Real Estate Market ‘Turned Quickly In December’: CEO
Some corporate news regarding the housing bubble. “MFA Mortgage Investments Inc., a mortgage real estate investment trust, said Tuesday it is postponing its fourth-quarter earnings release and conference call as its independent auditors need more time to complete their review. The release and call had been scheduled for Tuesday.”
“MFA is still working with its independent auditors to resolve a technical interpretation of Generally Accepted Accounting Principles (GAAP) applicable to the characterization of the ownership of certain of MFA’s MBS assets and their related repurchase financings.”
“(A) company that analyzes executive compensation for mutual funds and other large investors, called Bob Toll’s compensation excessive in relation to the company’s recent performance. It recommended that investors withhold their vote for Sa Toll Bros. independent director who sits on the compensation committee and is up for reelection this year.”
“Toll Bros.’ shares fell 47 cents yesterday to $29.35, its 52-week low, reflecting the slowing housing market and Toll Bros.’ weakening order book. The 52-week high price was $58.25. Shirley Westcott said that Toll Bros.’ practice of basing Bob Toll’s compensation on a percentage of profit was unusual and that the company had been ’sort of riding the real estate bubble.’”
“Cendant Corp. plans to cut costs at real estate brokerage company NRT Inc. by about $50 million this year through a cost-cutting strategy that includes office closures, Cendant chairman and CEO Henry Silverman said today.”
“‘To counter the impact of a slowdown at NRT we have put in place a cost-reduction program, which principally includes consolidating local offices in order to right-size NRT’s cost structure to be in line with reduced volumes,’ Silverman said.”
“The real estate market quickly turned in December, Silverman said, and the default rate or cancel rate of open contracts to purchase properties ’spiked by about 30 percent just in December alone.’ This cancellation rate was largely in markets where there have been reports of widespread real estate speculation, he said. ‘The flippers, the speculators, either have or are departing the market.’”
“Silverman blamed media reports about the real estate market, in part, for the change in market conditions. ‘We think to some extent that that is also a function of the media which is reporting on a daily basis that the real estate market is going over the cliff, that may have convinced buyers to become more cautious. Anecdotally we’re being told that,’ he said.”
See this great article:
In come the waves
Jun 16th 2005
From The Economist print edition
The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops.
Great article and there are wonderful graphs showing the bubble in the US, Britain & Australia is actually bigger than the one in Japan.
http://www.economist.com/finance/displayStory.cfm?story_id=4079027
Thanks for the link. I just read the whole article and it is great. Look out belowwwwww!
If you guys liked that article in The Economist - you should become subscribers. It’s worth the money and has great info in every edition (no, I am not affiliated with the publication in any way - I’m a fan of its rational presentation of information).
BTW - that article was published eight months ago.
yes, the economist is great. It’s impossible to go back to the partisan screeching and infotainment that passes for journalism in the US these days once you’ve read it.
The great thing about The Economist is that it is sophisticated enough to benefit professional economist readers, yet sufficiently non-technical for the layman. And like the rest of the British press, its editorial position is safe from the wave of truthiness which has swept across the US media in recent years.
“MFA Mortgage Investments Inc., a mortgage real estate investment trust, said Tuesday it is postponing its fourth-quarter earnings release and conference call as its independent auditors need more time to complete their review. The release and call had been scheduled for Tuesday.”
Good stuff, Ben. At least the second mortgage finance company highlighted on Ben’s Blog to reschedule its earnings conference call the very day of the call. This is very unusual. Must be some very interesting “discussions” going on with their auditors.
Translation: They need to find out how much lipstick they can legally put on this pig.
Sounds like more companies are taking a page out of Fannie Mae’s playbook.
Yeah, it’s the media’s fault. The same media that reports that housing is frothy, but gold, having reached the level it was at in 1982 is in a bubble. At this point, the media should be added as the 4th branch of the government.
The problem SIlverman is ignoring is this: Houses cost too much. People can’t afford to buy them with current salaries, and are content to rent (hey, I like that) until the stupidity ends and affordability returns.
Silverman = Chris Rock Comedy Act
Blame the Media!
Silverman blamed the media…….surprised he didn’t blame the blogs.
People have already started blaming the blogs, and this one has been mentioned by name.
Yep, there has been quite a bit of carping from MSM blogs (OC Register’s Morning Eye Blog) and the MSM giving backhanded compliments to this very blog (businessweek last week)
Not to worry though any publicity is good publicity and it is better than being irrelevant.
This just goes to show how emotionally driven this bubble is. Knowone tried to blame the media for the tech bubble bursting. People seem to think this can go on forever as long as everyone keeps quite.
It’s okay for the media to report endlessly when prices were going up though.
“‘We think to some extent that that is also a function of the media which is reporting on a daily basis that the real estate market is going over the cliff, that may have convinced buyers to become more cautious. Anecdotally we’re being told that,’”
Yeah, Ben, get ready for the onslaught of “It’s that d*mned housingbubble blog that is to blame for the crash!”
I’ve got my steel undies on, ready for the calls of “It’s the VHB’s fault!”
Doesn’t the fault lie with the buyers and their reluctance to get screwed.
Read about The 12 Biggest Money Mistakes.
“6. Don’t finance a home purchase with a variable interest-only loan.
If the only way you can buy a home is to take out an interest-only loan with a low initial teaser rate, then you can’t afford that home.
And the ultimate bad housing move is to use an Option Adjustable Rate Mortgage that allows you to set a very low payment during the start of the loan that might not even cover your interest costs. If you fall for that trap, you will have a “negative amortization loan.” Instead of your loan balance becoming incrementally smaller with each monthly payment, it’s actually rising because the lender just shovels the “unpaid” interest onto the balance of the loan.”
I know some of you don’t like Orman, but I do agree with most of what she says.
IMHO the option ARM is unfairly blamed. The option ARM when properly used is an excellent lending tool; unfortunately, very few borrowers qualify for the loans intent. And now, it is easier to get an option ARM than most conventional loans. Blame the LOs who do anything to get their commission.
what do you mean very few borrowers qualify for the loans intent? it seems everyone can qualify with option ARM.
You are absolutely correct! Everyone qualifies, but when the loan was started 15 years ago - the intent was that individuals with significant cash reserves and great credit could simplify their short term cash flows. With time this good intent was subverted by the enormous deferred profit to the lending institution. Now the lower standards for this and other portfolio products have jeopardized the financial health of all of us.
When you first watch Suze Orman, she reminds you of your (she reminds me of mine) 1st grade teacher. Once you can get past her delivery, she is very fundamentally sound and full of great (conservative) advice.
, she says to wait to buy real estate until, well, you know.
I thought Orman was pretty good until she started pushing 0% financing in GM’s ads. I’ve turned her off ever since then.
A very wise man said: “the borrower is servant to the lender.” And anyone who touts otherwise gets crossed out of my mind in a heart beat….
Shirley Westcott said that Toll Bros.’ practice of basing Bob Toll’s compensation on a percentage of profit was unusual and that the company had been ’sort of riding the real estate bubble.’”
IS THAT like saying my girlfriend is “SORT OF PREGNANT”??
Look, these folks know they have been riding the bubble for many years… it’s only now that the MEDIA is flushing out the TRUTH and hind sight is becoming 20/20 (i.e. the bubble has burst and panic is setting in… and construction stocks are CRASHING big time).
bob and the boys were cashing out big time over the last two years, same with angelo mozilo. they didn’t get to the top of their game by being dummies. all language now will be damage control and covering their ass(ets).
I take full responsibility for all this.
Blame it on me.
LOL.
…and there’s 15,634 properties on the market in Orange County today.
That’s my fault, too.
16,000 by Monday! Here we come!
Read about About the MLS.
“There is no one nationwide MLS that covers the entire country. Each locality, state or region has it’s own MLS and some have several.
MLSs are generally run by or controlled by Realtor members of the local association of Realtors and placement of a property on the MLS is restricted to MLS Realtor members.”
I thought there was one MLS services in the US, that’s how stupid I am. And of course it’s controlled by Realtor Members (I knew this); so why would we believe the stats. I would put a large margin of error on the MLS. Think about the mentality of all those new realtors. This is not meant to harm anyone.. just a thought.
More after-the-bell news:
‘FMF Capital Group Ltd. today announced its results for the three and nine months ended December 31, 2005. Compared to the prior year, mortgage loan originations and mortgage loan sales for the three months ended December 31, 2005 increased 51% and 60%, respectively. However, adverse market conditions in November and December
resulted in a significant decrease in the average premiums we received on the sale of mortgage loans to approximately 1.99% for the quarter ended December 31, 2005 from approximately 3.57% for the same period in 2004. Net revenue in the quarter declined 53%, primarily due to lower premiums on mortgage loan
sales.’
‘As a result of the significant reduction in net revenue in the third fiscal quarter, cash available for distribution was a deficit of Cdn$12.3 million. FMF Capital is in default of the tangible net worth covenants in its two
credit facilities as a result of the net loss for the quarter ended
December 31, 2005. Based on discussions with these lenders, FMF Capital
anticipates that the lenders will waive these defaults. There can be no
assurance that we will obtain these waivers. In addition, FMF Capital may
negotiate a reduction in the maximum commitment amount of the credit facilities in connection with or as an alternative to the waivers of default. Any such reduction would have the effect of realigning the credit facility capacity with FMF Capital’s reduced net worth and limiting the amount of mortgage loan originations that the Company can fund.’
Train wreck.
These home builder are real slime balls. Read the following link that suggests that this builder announced a share buy-back so all the executives could dump their shares without affecting the price:
This must be illegal — sounds very Enronesque to me! Of course, Enron executives might manage to get off the hook with the brilliant legal strategy of first pleading guilty, then having their attorneys prove that they were all innocent, even the guy who ratted on everyone and keeps insisting to the judge that no, he is not innocent. Maybe Robert Toll and his friends can use the millions they made last year by diversifying out of company stock to hire the same legal team as Enron, if ever the need arises?
P.S. I missed the link you referenced…