates that high =)
Hell for 17% interest I might even consider a bond, no way you can touch them at less that 10% if you don’t want to lose your ass to inflation of higher rates.
Yep, today was no fun. I have to think it was a temporary thing given that the yield on the ten year did not move nearly as much as one would think given the action in the HBs.
“One homebuilder had this out after the bell.”
Wouldn’t the markets operate more efficiently if they announced before the bell for once? I guess this is a sign that BHS stock will go up like a rocket first thing in the morning, given the stimulative effect of bad news on HB stock prices these days.
P.S. That 50% off figure is a nice match to our earlier guesstimate that 50% of new homes were bought as seconds (or more) in 2005…
Warren Buffet has suggested he would be just as happy if the market were open only one day a year. Just think of it as reporting the next open.
“Was $849,565! Save $150,000!”
Bubble? What bubble?
That was awesome. I needed to see hundreds of thousands of dollars of straight-faced reductions.
Bubble, Bubble, TOL and Trouble!
Thanks to the readers who sent in this tip.
Ben, Fellow Bloggers and Story Contributors…
WE BE SMOKIN’!!!!!! There is a NOTICABLE UP-TICK on Bubble Stories.
You gotta think that CNN, ABC, NBC, CNBC, BLOOMBERG, HECK, even Cramer must be reading and lurking Ben’s Blog.
Here’s a dash of cold water for all of you Cramerites:
http://www.signonsandiego.com/uniontrib/20060402/news_mz1b2mad.html
The personal finance columnist for the San Diego Union-Tribune tracked down how well Cramer’s stock picks have been doing….general impression, not so much.
Great video interview with Kramer here http://www.thestreet.com/video/cramermarketupdates/10277591.html He actually sounds rational and isn’t sweating, weird. I’ve heard his picks on average do actually beat the street in the long run but probably not by much.
Efficient market theory is CRAP!!!
Anyone that can read and understand a companies balance sheet and grasp basic economic cycles will quickly realize that the vast majority of stocks are crap. I would rather have precious metals under my bed than 1/2 of the securities out there.
That being said, if your an astute reader willing to put in the research I see no reason to not pull in at least 20% ROI. I have made over 40%/yr (margined to the max) for over 5 yrs now. Sold my rentals and dumped the money into securities, have never held a stock more than a year. The largest hit I have taken on one stock in $7k the most made was $70k.
I believe that half the stocks out there do little more than part fools from their money over time. With inflation running the way it is (screw the govs numbers) if your not making more than 10-15% I think your dead.
I know the stocks are risky and can’t wait to get back into rentals. My returns on my two rentals and the residence I sold smoked the returns I have made on stocks, and I felt much safer with the RE.
Can’t wait for the foreclosures at less than 10 times rents (hoping for less than 8 times rents).
In the mid 90’s the best courthouse sales were $550/mo rentals selling for $40k (40k/550*12) just a little over 6 times rents =). Those kind of numbers would take todays $360k home down to $100k =)
(1300*12*6).
These would represent the same rental.
Lemme see $40k in 95′ to $100k in 08′ this works out to about 7% appreciation/yr plus positive cash flow =). Much better deal than todays “INVESTORS” are doing =).
TOL is next!
“With the current San Diego/Riverside and Washington D.C. market conditions, it will be mid-summer 2006 when a better assessment of the 2006 home closings will be made.”
How right they are! By then, I am guessing that SD used-home inventory will have surpassed its 1995 level of 19,200 units for sale (the highest in level of the past 10+ years) and there will be nobody left on the planet who doubts the market is crashing.
I say: “San Diego condos for everyone!”
May I have that dessert {falling prices},with a sip of tea-ser @ 1.95% and a pinch of negative-am on my mortgage to go? Please.
Hmm! Does everyone want a downtown condo with a view of Petco Park?
I just can’t see the attraction of that.
You’d be amazed at the number of people I have never heard remotely interested in sports express how excited they are about a view of Petco Park.
Look, I could buy season tickets with a couple months of your HOA.
RE agents and lenders should beware: Their commission is a pittance compared to the cost of litigation. They need to disclose up front and in writing the extremely high risk of buying residential housing today.
‘The company continues to anticipate bulk lot sale closings of 1,500 units during 2006, of which 386 units have been closed to date for net income of $13 million’
So they sold almost 400 lots, assumably around their prime markets, and they only netted $13 million? So much for the idea that fat profits are sitting in these land banks.
“Was $849,565! Save $150,000!”
How many new Honda Civics does that incentive work out to — about seven or so?
LOL!
Please don’t forget these homes even with the discounts are stupidly overpriced. $700k townhouses in Loundoun County! There were cows there 2 years ago!
These homes still need another $200k reduction to get close to their true value. No townhouse 30+ miles outside of the city should be over a half million dollars.
William Lyons also came out with 1Q (ended March) order rates. New orders down from 873 last year to 647 this year despite having 10 more communities available for sale this year. Backlog down and sales per community dropped from 23 last year to 13.5 this year. OUCH!
Update: ”William Lyon Homes, which builds homes in California, Nevada and Arizona, on Wednesday said first-quarter new home orders fell 26 percent. The company said orders fell to 647 homes in the quarter compared with 873 the prior year. The Company’s cancellation rate for the three months ended March 31, 2006 was 28%, compared to 12% for the three months ended March 31, 2005.’
They were recently trying to convert a mediocre early 1970s apartment complex (Kimberly Place) in Monterey to condos (e.g. a studio for $250K+, a 2br for $500K). As far as I know that plan has stalled out. If not I’m interested whether the sales figures are available.
Any of the realtors on the board able to pull some preliminary March sales numbers for san diego yet ?
I’m curious to see if sales are still as depressed as the last two months compared to years gone by - Feb was the slowest year since at least ‘99 - as far as the dataquick numbers I can pull shows.
Per the Sandicor numbers I just ran, it’s astounding but the numbers are looking surprising good. Sales volume is off about 20%. The sales numbers should increase 100 or more after the lazy Realtors who have not converted their pending listngs but which closed in March. This would put the sales number closer to 85%.
March 2005 - 2,377 detached homes sold with avg asking price of 700K and avg selling price of 674K in 54 days.
March 2006 - 1,891 detached homes sold with avg asking price of 744K and avg selling price of 712K in 66 days.
Sorry but I cant pull median prices. I’m flabbergasted and expected them to continue to be off by 30% as they have the previous couple months.
Spring dead cat bounce. The last load of greater fools jumping into the washer just before the spin cycle…
There’s a solid chance the entire year will be pretty good–prior housing bubbles have often deflated more gradually than expected. There’s still a lot of easy money floating around and interest rates are historically decent.
The real test comes in ‘07, ‘08, and ‘09 when the teaser loans expire and recent buyers must actually pay for the house. Reason will kick in when owners see stagnant house values as renter friends are paying 50% less per month.
Good one AZ….
Was the 400k market as dead as last month ?
That’s the engine that feeds this monster - if that runs out of steam it’s over - no move up buyers = no equity to put into the magic roundabout.
Then it’s just a matter of waiting on the bad loans to come home to roost.
The lower end of the market is tapped out. The only buyers that can ‘qualify’ is the upper end. Therefor the median has not moved as much. The leading indicator is ‘Volumn before Price’.
sd realtor..I don’t know what comparison you are referring to but if they were GOVT. statistics attached to a median, then chances are the RAW March numbers need to be” Seasonally ADJUSTED…”
Even so, your raw data “Sales off 20% versus February ‘06 or last March (’05)? 54- & 66 days doesn’t sound like the sky is falling in SD!
20% off from a seasonally adjusted February would be a disaster!
test
Oh to be in Florida:”The governor’s call for using tax dollars to hold the line on home insurance costs emerged on the same day the governor and the Cabinet tacked on a 2.8 percent surcharge to every homeowner policy. It amounts to an additional $28 for every $1,000 of annual premium on a homeowner’s policy.
The increase comes on top of the 6.8 percent one-time surcharge imposed last year to bail out Citizens Property Insurance Corp., the state-run home insurer of last resort, and another Citizens’ levy at least 11 percent slated to go in effect later this year to cover 2005 storm losses.
The three additional insurance charges added together mean an annual premium increase of more than $300 for someone who had been paying $1,500 a year on home insurance. At the same time, home insurers statewide are seeking their own double-digit rate increases separate from these storm-related surcharges.”
URL:www.sun-sentinel.com/news/local/southflorida/sfl-finsure05apr05,0,1175428.story?coll=sfla-home-headlines
I got short BHS around $52 months ago after discovering it from someone on this board. THANK YOU. This stock is going much much lower.
“Risk Management said recently that it is tweaking its model for the second time in three years to account for much greater frequency and intensity of hurricane activity during the next five years. The company told insurers to increase their annual loss estimates by 25 to 30 percent in New England and the mid-Atlantic states, and 40 percent across the Gulf Coast, Florida, and the Southeast, moves that would trigger hefty premium increases for coastal homeowners.”
Whoa there, sell now! URL link:/www.boston.com/business/globe/articles/2006/04/05/groups_storm_consultants_collude_with_insurers/
My family has lived on the NE seascoasts for generations. There have been no large hurricane hits since ?Carol in the 40s. We did have the “no name” storm in the 90s although compared to what goes on in Florida the damage was nominal and was more about boats, the same yearly flooding in Scituate harbor, Lynnshore drive, & the seawall in Hampton beach, NH. Every once in a while the houseless strip of land just before P-town would get flooded over for a day or so and the road would have to be fixed. Our home just over a mile from “Uncle Ted’s” house in Hyannisport wasn’t even a designated flood zone. These insurance agencies are out of control.
Forbes
The most expensive states to insure a home: the five most expensive:
1. Texas $1,328
2. Louisiana $975
3. Oklahoma $925
4. Florida $810
5. District of Columbia $806
Hurricane-prone states like Florida and Louisiana, along with windy dust-up states like Kansas and Oklahoma, are among the 10 most expensive states for homeowners insurance. So are densely populated spots like Washington, D.C., and states such as Mississippi, where many houses are less structurally sound.
URL: moneycentral.msn.com/content/Insurance/Insureyourhome/P149144.asp
That’s only if you fail to add in quake insurance in CA. If you added that to the home normal insurance costs, CA would easily top the list, by far.
Yah but nobody in CA actually gets earthquake insurance. For like 5x the price of your regular insurance, you get to pay a 10% deductible before the insurance company needs to pay attention.
I had a house “worth” like $250K. I would have been in for an additional thousand a year on the premium, then $25K out of pocket. That was an easy decision to make because I knew I was going to be in it for only a couple of years. Never had anything so much as fall off a shelf.
Yes, insurance in Texas is expensive, as are property taxes. That, and the fact that there is lots of land and few regulatory barriers to building, is why there is not much of a bubble here (in most areas).
can we conclude this year that the post-Super Bowl is a bust this year?
Nope, not yet. See my post below.
“WEST PALM BEACH, Fla. — About 140,000 Florida homeowners will lose their insurance policies after a large provider said it will begin canceling them just over a month into this year’s hurricane season.
Atlantic Preferred Insurance Co., a subsidiary of Tampa-based Poe Financial Group, will begin dropping its policies July 13 as they come up for renewal.” announced on am radio this pm…..
Here’s a thought; a $100,000 new home discount is a new Honda Civic every two years forever.
http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=S417947&page=3&property_type=SFR&mls=mls_so_cal&cKey=q3bw4pfd&source=SOCALMLS
Do you guys see this alot On Zipreality, where they Reduce the price one month and then raise it alittle.
Here’s an example of what I’m talking about where they reduce it to 600k and then a month later re-reduce, but acctually raise the price to 605k????
I see this alot on Zipreality and I check OC almost everyday!!!!
I have noticed that too. I have also noticed that Ziprealty does not have the whole MLS listing. I often compare it to realtor.com. For example Realtor.com has two eastside Costa Mesa listing in 92627 on Virginia that Ziprealty does not. I even went to see just to confirm it exists. Does anyone know why Ziprealty does not have all the MLS listings?
Worse yet, a lot of Realtor.com homes are listed twice, or more in their counts. It’s tough to say how reliable the aggregation is, but, still good enough for trend analysis.
And, when looking at the inventory, the trend is your friend
I see the same thing and I can’t figure it out. If one is looking for homes, they’ll see the same thing. I’m always tempted to call up and ask WTF? As near as I can tell, this property was last purchased for 269K in 2001. Not a bad profit.
actually, i saw one house listed on ziprealty in the DC area, only to see the listing go inactive. a week later, the same house was put out at a higher asking price with a different MLS #. i e-mailed the ziprealty broker to ask if this was standard real estate practice and my searches stored on ziprealty were deleted–i also received a curt, snotty e-mail from him as well.
So then they really don’t need to make more land then…
I can’t wait until the next time I hear someone say this… my new response will be… “sure, we will worry about making new land when you can sell all those houses sitting empty on the land we have now… your problem isn’t the scarcity of land, it is the scarcity of buyers and their problem is the scarcity of real money.”
“Was $849,565! Save $150,000!”
Did you look at the photo of this place? It looks like a coocoo bird is about to spring out of the front door (guess what it will chirp).
Its important to remember when the story says greater Washington DC, it means Nothern Virginia and Maryland. Brookfield Homes Corp does not build homes in DC proper.
http://www.dcbubble.blogspot.com
One thing to keep in mind w/the Wm Lyon and other CA/AZ builders. Last year, it was raining cats & dogs for Q1– going house shopping meant swimming. This year– nope (although last week or so hasn’t been great in the land of perpetual sunshine).
Huh? In Silicon Valley it’s been the wettest March — 25 days out of 31 had rain — on record (100+ years). April is 5 for 5 so far, and the local weather people say we’re gonna have maybe 3 days without rain out of the next 10.
sorry, I forget that CA is really 3 or 4 states. Southern half +AZ was swimming last year. Up until about 3 weeks ago, virtually no rain. Phx went 140+ days w/o rain (about 30% longer than prev record). SoCal better, but not much.
Does anyone have a handle on what actual construction cost is for various grades of new homes? I used to go by rule of thumb that decent two-story mid-range homes with basements but without special trimmings were in the $100-$110 per square foot range (not including land value) and that upper end homes (not pure luxury, but nice stuff - marble, granite, higher-end finishings) were in the $140-$150 range. But that was a while back. Anyone out there have a solid handle on what it costs to build psf?
btw THANK YOU for this great blog. I almost bought in central VA back in Jan, despite some uncertainty, and now am REALLY GLAD I didn’t and will be renting instead. Have been tracking listing inventory in Charlottesville VA - fyi, 52% increase in inventory since 1/17/2006, and some prices ranges are showing almost no sales at all.
depends where you are. DC could easily be 175-200/sf for average and 250+ for above average construction.
In the Deep South, you can build for $60/foot plus cost of the lot. No granite, but a brick front or 3-sides and a decent starter home. Even in Central Florida, $160 a foot exclusive of land builds a very high-end custom house.
Up here people figure $75-80/sf…..basically appointed, maybe a jacuzzi or sprawling deck. Depending on where you are that could include .20 acres or 1+ acres.
Centex still seems to be going like gangbusters in Southern California. No sign of trouble for their Fusion project yet. Of course, this area has not shown signs of the downturn so obvious in other areas - it will be the last to implode.
sdrealtor said:
“Per the Sandicor numbers I just ran, it’s astounding but the numbers are looking surprising good. Sales volume is off about 20%. The sales numbers should increase 100 or more after the lazy Realtors who have not converted their pending listngs but which closed in March. This would put the sales number closer to 85%.
March 2005 - 2,377 detached homes sold with avg asking price of 700K and avg selling price of 674K in 54 days.
March 2006 - 1,891 detached homes sold with avg asking price of 744K and avg selling price of 712K in 66 days.”
___________________-
I hate to say this, but there is far less inventory in my neighborhood (south Carlsbad) than there has been in the past two years. It really seems as though there is a “spring bounce,” which I expected, but it seems stronger than I had hoped.
We drove around LA (Sherman Oaks) this past week, and there seems to be very little inventory compared to other inventory “scouting” trips we’ve done over the past couple of years. Maybe we’re looking in the wrong places, but houses are still selling.
On the way home, we heard many ads on the radio (1070 AM) for mortgages. Now they’re selling **FIXED RATE** negative-amortization loans. They’ve already had the I/O FRMs for a while. They’re taking the same path as they did with the ARMs — reducing monthly payments more and more.
Until these loans go away, I don’t think we’ll see the real crash begin. Yes, it will be “softer” due to lack of affordability and psychology, but the lenders are going to drag this carcass around for miles and miles. I want to see a REALLY BIG credit “event” which will shut these things down, once and for all.
**sigh** Getting tired of this garbage…
I’m with you Ca renter , I’m getting tired of this garbage to . Why is it dying so hard . The market needs a major correction now before more bad loans are written .
“These homes still need another $200k reduction to get close to their true value. No townhouse 30+ miles outside of the city should be over a half million dollars.”
Say rather $400k– we sold an Alexandria townhome in a wonderful neighborhood, near the metro for just under $400k last May. No way these McMansions on the edge of nowhere are going to hold even a fraction of their pumped up ‘value’.
And all that inventory must be why the firm has so many reduced prices at this website, some as much as these in Bristow, Virginia: “Was $825,021! Over $225,000 in Model Home upgrades! Was $849,565! Save $150,000!.”
Think of the FB’s who bought @ $849,565 w/ 0% down a 6 pt. ARM cap.
Already $150k underwater. No refi/HELOC help here…