‘Pricing Power Has Begun To Soften’: CEO
A check-up on the housing bubble and Wall Street. “Bank of America Corp. told employees last week that it will close the mortgage centers of the former MBNA Corp., shifting their work to its own centers, a spokeswoman said Thursday. Bank of America plans to cut 6,000 jobs in total as it swallows MBNA.”
“Bank of America also will shutter Nexstar Financial, a company MBNA acquired last summer that provides mortgage services for other companies, Davis said. Nexstar employs more than 300 in the St. Louis area, and more in Colorado. It will continue to service its existing customers, but will stop accepting new customers, and eventually cease operations.”
What’s the bubble blow-up of the day? “NovaStar Financial Inc., a large U.S. subprime mortgage lender, on Friday said it is postponing its release of fourth-quarter financial results as it seeks legal advice concerning taxes. Shares of the company, which is also a mortgage real estate investment trust, fell as much as 14.6 percent in early trading.”
“In the statement, NovaStar said that in reviewing its year-end financial results and talking with its independent auditors, it decided ‘to obtain legal opinions to further support certain tax positions of the Company.’ Jeffrey Gentle, a NovaStar spokesman, declined to elaborate on that issue. Asked about the timing of the company’s announcement, he said the matters under review involve ‘a recent question that came up.’”
And a homebuilder had disappointing news for shareholders. “WCI Communities Inc. shares were down nearly 5% in early dealings Friday after the company before the opening bell said its fourth-quarter profit fell on a charge for early repayment of debt and delays caused by Hurricane Wilma.”
“The Bonita Springs, Fla., builder of luxury homes and towers said fourth-quarter net income fell 7.3%. The company said net new orders in the fourth quarter plunged to 334 units from 1,081 last year, due primarily to the effects of Hurricane Wilma and fewer properties available for sale.”
“The company is the second builder that caters to the high-end market to report disappointing results. Earlier this week, Toll Brothers Inc., which is considered a bellwether for the U.S. housing market, led the sector lower after it reduced its forecast for 2006 for the second time in three months.”
“But WCI Chief Executive Jerry Starkey said Friday the company is optimistic. ‘While there is a general sentiment that pricing power has begun to soften in many markets, we believe this is temporary,’ Starkey said.”
Thanks to the readers who posted these tips. I would have thought a hurricane would be good for a homebuilder.
More of the iceberg is being revealed each and every day.
David
Bubble Meter Blog
I add a new prediction. The bubble “elsewhere” will hit Manhattan especially hard. The excuse will be Wall Street as a “victim.”
Centex had 10k off in my neighborhood, and it’s 40k now.
There was a development with 80k off in Stuart, Fl which is up to 100k now.
They’re not selling less cos there are less homes available, they’re selling less cos nobody is crazy enough to buy now!
The pool of greater fools is getting smaller and smaller.
Most of the people displaced by the hurricane are not able to afford the size of houses that drive homebuilder profits. The insurance companies are dragging their feet, so even the insured don’t have checks yet. Many building sites are condemned. I don’t think the hurricane will end up helping anyone without influence in the relevant government jurisdictions.
Ben,
It would be interesting to compile quotes from articles regarding layoffs in the RE industry. We have seen tens of thousands lost jobs in articles so far. Before we are through I bet we will see over 200,000 lost jobs dirrectly related to RE, no telling how many will be lost in the ensuing recession.
Thanks for all your work Ben.
Peace,
Rich
A fantastic must read historical article about the LA housing bubble in the 80’s.
where’s the link?
OT, but check out rates today. Bond Prices selling off, rates going higher. Yield curve still staying fully inverted… Looking good.
Fewest in O.C. on record can afford a single-family house
Only 10% earn $171,000 a year, enough to buy a $702,290 home, Realtors report.
From the OC Register.
http://tinyurl.com/9c47n
Sorry about the missing link. You can see the article at the Housing Panic Blog.
http://housingpanic.blogspot.com/
“In the statement, NovaStar said that in reviewing its year-end financial results and talking with its independent auditors, it decided ‘to obtain legal opinions to further support certain tax positions of the Company.’ Jeffrey Gentle, a NovaStar spokesman, declined to elaborate on that issue. Asked about the timing of the company’s announcement, he said the matters under review involve ‘a recent question that came up.’”
The “recent question” was from the CEO as he reached for a pen to sign the 10-Q: “I’m not going to get nailed by SarbOx if I sign this, right?”
Under SOX, CEOs lose all compensation (cash and bonus) for 12 months if there is a material error in its quarterly filings. This is trict liability– doesn’t matter if it’s intentional or not. Pretty good reason for this CEO to blink before filing
blame Bush or Katrina
hehehheh
if it’s over in FL and AZ , it’s really over
I must say, it is a delightful time to be short the homebuilders. Today, WIC. Yesterday, TOL. Just about every day or so, some HB has to issue bad news. And the stocks are showing it. There is a general drift downward.
The really good news is that it is going to be this way for the forseeable future.
Has anybody been paying attention to the yield curve? Almost fully inverted now.
02/09/06 4.32 4.52 4.67 4.66 4.66 4.62 4.55 4.55 4.54 4.72 4.51
That is scary, the 30 year yield has dropped almost 30 bps lately. Are the buyers stupid? Can we have deflation with a fiat currency and a war going on? Prediction-Bernanke leaves Fed funds unchanged in March to get the yield curve steepening.
Personally, I doubt that the fed can stop deflation. The credit bubble has pretty much run it’s course. The only way the fed can pump up the money supply is to expand credit by lowering short-term rates. But lowering short-term rates to zero will not help in a deflationary environment. Once the credit bubble starts to seriously implode people will be scrambling to stay solvent. They certainly will not be looking to take on more debt. That is deflationary. The Treasury is utterly dependent on foriegn bond buyers and holders so they can not monetize debt. I see no way out of a deflationary trap.
Today was the first time I got the chills running up my spine when I was reading this blog. The news, the yield curve, everything is crying it out loud; shit has officially hit the fan now. It’s scary. So awfully scary!
Look at craigslist bay area blog.. The house are 15% below peak.. I think Bay area is headed for a sharp fall.. Watch out below.
WCI is developing Hammock Bay outside of Marco Island ,located in South Naples. It is an investor nightmare. There are 2 high rises with one nearing completion and a third going up. The first, Aversana, has 95 available and 2 pendings. Drive by at night and there are no lights on. All in all, a total of 4 towers are planned.