‘You Don’t Lower The Price, You Just Start Dealing’
Some readers are looking at what the public homebuilders are paid. “How about the outrageous pay the CEO of some of these homebuilder took home in 2005.”
Beazer Homes USA - Ian J. McCarthy - $10,239,300
Horton (D.R.) - Donald J. Tomnitz - $18,182,600
KB Home - Bruce Karatz - $155,903,200
Hovnanian Enterprises - Ara K. Hovnanian - $45,915,900
Lennar - Stuart A. Miller -$28,851,100
Toll Brothers - Robert I. Toll - $40,889,800
Here’s how one reader saw it. “Here is a good business model: 1) Grant lots of stock options to top management. 2) Borrow lots of money. 3) Use it for share buybacks that pump up the stock price. 4) Cash out options after price gets bid up. 5) Let company go belly up after the bubble pops Does that sound like a plan?”
Another responded, “These companies had record profits. While CEO pay maybe high at all companies, these salaries aren’t out of line with how their companies did. If there are lots of people willing to buy new houses for double their cost to be built; blame those idiots; not the home building companies.”
A reply, “Private company hurray for your thinking… publicly traded… I don’t think so.”
The Philadelphia Inquirer. “As the nation’s housing market boomed in 2004 and 2005, managers in Toll Bros increased base prices by $3,000, $5,000 or even $10,000 every week or two. But Toll Bros. is paying for the good times. New orders for its homes fell almost 30 percent in the quarter that ended Jan. 31 as the housing market cooled. The company’s stock price has plunged 40 percent since early August.”
“Bob Toll said in a recent speech that profit margins were likely to decline this year. But the housing market would recover when ‘we finally stop chattering about when the bubble will burst.’”
“The company will hold prices at current levels by offering buyers incentives, Toll told the group. Experts say it is important for home builders to maintain prices in their developments as the market softens so that people who bought in the last year or two do not feel as if they are losing money on their own homes in the same subdivision.”
“‘You don’t lower the sticker price, you just start dealing so that nobody knows other than you and the dealer what you paid,’ Stephen East, home-building equities analyst.”
And from New York. “Seemingly without warning, a surge of housing development proposals have hit the desks of planning officials in two western Broome County towns. Developers have revealed plans to build almost 500 housing units combined in Union and Maine, with potentially more on the drawing board.”
“The news is prompting questions, including: Who will occupy the houses, condominiums and rental units proposed for the towns, particularly at a time when Broome’s population has declined by about 3,600 since the 2000 U.S. Census?”
“Yet the questions haven’t seemed to reduce a level of demand that real estate agents claim is high. Still, a question remains: In a county where the median sale price of a single-family home is about $95,000, how many people can afford to pay two or three times that amount?”
Well for this double secret plan to hide real sale prices to work, the home builders are going to have to offer a buy-back plans from existing homeowners, otherwise their pre-owned resales will show up in comps.
Ah, but it’s all about deniability and blame. Once the lower resale values start showing up the HBs will openly lower their sale prices while saying, “What could we do? We have to be able to compete with the resellers.” Then it will be the resellers fault for lowering values, not the HB’s.
SalinasRon - is this for real?
Full Member
Posts: 134
How many farm hands would need to pay rent here to cover a crazy mortgage?
« on: Today at 01:59:08 PM »
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Are my eyes deceiving me? How can a basic tract home in Salinas CA be commanding a price of $720K? How many farm hands would need to be living in the garage to cover a mortgage and destroy the inside of the house? And they paid $350K last year? Unbelievable.
http://www.craigslist.org/sby/rfs/151614259.html
$719995 - A must see home!! Virtual tour. Looks like a model home
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Reply to: see below
No contact info listed below? Let them know.
Date: 2006-04-16, 9:34AM PDT
This home has it all.It’s 2227 sq.ft. of elegance. There are 4 bedrooms, 2 1/2 bathrooms and 2 of the bedrooms have walk-in closets.Take the vitual tour you’ll be very impressed!Hunter/Douglas blinds through out the home. Tile and marble floors and carpeting. Gourmet Kitchen also huge walk-in pantry. Beautiful landscaping. Refigerator,Washer and Dryer included with the sale of the home.Close to Hospital,Schools ans shopping. Seller is very motivated and willing to look at all reasonable offers. Owner is very flexible for showing. Open House on Sunday April 23, 2006 from 1:00 pm to 5:00 pm.
If interested please contact agent Buryl Barton at All Brokers (408) 266-5756. http://tours.tourfactory.com/tours/tour.asp?t=270034
859 Cactus Court at Tumbleweed Dr. google map yahoo map
this is in or around Salinas,CA
no — it’s NOT ok to contact this poster with services or other commercial interests
151614259
Sale History & Tax Info Sale History
No sale history is available for this home
2005 Property Tax $3,801
Total assessed value: = $317,387
Assessed value bldgs: $214,691
Assessed value land: + $102,696
ZESTIMATE™: $707,474 (What’s this?)
Value Range: $622,577 - $785,296
Some fool will probably buy it. I can’t believe the madness. That is what zero down, interst only, stated income loans will do to a market.
“The company will hold prices at current levels by offering buyers incentives, Toll told the group. Experts say it is important for home builders to maintain prices in their developments as the market softens so that people who bought in the last year or two do not feel as if they are losing money on their own homes in the same subdivision.”
Toll may be good at promulgating his greedy vision of McMansion-style living with wannabe millionaires, but his notion of maintaining prices through using incentives instead of discounts to move product reflects either deception or complete ignorance of basic economics. It seems obvious that the incentives are a delaying tactic used to hide the fact that prices are falling, and also that this strategy has a limited shelf life.
Incentives do not help with the high property tax and insurance cost a buyer has to bear. A $100K price reduction is worth at least twice as much as a $100K incentive.
I presume this is the same Toll that talks about moving to a “European” model with a substantial proportion over lifetime renters.
CEO pay is an issue not limited to homebuilders, witness Chris Cox’ SEC initiative on disclosure of company officers’ total compensation. The relationship between CEO’s and their Boards (many of whom are or have been CEO’s themselves) may border on incestuous. Compensation often has very little relationship to performance. If a CEO gets $50 million for failing does it matter how much he gets for succeeding?
“While you stand at the gas pump today, paying .37 or more for a gallon of regular unleaded, spare a thought for the chairman and CEO of ExxonMobil.
Lee Raymond just announced he’s going to retire – with more than half a billion bucks.
How’s that for executive compensation?”
This is from August 2005.
I am an Exxon Mobile shareholder - Small potatoes - 800 shares - orginally 100 shares purchased at $15 in 1985. Stock has performed extemely well - 800 shares at $60.
No qualms here with managements’ compensation.
Did you know the recently retired Lee Raymond made $150,000 dollars a day for each day of the 13 years he led Exxon Mobil?
Its friggin oil company! With our thirst for energy it would have given you the same return even if daffy duck headed the company.
Did he do anything to substantially decrease the cost to refine a barrel of oil? No!
Significantly expand reserves under control? No.
Over see the merger of two behemoth oil giants? Yes.
Move ExonnMobil into new energy frontier similiar to how BP has done? No.
Why exactly did you, as an owner of ExxonMobil, pay him 150,000 dollars a day?
BP is not further along the energy frontier than any other oil major, any thoughts otherwise are an excellent example of what Madison avenue does to folks around here.
I don’t know when he was hired, but it looks like Exxon has been doing better than it’s major peers for a long time (not just post Mobil merger).
http://finance.yahoo.com/q/bc?t=my&s=XOM&l=on&z=m&q=l&c=CVX%2CBP
Was the CEO overpaid, probably, but our tournament compensation system gets the job done. If you don’t like it there’s tons of capital out there for anything oil related, come up with a better compensation plan and smoke the majors out of the way (spotting you $150,000/day should give you a nice boost to get started).
You clearly haven’t read much about Browne or how he flies in the face of all the other oil company executives. This guys leads… the others follow.
http://www.businessweek.com/magazine/content/03_43/b3855023.htm
You could also follow all the links on the new BP alternative energy site. Browne been doing the alternative energy for over a decade but as of Nov 2005 they have spinned it off into its own unit. Learn more here:
http://www.bpalternativenergy.com/liveassets/bp_internet/alternativenergy/index.html
Here’s hoping they all follow him on this path too!
BTW Pluto in the interest of disclosure I own XOM, much, much, more than Anon. I also own more BP than XOM, just so you don’t think I’m pimpin’ BP stock.
Has Raymond made me a bunch of money? Yes.
Do I think he is worth the big payout? No.
We compensated him fairly for his services before the windfall takedown of 2005.
Browne’s a sharp guy, although his Russian ventures are probably looking a little less hot with Putin sending anyone he doesn’t like to Siberia while keeping their oil trumped up tax charges.
I stand by my statement, the only numbers mentioned were solar’s expected revenues in 2008 at $1 billion vs oil company revenues of about $300 billion, when alternative energy is half or more, you can claim they are meaningfully different than the other energy majors. Until then they are just good at marketing (I’d suspect that there is a decent portion of consumers who don’t realize how small their alternative investments are relative to their oil company and really see a difference).
I’ve stuck to shipping and refining the crude rather than taking it out of the ground. Having moved from Montana to DC this summer I’m investing what was a pretty nice down payment there and working on that first down payment here.
Bluto, of course their returns are small compared to their oil revenue, after all, first and foremost, they are still an oil company.
My point is BP isn’t blowing hot air and they’ve been at alternative energy long before madison avenue got the “green is good” idea. Here is a copy of a speech by Browne in 1997 were he began to part ways with the other oil companies.
http://www.gsb.stanford.edu/community/bmag/sbsm0997/feature_ranks.html
BP Solar unit is now the world’s third-largest solar company, with about 10% of the global market, and recently signed a strategic joint venture to access China’s expanding solar market and provide local manufacturing capacity.
BP has been very upfront in all their ad’s acknowledging all their alternative energy efforts are (1) a start (2) provide a future for us, and them, after oil.
Bringing this thread back into focus, Anon in DC thinks Raymonds done right by him. Fair enough.
I would have preferred that Exxon’s board had the guts to go out and get Browne 13 years ago instead of tap a 43 year insider.
During both their tenures Browne took at second rate oil company and transformed it into a serious contender to be feared and an energy leader.
Exxon did under Raymond what it would have done under any competent leadership… grow at a very predictable rate.
BTW -$400 million of that was granted to him 2005 in the last year of his retirement. Funny how the executive compensation committee felt he was farily paid up through year 12.
I figure year 13 was either one helluva gold watch send off, or, a kudos for the nice katrina oil price fuckin, he orchestrated, after the gulf coast got pounded.
Let’s test you knowledge - Do you remeber how much profit ExxonMobil posted in 4th QTR of 2005?
OK give up? 10.5 billion dollars! No company has ever done that, nor will it ever happen again.
400 million sounds like his share of the ransom!
Geez everybody - sorry for the ranting.
Anon’s ‘I have no qualms’ comment is so irresponsible I just can’t help myself.
“‘You don’t lower the sticker price, you just start dealing so that nobody knows other than you and the dealer what you paid,’ Stephen East, home-building equities analyst.”
Right. Let’s see how long it takes before neighbors — especially the wives — start comparing notes on their respective “deals.”
Exactly, even the men folk won’t be able to resist the ‘who got the biggest deal’ bragging rights at the Bar-B-Q.
I have to wonder how much of the Bruce Karatz’s cashout he’s going to have to fork over to his soon-to-be-ex-wife Sandra Lee, the hostess of the “Semi-Homemade with Sandra Lee” cooking show. Sandra Lee’s show features pre-fab food prepared with the same care and skill of a typical house built by KB Homes.
What, it takes 18 months to make it work, its thrown together by 18 illegals, that haven’t a clue, and its delivered in a 1/2 baked manner. Sounds like my builder’s recipie from hell. New, never again!
Haven’t heard of Sandra Lee’s show. Is she a looker, or not? Just curious.
Yes, she is good looking. I’ve seen her since the beginning of her show and like all celebrity personalities she’s lost a lot of weight. However, she was thin to begin with so now she looks like a concentation camp survivor. Why these women think they look good with streched faces, big lips and skeleton bodies is beyond me. But that’s OT, sorry!!
In a bleached blonde, surgically-enhanced kind of way, if you like that sort of thing. Classic “trophy wife” for successful middle-aged businessman. It would appear that Karatz’s divorce from his first wife also involved a large stock cashout.
Where is Joe Isuzu when you need him?
(Or is that strictly Northern Virginia humor?)
‘You don’t lower the sticker price, you just start dealing so that nobody knows other than you and the dealer what you paid,’ Stephen East, home-building equities analyst.”
Shhhh, we’ll just keep it between the two of us no no one has to know…ahahahahahahha
Simmssays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
““Bob Toll said in a recent speech that profit margins were likely to decline this year. But the housing market would recover when ‘we finally stop chattering about when the bubble will burst.’””
Sounds like Bob Toll has resorted to browbeating the public for being a bunch of ninnies. He’s actually blaming the public for not having the balls to keep buying at these inflated properties and keep the party going. Sorry, Bobby, but part of the public has gotten too sick from drinking too much Kool-aid, and the other part is beginning to wonder why ….
The Inquirer is the new mouthpiece for the Tolls. Look up the news.
Philadelphia Inquirer with a report on Toll Bros! This is fantastic!
Did you know that the Tolls purchased Philly Inquirer recently? Check out
link got lost in the formatting: http://www.latimes.com/business/la-fi-mcclatchy24may24,1,7425211.story?coll=la-headlines-business