Tuesday, July 10, 2007

Sacramento Horton Lays an Egg

From the Associated Press:

The traditional spring home-selling season was a bust for D.R. Horton Inc., one of the biggest nationwide homebuilders. Horton said Tuesday it will post a loss from operations for its latest quarter after net orders fell 40 percent and it wrote down the value of unsold houses...The rate of canceled orders was 38 percent...The report provided more evidence that the housing sector continues to sink.
...
A glut of unsold homes has pushed prices lower - Horton said it has adjusted prices to cope with the deteriorating market. Builders have also been throwing in extras to entice buyers. But neither freebies nor lower prices have brought in enough traffic, particularly for entry-level homes where the pool of available buyers is being reduced by tougher mortgage-underwriting standards.

Horton's June-quarter orders fell the most - 53 percent - in California. Horton was building entry-level homes in Sacramento and other inland markets that emerged as affordable alternatives to the pricey coastal markets but are struggling now.
From the Sacramento Business Journal:
In the six-county Sacramento area, D.R. Horton sold 182 homes January through May 2007. The homebuilder had sold 590 homes in the same period of 2006.
-69%? Ouch!

10 comments:

norcalray said...

182 homes in 5 months, that is really bad for a big homebuilder!
They really are out of buyers. Look for even more cuts in prices to clear out inventory.

cole said...

beazer is currently being hunted down for fraud by eastern states, feds amd fbi...

seems their loan practices are mighty sleazy

Diggin Deeper said...

More and more inventory expanding in north Sacramento area. Hundreds of homes going up right now in the midst of this RE meltdown. What the hell are these builders thinking? Rental market soft and getting softer. Speculators virtually out this market as they should be. The numbers of new homes don't jibe with those that can afford them.

It'll just keep the lid on this mess that much longer.

HappyinSF said...

"entry-level homes where the pool of available buyers is being reduced by tougher mortgage-underwriting standards"

Uh no, the pool remains they just can't buy your houses without crazy voodoo loans since your prices are ridiculous. This statement basically says "to bad people can't still get loans on houses they can't afford so they can get foreclosed on later."

Lower the price stupid.

smf said...

Again and again.

THERE ARE MORE HOUSES BUILT THAN PEOPLE TO OCCUPY THEM.

Plain and simple.

The population growth rate in the US has remained pretty constant, which should have translated to a steady growth of housing.

But the number of houses built exploded, and not everyone is looking for a second home. And those looking for a second home usually rent them out when not in use.

So you have a lot of houses. And with high prices, you remove a good pool of buyers. Lower the price, and you will get some. But nothing will stop the fact that there are more houses than people required to live in them.

Look at how many houses were built in the Central Valley. What changed in the last few years (population growth wise) to logically justify such an increase in the housing stock?

Nothing...

They just overbuilt.

And to stay in business, they have to keep building.

BTW, agentbubble can vouch now for my credentials in the building industry.

Perfect Storm said...

In the six-county Sacramento area, D.R. Horton sold 182 homes January through May 2007. The homebuilder had sold 590 homes in the same period of 2006.

Builders, realtors, mortgage brokers just do not have a clue on how bad this market is. A 62% decline in sales, that is a lot. The sad part is they keeping drinking the Kool-Aid and keep telling themseleves and the greater fools that things will turn around in a couple of months. The housing market will get much worse over the next couple of years.

Housing/Mortgage Doom 2007.

Were right on track for a 50% decline by 2009.

HappyinSF said...

SMF, I totally agree that there are more houses than people to live in them, but there is a large pool of people who would buy if the price was what the comps went for in 2000 plus 4-5% appreciation per year up to 2007, probably bringing the average price for a new tract home up to about 250k or less..

Gwynster said...

The more I look around, the more I'm convinced there is a ton of empty homes that aren't on the market at all as rentals or for sale.

I biked up to the Nugget and passed 3 were just empty. They are not on the MLS, not FSBO, and I haven't seen them listed with property management firms or on CL. Just plain old empty.

buying time said...

Speaking of empty houses, the house next door to us (the one with the beautiful pool I am so tempted to help mysef too), has been empty ever since we moved in (Nov 2006). We have never seen the owners. On Monday a for rent sign went up. Not many owner occupie in this area. I think the stats on the Bee site are out of date.

Diggin Deeper said...

Looks like the "burrito" theory goes up in flames. At least when a burrito spoils you can get rid of it.

Now we're faced with acclerating new home inventory to be added to the resale, REO, bank owned properties, and those ghost homes that don't show up on any RE service. It's probably between 30-40,000 total properties and it appears to be growing each month (save the paltry 300+ that fell off the roles last month).

Imho,there's a tipping point when financial pain exceeds the ability to carry financial loads.
It will affect builders, banks, and selling homeowners, the same way it affected those who've foreclosed. Momentum will build and price slides should be dramatic. It will attract buyers' attention but there will be too few, too late, to prop up area prices for years to come. When this happens is anybody's guess. But there's already 50# of s**t in a 20# bag. It can't be too long now.