Builders ‘Walk Away’ From Lots Amid Glut: California
The Sacramento Bee has an update from California. “Nearly one in every 10 homes, apartments and condominiums started last year in California rose in the Sacramento area, led by Sacramento’s Natomas area, the cities of Lincoln and Elk Grove, and unincorporated Yuba County, according to the California Building Industry Association.”
“In fact, builders in California produced 10 percent of the nation’s housing, the CBIA said.”
“‘Twenty thousand permits is a very good number for the region, even though they trailed off some in the last quarter,’ said John Orr, CEO of CBIA’s Roseville affiliate.”
“The number is expected to drop by at least 2,000 homes this year in the six-county region, Orr said. Area builders are scaling back amid a glut of existing homes for sale and rising interest rates, among other reasons.”
“Roseville-based homebuilder consultant John Schleimer said builders have begun backing out of land deals just as buyers are backing out of new homes. ‘I don’t know of a major homebuilder who is not in renegotiations or didn’t walk away from lots in the last three months,’ said Schleimer.”
From the Napa Valley Register. “Napa County’s housing market seems to be slowing down, with fewer sales and a slight drop in the value of the median priced home, new statistics reveal. The median sale price decreased 5 percent between March and April to $609,000, while the number of units sold plunged 39 percent, according to DataQuick.”
“DataQuick reports the ‘typical’ Bay Area buyer has an eye popping $3,048 per month mortgage payment. That tops March’s $2,948 figure and the $2,659 payment reported in April 2005. Not only are homeowners taking on higher monthly payments, the days of hosting a ‘mortgage burning party’ seem to be dwindling, said Silvas.”
“Different generations have different home ownership goals, she added. ‘I don’t think most buyers today are looking at that as a goal,’ said (realtor) Jill Silvas of Morgan Lane.”
“Different generations have different home ownership goals, she added. ‘I don’t think most buyers today are looking at that as a goal,’ said (realtor) Jill Silvas of Morgan Lane.”
So what she’s really saying is: “Young homeowners don’t ever intend to actually own their homes.” Ahh, what a thinly veiled attempt to hawk 50 year mortgages and death-or-glory loans. Keep on whistling past the graveyard, Jill.
I agree with your assessment of her statement. What is baffling/troubling is, then why are they “buying” these homes? It’s clearly much, much cheaper to rent. Apparently, they’re only in it for the investment aspect, but can they actually handle a loss on their investment? I don’t think so, and even if they give the place back to the lender, they’ll still be stuck with a huge tax bill that will take years to pay off. Come on, real estate crashed in the early 90s - it wasn’t that long ago. Don’t people realize that sometimes real estate does decrease in price?
These people are killing me, because I actually want to buy a home (yes, to actually own it - I don’t have the cash to pay in full, but I will use conventional loans and pay it off), but I have to wait until they all get crushed when their loans re-set, they have to move, they lose their job, etc. and they can’t sell their homes because they owe too much on them. Owning my own home (it will be my first) is something that I really look forward to, and it sucks to have to delay it because a bunch of people are just too stupid to realize the mistakes they’re making. Sorry for the little rant here at the end, but it’s frustrating for me (and I’m sure for others like me that have had to put a purchase on hold while this thing takes a few years to really sort itself out). Phew, I feel a little better now.
amen.
I’ve in exactly the same boat, WaitingInOC, but in the Seattle area. I’m looking forward to owning my own home, but I’ll only do it with a 30 year fixed, not one of the creative loans. This means I basically have to wait for the market to correct because things are so out of whack right now. You’re not alone.
“These people are killing me, because I actually want to buy a home ”
I hear you.
Be patient. We represent “pent up demand”. The realtors are counting on us to rescue things once prices finally decline 5-10% Y-O-Y. Hopefully we won’t rush in too soon, because if we hold back we may one day see our dreams of 30-40% price reductions.
But we’ll never get there if we jump in too soon.
“Come on, real estate crashed in the early 90s - it wasn’t that long ago. Don’t people realize that sometimes real estate does decrease in price?”
I know, that one kills me too. Every time I mention that to an FB, they have no idea that happened. Memory is very short and they are too lazy to research it.
Hopefully the gold mania gets parabolic again in a few years and everyone forgets that it crashed in the 80’s. It should be the same investors…
Heck yeah. I want to own also…but not at these prices. I have to wait until either the idiots wake up, burn out or move away.
Halleluja brother! Ditto in SF. I am sooooo ready to buy, for at least three years now, and I looked, and saw all the craziness, and although I *could* afford something okay I just couldn’t bring myself to do it. It just didn’t feel right. Having to wait a couple of years for this to all play out doesn’t sound so great either.
Look, people are buying these houses for as many reasons as there are people buying. We all know the upside of home ownership, and it isn’t all (or mostly) financial. If there is a house you like and can afford, BUY IT!
Some poeple on this blog have been predicting the bottom of this thing for years. I guess that if every day you predict the bottom will be tomorrow, eventually you will be correct. But no one can really time it to any significant extent.
People who try to time ovulation = parents.
People who try to time the bottom of the housing market = eternal renters (which is not necessarily a bad thing)
homepop: you need to wise up a bit.
“Some poeple on this blog have been predicting the bottom of this thing for years.”
This blog hasn’t been around for years ! And yes, housing has been over priced for more than one year.
“I guess that if every day you predict the bottom will be tomorrow, eventually you will be correct. But no one can really time it to any significant extent.”
All you have to do is watch the inventory levels. They will balloon and balloon for many months now. When interest rates drop to a low level and people start buying again, that will be the bottom. Until then, we have lots of foreclosures to contend with.
And apparently I can time the market, because I sure didn’t buy at the top !
Nice…we have got a genuine bubble denier troll here.
What do you think is a reasonable premium over renting to own an equivalent home?
The current premium for me is 69%.
What would drive people to pay a 69% premium to own?
Free money
As soon as that speculation premium disappears I will buy, or stated another way once the premium to own a home is within the historical range of 10-20% I will own with a traditional 30yr FRM.
“If there is a house you like and can afford, BUY IT!”
That is the whole problem, duh.
Don’t worry, no one has actually “bought” a house in 3 or 4 years. They’ve all bought options from the bank. We rent, they pay margin fees.
I don’t think people have been predicting the “bottom” so much as the “top”.
As I said above, there is a major problem in the housing market, and it’s not prices on their own–it’s liquidity.
People are willing to borrow with ridiculous terms, and banks are willing to lend to them. I have a strong salary, and have saved a real down payment. I’m not willing to compete with all the people who are willing to buy with little or nothing down and an option ARM. The net effect of this is that many people will half of my income are buying houses in the price range that I am comfortable with. And because this has been going on for so long, it has driven the prices up to a point where I would be buying much less house.
No thank you.
I’m renting in a great neighborhood within a walk of where I work and a small downtown and saving a TON every month.
I’m not trying to time prices in the market, just waiting for there to be more fear with respect to interest rates than there is today.
Yes, exactly, the problem is excess liquidity. What would happen if tomorrow Bernanke woke up and decided to helicopter-drop a gazillion dollars into our economy? You bet — the bubble would continue. Watch the (now independently calculated) M3 — that will tell you when the bubble is about to burst. And, BTW, it would appear that the M3 is recently contracting. Maybe Bernanke isn’t such a putz, after all.
homepop, I bought in 2003 and I almost regret it. I figure it’s a toss up. Benefits: Low fixed, house the way I want it, rental unit in back to offset the mortgage and I’ll be seven years into my mortgage in 2010 (when I see the bottom coming).
Negative? I haven’t actually run the numbers but property taxes would be a lot lower and my mortgage in 2010 will probably be what the place itself would go for.
I guess the point I was trying to make (badly) is…don’t act like the flippers, don’t make the home buying decision only a matter of dollars and cents. If you are looking to buy your home and you have found a place that gives you peace and contentment and you can afford it…don’t be paralyzed by fear that you’re not getting the best deal or that you may lose some money in the short run. Just buy it.
I am almost 60 years old and I have owned my homes throughout the past 35 years. I never worried about making or losing money in this area and guess what? I have never lost money. It isn’t that I’m smart, but it didn’t matter to me as long as it was a good home for my family.
I am a psychologist and every day my patients talk to me about how they are afraid of making mistakes or making committments. Let me tell you, at the end of the day when you are looking back at your life, whether or not you got a good deal or a bad deal on a house is going to be very close to the bottom of the list of important things to remember.
So, that was my point.
Like everyone else here (it seems), I’m with you. I’m not targeting a time in the market as it relates to home prices, I only want to compete with everyone else to buy a house when they are as scared as I am about interest rates going up (and consequently down payments will come back into vogue). This will necessarily mean that home prices will be less (or there will be the potential to negotiate). Then I’ll be ready to compete to buy. Otherwise, I’m taking just as much financial risk as everyone else–which I’m not willing to do.
I think it really may be different this time–except what’s different is the people. They’ve gotten much more stupid. And more greedy. Really.
right… they aspire to rent from the bank and they love paying double the prices of rent for the privilege! Better hurry up and line up or be priced out of the new american dream!
ROFLMAO
who raised this generation of dummies?????
“Different generations have different home ownership goals, she added. ‘I don’t think most buyers today are looking at that as a goal,’ said (realtor) Jill Silvas of Morgan Lane.”
Yeah, Jill, we Gen-X’ers don’t want to pay off our mortgages. Nor do we want to live in a spacious single family home, we’d much rather opt for a cramped condo unit.
Wow, this lady really has her finger on the pulse of the market.
Affordability has nothing to do with it!
Amazing enough a large portion of the public still are determined to buy at any cost. It’s as if they are zombies implanted with one idea “must buy house…must buy house.”
People are pretty dim. Once things drop a few percent they will convince themselves that the market is now full of “bargains”. I have relatives who see the huge number of houses being built near Sacramento and believe it proves that real estate is still booming.
Sometimes I think reality will not be restored until all the dumb people are completely broke. Trouble is there seems to be an endless supply of really dumb people here in California.
I totally agree. I don’t think we’ll run out of these dumb people until the MSM is blaring stories about broke FBs and plummeting prices, which will finally scare the dumb people into paralysis. Unfortunately, I don’t think that’s going to happen until 2007, and the good buying opportunities won’t really hit until 2008 or 2009.
Alas,
I unfortunately agree with your timeline *except* I expect by Oct 15th of 2006 we’ll see small price declines on so cal (San Diego in particular).
Neil
O.K., the MSM are still hiding the facts but how can anyone these days even walk into a neighborhood with multiple FOR SALE signs on every corner and not “sense” that something’s wrong? Isn’t there some kind of innate trait burried deep in our brains that would at least warn most humans of eminent danger?
I moved to SD from Chicago in late ‘04. At the height of the bubble. Since that time, I’ve developed my opinion that there are a lot of stupid lazy people in SoCal. One of the other posters coined a phrase that I think is very appropriate: Clownifornians.
They don’t call them “Greater Fools” for nothing!!
I forgot to comment on the “couple percent” price dropping causing a wave of bargain shopping.
Yep, seen that already at work. People ready to run off down to San Diego for that “once in a lifetime buy.” Yep… it won’t happen twice.
Not by the same buyers anyway. 
Neil
Prices not seen since… since… March!
V.good
“Sometimes I think reality will not be restored until all the dumb people are completely broke.”
That is exactly what it takes. Nothing less. The bottom has to totally fall out of the market and people have to loose their shirt before they realize that they were wrong. And even then some of them don’t understand what happened. I know several people that bought stocks on the way down when the dot com bubble burst.
The stock markets fell again today. It will be interesting to see what happens overnight in the foreign markets. Things are finally coming to their senses. The fall out is going to be huge. Bernanke can’t afford not to tighten and when he does it is going to kill the economy and housing and China and all of it - all of which existed on the illusion of free money. And all the dummies are going to get left holding the bag, maybe even buying on the way down.
It is totally stupid that we have to run our economy like this every 6 years, but when you give idiots money, they don’t know how to invest it. That is the bottom line. It took 2 participants to make this all happen. It took the Fed and banks to lower interest rates to nothing and make sure that everyone who wanted a home got one and it took idiots to think that buying homes at an inflated price was a good thing. So, we wasted the last several years dumping our hard BORROWED money into houses that have no return, we’ve run up the price of commodity, we’ve over stimulated the Chinese economy, we’ve built WalMart into a mega corporation and now it is over. Now we pay the price.
We are going into recession. People are going to get laid off. Foreclosures are going to be rampant. Commodities are going to fall back to their normal levels. China will go into a recession. There will be a credit crisis. The stock market can now see this and there is no way to avoid it. We’ve been partying since 1994. Now comes the hangover.
I would prefer to see the really dumb people broken.
I bought dot.com stocks on the way down after my Good CPA/Assshole Financial Planner lost $25,000 of my life savings. Recouped probably $15,000 by carefully watching the market. Dollar-cost averaging can help cover your ass.
Fired his as as a Financial Planner, BTW.
Most financial planner are no better than “Madame Zola” with her crystal ball. Anyone can claim to be a financial planner. You would be better off putting graph paper on the bottom of a hamster cage and basing your stock picks on where the droppings fall.
Don’t the chinese do things like this?
WHEN WILL SHEOPLE UNDERSTAND THAT TOO? ANYONE CAN CALL THEMSELVES A ‘FINANCIAL PLANNER’. TURN YOUR LIFE SAVINGS OVER TO SOMEONE PROBABLY LESS QUALIFIED THAN YOU? AND WITH LESS MOVIATION - HEY, IT IS NOT THEIR LIFE SAVINGS!
PEOPLE NEED TO UNDERSTAND THE DIFFERENCE BTWN CFP, CFA, CPA, Series 6, Series 7, ETC.!!!!!!!
That is exactly what it takes. Nothing less. The bottom has to totally fall out of the market and people have to loose their shirt before they realize that they were wrong.
Indeed. People will need to really get the full 220v jolt to the nether regions to snap out of zombie mode. Until the words RE + “deal” causes widespread sphincter puckering we will not be over this.
And way-too-easy credit.
There are advantages to owning a house. I am now renting after 15 yrs of owning one particular house. I have 4 (FOUR) dogs, 9 birds, and 1 cat. At my previous house I had an outdoor aviary for the birds, a big yard for the dogs (and all hardwood floors, no carpet), and even a little room for my kitty. Now I’m in a 800 sq ft duplex and it’s tough. I had to give the landlord a $1K pet deposit (which I didn’t mind doing, 4 dogs is over the top). People with pets have a very difficult time renting. And at my old house I had a gorgeous CA native plant garden (no lawn) that took me 15 yrs to create. I was so involved with my garden even my bees had names. And here in the Ozarks my landlord is incompetent when it comes to fixing stuff, plus this place is built so cheaply if I close a door too hard it falls off. Anyway, having your own place is nice.
However, even though I practically owned my place outright after 15 yrs I always had the mentality that the bank and I owned it, not just me. I only wish I had paid off my mortgage completely with my pets.com stock (just kidding but I did have some other incredible losers…remember MarchFirst? Yikes, I can’t even remember the others, maybe it’s for the best.)
I worked with a bunch of them a while ago…I remember MarchFirst’s CEO Robert Bernard thought all advanced technology was the result of alien intervention. Plus, according to the MarchFirsties, he had a smokin’ wife.
I would throw in i2…had a couple of friends that worked there for a while.
Amazing how these ‘can’t lose’ investments all crater’d…
Heh, I remember where all those investor dollars went.. Into my belly and liver, and up the CEO’s nose….
If only we could regulate away stupidity.
Nah, the stupid are the ones who create the opportunities for the smart.
These quotes show just what lies so many of the industry excuses were. Remember builders complaining that the run up was due to the unavailability of land? TOL claims $5b in assets, let’s see; $28m corporate jet, check, $4,972,000,000 in land and land options, check.
Just on ABC, Maricopa Co.,Az. has the highest level of identity theft in the U.S. helped by the Cty.’s practice of posting all personal info on public sites such as house deeds, permits, bankruptcies etc…” It wasn’t me that bought those 5 houses”
I smell a NAR Rat! Could their agenda include restricting public access to information on real estate transactions with, of course, a provision granting special access to licensed real estate agents?
Nar my ass, Anybody who knew how easy it was to destroy someone’s life by foraging around the courthouse would be sounding that siren.
High illegal Mexican population also is a major contributor.
…for being victims… right?
These numbers tell me there will be 10-15% less construction jobs in Ca. I assume that wont be good!?!?
Wouldn’t that mean an evaporation of jobs that “Americans won’t do?” Just what we need: 12 million amnesty recipients becoming welfare recipients.
RecessionDepression here we come.Stock market down a fair amount today, looks like it will be a tough fall and winter coming up for RE and financial markets. The reduction of excess capital in all markets will lead to a increase in the risk premium and a decrease in prices.
Hold on to your cash and wait for the bargains.
A declining stock market will push even more people/investors into housing.
STFU. Move to another blog. This is not the place to put realtor spin on anything, unless you back it up. There have been welcome contrarians in this blog, e.g. Mr. D., who could reason what they said. You are just a spinning troll.
You didn’t back up your objection to my statement.
I will back it up. Read the lead article about “Correlation” between asset classes in the Money and Investing Section of today’s Wall Street Journal. Then use a little imagination, and see whether you can envision positive correlation between US home prices and US stock market valuations.
I agree with Getstucco, only because at this point I don’t see the math that can get us out of this. That does not mean it does not exist. 6 months of research have brought me to the conclusion that before the economy can expand again, its going to have to contract, Skipintro.
I really hope that people are not overly crushed by what is likely to happen next, but there were plenty of warning signs. Thankfully I bought during the 97 dip and I think I am in good shape to wait for the bargans after the storm.
There is nothing to back up since I did not make an objection to your statement. I simply called you a troll and a spinner, which is obvious from your post here, the previous one in this thread, the one in the thread that preceeded this one, ect.
We will probably see declining RE and stock markets. If this does happen, it will send investors into selling in both markets and losses will pile up for the investors who purchased at high prices.
Hard to predict, but may be a credit crunch and a deep recession ahead. Thus, hold on your cash and have reserves for 6 months to 1 year of living expenses.
Sorry, a declining stock market will typically push investors into cash, short term bonds and precious metals, NOT RE.
Agreed. Stocks and real estate are both risky assets, and the end of the conundrum, which is currently in its death throes, will drive up risk premiums on all classes of risky assets. Higher risk premiums = lower prices.
“one down day does not mean a stock market crash. let me remind you that we are very close to an all-time high on the DOW. don’t hit the panic button just yet on stocks.”
Agreed that one day does not a crash make. However, when was the last time the S&P suffered a 10-20% correction? (The answer is more than 4 years ago, which is almost unprecedented.) The equity markets are LONG overdue.
If readers of this blog can’t stomach 30% swings in the stock market, they should stay out of stocks. And if you don’t have the cash to put 20% down and make your house payment on 25% of your gross, you should stay out of RE. IMHO
Good one. It may be true.
In boxing terms it would be like saying a blow to the head will open you up to a punch to the gut.
Sure, some suckers will pull their losses out of a declining stock market and move everything to RE just as it tanks. All that proves is how blind people are.
just like what happened to lucent investors on the way down.
John Schleimer stole the show! He says he doesn’t know of ONE single major builder that isn’t in “renogotiations” or simply walking away from building lots! That’s a pretty telling blow. For those of you that may not be familiar w/ “renogotiations” they’re a real pain in the a$$. Kind of like when your kid brother agrees to buy your old car gives you half (of the half he was supposed to put down) then after missing a few payments tells you about how the car isn’t worth that much anyway and now you notice “funny noises” every time it’s at idle and the smell of burnt rubber. Not fun.
WaitingintheOC - I also understand your sentiment. I had the same thought. And thought something was out of whack several years earlier (2001 timeframe +). The whole thing actually chased me to leave CA. I second your rant, and could go on for hours on CA. Too many clowns there. Even this GenX folks should remember the early 90s bust. Everyone buying a home these days was at least born before 1988 or so, so they should have even recollections of hearing it as a child. CA has a long way to fall down. Waiting here for a front row ticket. Bring on the circus. It should be entertaining.
We’re gen Xers who thought about buying in 2001. The condo we looked at seemed expensive at 230. It was resold last fall for 375. I’m glad we don’t own because it would make me nervous. Unfortunantly our savings is in the stock market (fairly conservative stocks) but we’re still 100k ahead of our peers.
I don’t understand how someone who makes less & saves less thinks they should buy a house for half a million dollars!
Would they just get foreclosed on already…
“Napa County’s housing market seems to be slowing …The median sale price decreased 5 percent between March and April to $609,000, while the number of units sold plunged 39 percent”
This is where everyone in the roller coaster puts their hands up, enjoys the view, gets ready to enjoy a good scream…enjoy the ride all.
The Left Coast is Toast!!
Watch out for those FB’s though as they may hurl on the way down once they get that “quesy” feeling in their stomachs.
… a 60% decline on an annualized basis, yummy.
Shit, you got me. Thanks for the laugh.
This may end up showing how houses can eventually sell for below replacement cost. Even if you happen into a lot for free and build the house yourself a local housing glut or job market shift could leave you underwater. Especially with the mansion sized houses they’re building nowdays. I know a lot of people who use the replacement cost as the bottom line value for a house, but sometimes even that level is taken out. It’s happened with oil, gold and many other resources as well.
Aw, heck, in a lot of the Rust Belt and Appalachians, tons of houses are on the market for less than replacement cost right this very minute.
That reminds me of a saying my father would quote, “one man’s junk is another man’s treasure”.
I know of some people that literally throw things away, or put them out on the curb with a “free” sign because they could not sell it. Or perhaps they did not have the time, interest, or resources to sell it.
Freecyclers doing it every day…
Los Angeles Friends In Deed
DataQuick reports the ‘typical’ Bay Area buyer has an eye popping $3,048 per month mortgage payment. That tops March’s $2,948 figure and the $2,659 payment reported in April 2005. Not only are homeowners taking on higher monthly payments, the days of hosting a ‘mortgage burning party’ seem to be dwindling, said Silvas.”
So, how does this translate into $700K ave house price. That loan would be about $5000 before any taxes/insurance are figured in. I know the ave is low due to the high number of toxic loans that were used to initially get in. This is going to skyrocket when all of these loans reset. And, all thought that housing only goes up. They are going to wake up and realize that hosing (spelling is correct) only goes down. And they will say, “Man, I’m hosed!! LOL
Heavy use of IO and neg-am is the only way I can make those price/pmt numbers line up. These folks are cooked.
Some folks are cooks.
It could also include people who bought in 1993 and have a low mortgage.
The quote didn’t have “new” mortgages.
One of the most popular loans in the Bay Area are 2.9% introductory rate Option ARMs. Pay 2.9%, accrue the rest for 3 years.
If people are hoping they can replace one cheap ARM with another in three years, they may be in for a world of hurt. As appreciation slows/reverses and lending standards tighten, option ARMs may not be obtainable.
Watch that $3,048 number rise quickly in the next 18 months as home prices are not rising. That will be a good measure of the pain being felt for the aggressive borrowers.
Yeah and I wonder who they are “renegotiating” with, the current title holders or the 1st or 2nd trust deed note holders…
The market value is what someone will pay you for it at the time you want to sell it. Replacement cost, value of it yesterday or tomorrow, etc is all irrelevant. I need this price to clear past debts is also irrelevant.
Market value is a bit higher than you suggest, because sellers have the option to list above the price that a currently available buyer would pay in order to wait for a more attractive offer. (This also explains why most of us did not marry the first girl we dated.) Nonetheless, most sellers whose homes are currently listed must either lower their reservation price, or else they will never sell, as the market price (even adjusted for the waiting period to find the best offer) is much lower than they believe.
I would like to add that value would be based, IMHO, on the maximum price a person is willing to to pay. It would also have to be the maximum a person is willing and able to pay. A person may be willing to pay a million, but they may only have access to 900k cash plus credit. Thus, if they had the best offer, IMHO, that is what it would be worth today, so to speak, based on supply and demand.
However, that valuation would be if you were only transacting in “dollars”. It would become a little more complicated or unclear if you included trading non cash for the house, as in bartering, full or partial trades.
And that would open the door to “buying” or “selling” without the use of currency. I know of some people that perform services for equity in real estate. That throws another twist into real estate transactions.
Los Angeles Friends In Deed
I saw today on cnbc that truck sales are off a great deal in higher numbers in previously hot RE markets. Now, obviously gas prices have effect on truck sales, but the drop in sales was larger in the bubble areas. They actually spent the time to research this.
The point of the story on cnbc was that slowing truck sales are an indicator of a slowing RE market. (builders not building)
Any who, if I find a link, I will post.
Makes sense to me. I’m glad because I’m going to be in the market for a slightly used Toyota truck in the near future. I’ll bet newer trucks will also go up for sale as well as the luxury autos. Can’t make truck payments if you’re not building anymore houses.
Easiest way to check this is to use Carsdirect.com
Enter a full size truck and see the discounts.
Enter an economy car and see full sticker or unavailable.
Also from cnbc-
“Not a great day for the home builders
Home builder Hovnanian Enterprises (HOV, news, msgs) cut second-quarter profit guidance after the bell Monday to $1.40 to $1.50 a share from $1.55 to $1.80 a share. Analysts polled by Reuters Estimates predicted a profit of $1.68 a share. The company blamed production delays and slower sales. JMP Securities said this morning that the new guidance may still be too optimistic, based on deliveries so far and its expectations for future orders. Shares plunged more than 6.2%.
Other home builders fell as well today, continuing a plunge that began last summer when it became apparent the housing boom couldn’t go on forever. Pulte Homes (PHM, news, msgs) was off 2.3%; Lennar (LEN, news, msgs) slipped 2%. The Philadelphia Housing Sector index ($HGX.X) was off nearly 2.1%.
Toll Brothers (TOL, news, msgs), off nearly 3.3% today, is down 48% since peaking last July 20.”
http://articles.moneycentral.msn.com/Investing/CNBC/Dispatch/060502markets.aspx
Watch the churn. The major Wall Street builders have been selling off every month or so, but then their share prices magically bounce up by 5%, with no good news to explain the price increases. My guess is that we will soon see the value of Toll Bros stock mysteriously rise back up to $35 despite a preponderance of evidence that the housing market downturn is worsening. Of course, at some point, fundamentals will catch up with this company and its brethren, and share values will drop back to pre-bubble valuation levels.
i thought the only reason their prices are holding is because of stock repurchase programs. basically, to distribute profits accumulated over the years back to the shareholders.
The sucker HB rallies are good for new short entry points. Although their P/E ratios are getting very low. I wonder how far they can go.
“Not only are homeowners taking on higher monthly payments, the days of hosting a ‘mortgage burning party’ seem to be dwindling, said Silvas.”
Then: Owner burns the mortgage.
Now: Mortgage burns the owner.
Nice!
In Soviet Russia, Mortgage burns YOU!
“Roseville-based homebuilder consultant John Schleimer said builders have begun backing out of land deals just as buyers are backing out of new homes. ‘I don’t know of a major homebuilder who is not in renegotiations or didn’t walk away from lots in the last three months,’ said Schleimer.”
This is some really great news! Because if builders are walking away from lots, I guess that means the California land shortage is history.
http://patrick.net/housing/calhouse4.gif
Erik Estrada is still pimping all over the world -
http://www.calpines.com/video.shtml
many folks in CA also need to pay their local “dealer” for their coke, meth, weed, etc of their choice/addiction
The next great CA boom town will be Baker. Quickly running out of desert there. It will be a cool 107F there tomorrow. Only 100 miles from Vegas - in a god forsaken desert where it is hotter than hell at night and in the shade!!!!!!!
Once this bubble pops, that giant thermometer in Baker will be converted to a *rectal* model.
Bwaaahhhaaa that was funny
Holy Sh#t!! LMFAO!
nice comment bubbly -
The owner of giant “rectal” thermometer is Bun Boy. Maybe when this blows, they will change the name to “Bum Boy”. It will be 112F.
Don’t go to bed, with no price on your head
No, no, don’t do it.
Don’t do the crime, if you can’t do the time,
Yeah, don’t do it.
And keep your eye on the sparrow.
When the going gets narrow.
Don’t do it, don’t do it.