Wednesday, November 08, 2006

"No Sign of Daylight"

From Business Week:

How Deep Housing's Decline?
Rumors of the real estate market's resurrection are greatly exaggerated, according to three major homebuilders who see no sign of daylight


Remember those headlines about the U.S. housing slump possibly nearing an end, heralding a turnaround in 2007? Well, forget about it. Three of the major homebuilders just checked in with reports showing that they are decidedly not on board with that view.

In financial releases on Nov. 7, Beazer Homes USA (BZH) and Toll Brothers (TOL) said their new orders had dropped by more than 50%, while both continue to grapple with rising cancellation rates.
...
In a statement, Beazer Chief Financial Officer James O'Leary said the company had cut a quarter of its workforce, or 1,000 jobs, in September and October "in light of our reduced volume expectations" for next year. Toll also said his company had cut workers, but declined to offer specifics.
...
Toll also disclosed a record 585 contracts scuttled in the current quarter, amounting to 37% of the contracts signed in the fourth quarter, compared to 18% in the third quarter. But 25% of the current cancellations were in two markets, Orlando and Northern California.

18 comments:

Lander said...

Hat tip to reader John.

Anonymous said...

Speaking of the housing downturn fallout . . .
Lowes is really dead on weekdays.
Been renovating this home since January & noticed a big slowdown.
It's actually pretty nice to be able to take your time while strolling the aisles. I like the reduced foot traffic.
I HATED the way Home Depot whored themselves out to the merchants by placing those freakin cardboard floor kiosks every 3 feet.
It's almost impossible to look at an item in the aisle without getting run over because the kiosks block 1/2 the width.
Took awhile to get familier with Lowes layout but I love it now.

No, I don't own Lowes stock but just appreciate the choices competition can bring to us all.

Anonymous said...

KM Bro,

I have noticed a distinct lack of traffic in Home Depot lately. I went there on Sunday and three of us had the whole store to ourselves. No waiting in check out lines. Is this seasonal? I don't ever remember it being this way, so I think the housing downturn is having a strong effect.

Anonymous said...

It's funny. Everybody's talking about the housing downturn, the bursting of the bubble, but I look around, even here in Sacramento, and prices of existing homes seem only slightly below the peak of about a year ago.

And an anecdote: the in-laws of a friend at work were happy as clams to pick up a 2/1 condo in Marin County, twenty years old, for only $775k about 6 months ago.

Anonymous said...

I couldn't beleive this crap!

LFrom Hispanic Trending. Latino group calls immigrants an untapped home buyers market: The slumping housing market could get a $200 billion boost from new immigrant home buyers if mainstream lenders start using alternative methods to score credit
....lack Social Security numbers or legal status in the U.S.
...Should the new reporting methods gain wider acceptance
...No law requires that buyers be in the country legally to buy real estate
...enerates a credit score using nontraditional data.

http://mercedgoingquickly.blogspot.com/

Anonymous said...

jr:

Slow Sunday at Home Depot surely is very unusual.
If its not bad weather or a holiday, then . . . !?

On a side note: when I use an automated check out scanner I want to say a cuss word to see if I hear" you are fined 3 demerits, John Spartan " from the electonic voice.

Anonymous said...

Anon 6:49, you're right, prices of existing homes haven't changed much. In many areas of Sac, they are down less than 10% from their peak, and in some of the most desirable zip codes, they haven't even peaked or are down 1 or 2% year over year. One poster pointed out that it's mostly the builders who are driving this train wreck so far. Individual homeowners are extremely reluctant to sell for less than recent comps in their neighborhood, so they will avoid doing so as long as possible. Only very motivated sellers are closing deals in this market. That's why Lyon said recently that just 10-20% of current listings are priced realistically. But, like the other poster said, individual homeowners will start competing with the builders next year and prices of existing homes will fall more steeply. And there's nothing like a few foreclosure sales in the neighborhood to bring down the comps.

Anonymous said...

I know of two instances where the seller sold for $30K below what they paid 12 months ago. Both of these homes were brand new at the time.

Anonymous said...

Anon 6:49,

If you look a little more closely, it is very easy to see all sorts of price reductions. In Placer County, where my wife and I walk 3-4 times a week, sales prices for existing homes have dropped 15%, sometimes 20%, since June 2005. The homebuilders in Lincoln are down 5-10% more, with incentives.

Go to this web site http://flippersintrouble.blogspot.com/
and you will see hundreds of homes where the listing prices are substantially below the recent purchase prices. Actual sale prices will be even lower, if they ever get sold.

While the majority of individuals are not pricing at the market level yet, they have to compete with the sellers who are (including the builders). The inventory of Greater Fools has almost dried up. People are examining the market much more carefully, because the individual price differentials are so great, the builders are including huge incentives, and real prices are declining. Once you start adding in the foreclosures from all the Flippers in Trouble and the ARM resets, it will get much more competitive. Just be patient. You can rent for 30% of the cost of buying, with no risk in losing equity value. We know prices are not going up, so why not save the extra $30,000/year in expenses, bank it, and buy a nicer home for less money next year?

Anonymous said...

Help, I've fallen and I can't get up...

Anonymous said...

Keep in mind those are the opinions of new home developers. As far as I can tell, the prices of older homes in established neighborhoods haven't dropped nearly as much.

Anonymous said...

In Turlock, noticeed a condo selling 45K less than the developer is selling. A sign went up for s condo in the same complex a few days later, the same price. The owners are actually underselling the developer.

The location is Balboa Park in Turlock.

Anonymous said...

" . . great time to be a renter "


I lOVE IT !! Nice turn of phrase, Gwynster.

Print that on USA Today front page & watch countless peroxide blondes go grey overnight, and middle-aged pacemakers seize up.

Anonymous said...

Sac Forum,

Prices are dropping in established neighborhoods everywhere, because they have to compete with the builders now. Check out MLS 60113991. The house was built in 1988. The seller purchased in early 2005 for $489,000, using a 20% down payment. They tried to sell it since April 2006, could not even get an offer. They lowered the price to the loan amount, plus a commission. There was still no sale. They gave up and deeded it back to the bank a month ago. Now it is an REO, listed at $403,000 for 1900 sf with a nice pool. So these sellers, who lost their $97,800 cash down payment, might just argue with you about prices holding in established neighborhoods.

Pricing set by the sellers can be a joke these days. Just look at JTS Estates at Lincoln Crossing. In October, they said all price reductions will end on October 31. Oops, just kidding. Their ad in the morning paper has new "liquidation" prices (probably still way overpriced for this market) for November. That subdivision in Lincoln has 140 homes and has been completed for almost a year. 20 homes are currently occupied. The builder has been trying to dump 50 of them since July. I think 20 may be sold to people who now will lose more equity to further builder price reductions. Another 70 homes are owned by Flippers and they are all in trouble and headed for the exits.

Here is the new wrinkle.....so many Flippers are in trouble at the Estate at Lincoln Crossing and have had their UTILITIES TURNED OFF…… that the builder or the HOA hired a construction crew with a WATER TRUCK through the neighborhood and SPRAY THE LOTS that have no utilities. That looks very strange.....a big truck spraying the house and yard from the street, like it is an earthmoving project. I guess no one wants to pay the back water fees for the delinquent property owners. It is an amazing site.

I wonder if the other home owners will have to pick up all the missed payments for the Mello Roos bonds and the HOA fees that all these Flippers are failing to pay. It has to come from somewhere. Evidently, a couple of homes have resold using fraudulent buyer “cash back” loans and the FBI is investigating. (These are two adjacent homes, which also get sprayed once a week with the water truck, cause the new buyer never turned on the utilities for either home….hmmm, something fishy there……)

I still predict there will be a big auction out there in early 2007. 140 homes, 20 occupied, some already in foreclosure, the builder dropping prices below the Flippers, yet little ability to sell anything at the reduced prices. It just gets "curioser and curioser".....

Anonymous said...

Jr, do you know for sure if the FBI, or anyone in government, is really investigating? Or was that just a guess? I'm asking because someone needs to investigate these wild developer and loan games that are ruining the economy and people's lives.

Anonymous said...

Also, a while back someone mentioned JTF might he selling off their corporate office. Is this for real, or just a rumor? If so, any link to that information might be helpful. Thank you.

Anonymous said...

JR, I think what sac forum meant my "older established neighborhoods" is from the flat Earth perspective.... one day's drive with a horse and buggy from the Fort. From that perspective, East Sac, Arden, Sierra Oaks, Willhagen, SW Carmichael, still very solid, minimal inventory....well, you can take a whole week to look.


But, an 18 year old tract home in Rocklin needing almost everything new... a tough sell in almost any market....perfect for Rocklin Renter.

Anonymous said...

Anon,

My understanding is the mortgage fraud game is becoming more easily identified by computer programs now. They look for the MLS listing price to jump, the new price at or above the recent sale price, multiple loans to the same borrower over a short time frame, 100% financing, new home developments with Flippers in Trouble, etc., etc.

If you are a seller and agree to give cash back to the buyer without the lender's knowledge, you will be probably be going to jail and getting a substantial fine and paying for the lender's losses, if the buyer doesn't make the payments.

If you see mortgage fraud, call the FBI in Sacramento. They have a whole division on Auburn Blvd, near Orange Grove that goes after these crooks. It costs honest people a lot of money every year and artificially increases housing costs

Look at

http://www.mortgagefraudblog.com/

All the info you need is there.