Sunday, December 16, 2007
In the past four to six weeks, several builders have pared their staff once again in the latest round of layoffs that started about 14 months ago.
Beazer Homes cut its staff nationally by 25 percent and that reduction was felt in its Las Vegas offices. Pageantry Homes and Woodside Homes also made cuts, said Dennis Smith, president of Home Builders Research. Richmond American Homes, Astoria, Centex, KB Home, Pulte Homes, Celebrate, Rhodes, Ryland, Distinctive, Engle, Meritage and Lennar have also recently cut staff.
Monica Caruso, spokeswoman for the Southern Nevada Home Builders Association, said she has heard of more layoffs in recent weeks.
"We are still coming down from the boom, and the numbers are slow," Caruso said. "It's just a function of the lack of sales activity."
The number of home closings are down 44 percent for the year. Permits are down 25 percent.
Builders have been tight-lipped about the details of cutbacks in their offices.
Smith said some area developers, title companies and lenders have made cuts as well.
"I had someone tell me ... they were referring to today (Nov. 30) as Black Friday," Smith says of First American Title.
What gets overlooked, Smith said, is the job losses in related industries, such as concrete, associated with homebuilding. The one industry not affected is appraisers. They are swamped, Smith said.
Staffing cuts at Toll Bros.: A November issue of Big Builder magazine that was placed on inside billboards at a housing conference last week in Las Vegas featured Gary Mayo, the group president in Nevada for Toll Bros. He says that since January, his staff has dropped from 348 to 174, a 50 percent reduction in three rounds of layoffs.
The layoffs are in line with the company's home closings in 2007, which are down about 50 percent from the 368 closed in 2006. The company indicates 2008 may even be bleaker.
"We won't cut back on the sticks and bricks, and the land cost is what it is, so the only area I can look at is doing it with few but better people," Mayo said.
Unlike most companies, Mayo said that rather than trim mid- or upper-level managers with heftier compensation, he's kept people who have been with him for 10 to 12 years. That method saves less money, but the managers have to juggle more responsibility with the cutbacks, he said.
"Land acquisition is almost nonexistent, but we have shifted their focus into production housing to preserve them," Mayo said. "I have vice presidents all the way up to division managers who are out in the field again — now running one, two or three communities as well as maintaining what their day job was before. It breeds loyalty with these guys. They know that as long as they are willing to take a step back, we're willing to continue to hold on to them."
Mayo said Toll Bros. is in a different position than most public builders. It uses incentives but won't sell homes at any cost.
"I do need to generate enough cash flow to pay the bills, but I don't need to do it at a loss. So you're going to see us with much less market share than we have had over the last 12 months ? and we are ready for that. When things pick up, I will just need to hire some construction managers, and I'll be ready to go again."
In other news:
LaPour Corporate Center has received the Leadership in Energy and Environmental Design silver core and shell precertification from the U.S. Green Building Council. The $19 million, three-story 70,000-square-foot office building was precertified based on its submission.
TWC Construction has started work on a project for Blackstone Capital Group. The Durango Centennial Retail Center is valued at $6.5 million for site improvements and the shell. It consists of four one-story buildings totaling 72,000 square feet and has underground parking at the corner of Durango Drive and Centennial Parkway. The project is slated to be finished in the third quarter of 2008. The Blackstone Retail Center on Fort Apache Road is scheduled to open in July.
Smith reports 51 apartment conversions closed escrow in October. That brings the year's total to 1,569, which is a year-to-year decrease of 3,410 units or 69 percent. Closings of conversion units have declined steadily in 2007 because of tightening mortgage credit, Smith said.
Title One Las Vegas, a title and escrow company, has made organization changes and additions designed to combat the slow residential market and service the commercial sector, it said. The company has named a new president, Norma Spaeth, and created private-client services, a new business unit under newly appointed Vice President Angelina Galindo. Guyon Long has also been appointed senior vice president/assistant county manager. Spaeth has previously worked as executive vice president for Equity Title of Nevada. Galindo previously served as vice president of special projects and a senior escrow officer with Chicago Title.
R/S Development has signed up to participate in the Green Building Partnership program of the Southern Nevada Home Builders Association. R/S is building green homes in its Kingswood Crown Series in Summerlin at Interstate 215 and Charleston Boulevard and at the Alpian Meadows at Mountain's Edge. The company plans to build 182 homes. For more information, go to www.rsdev.com. Model homes built by Pulte Homes in the Timbercreek subdivision in northwest Las Vegas are the first homes to achieve certification as green-built homes under the program. The model homes meet the program's requirements for resource, energy and water efficiency and indoor environmental air quality.
An 11-building multitenant office complex in Las Vegas has been purchased for $24.8 million by Koll/PER, a limited liability company owned by the Koll Co. of Newport Beach, Calif., and the Public Employee Retirement System of Idaho. Koll Canyon Plaza, formerly called Trident Business Park, consists of 103,345 square feet of office and retail space on eight acres on the south side of Sahara Avenue, west of North Buffalo Drive. The seven-year-old office park was purchased from Trident Development, which was represented by Grubb & Ellis. Koll represented itself. It's the fourth Las Vegas area acquisition by the group in the last two years.
Gavin Maloof, co-owner of the Sacramento Kings and brother of Palms owner George Maloof, sold his 5,499-square-foot home on Innisbrook Avenue for $2.2 million. The buyer was the Douglas Unger Trust.
Arte Nathan, the retired human resources boss with Wynn Resorts, sold his 5,304-square-foot home on Grouse Street for $1.3 million. The buyer was Paragon Relocation Resources.
Wednesday, December 12, 2007
The purchase - which was completed on Friday for undisclosed terms - was part of "long-range acquisition strategies developed" by the company, said Rob Ahrens, spokesman for Tampa-based Metro Development. The deal increases Metro's land inventory by nearly 40 percent, and brings the company's total land holdings to 30,000 home sites.
"We have tremendous confidence in Florida and the resiliency of the state's residential real estate market," Ahrens said in a release. "We know that current concerns about homebuilding will be resolved in the coming months, and when they are, we plan to be a major player in providing finished home sites to builders who will need them."
The purchases include 3,905 home sites covering 1,700 acres at Epperson Ranch in Pasco County, 530 home sites on 140 acres at Waterleaf in Hillsborough County, 393 home sites on 94 acres at Leomas Landing in Polk County, and 98 home sites on 41 acres in Sarasota County.
Lennar (NYSE: LEN) was looking to convert many of its land holdings to cash in the midst of the slowdown in the housing market, Ahrens said.
Also Friday, Lennar partnered with Morgan Stanley Real Estate Fund II LP, an affiliate of Morgan Stanley & Co. (NYSE: MS), to form a new corporation, MSR Holding Co., according to documents filed by Lennar with the Securities and Exchange Commission. Lennar then sold more than 11,000 home sites from 32 communities located throughout the country to MSR for $525 million, half of the reported net book value of $1.3 billion.
MSR was designed to "acquire, develop, manage and sell residential real estate," according to documents filed with the SEC.
It was unclear if the 8,300 home sites sold to Metro Development the same day MSR was announced were related.
"The combined expertise and resources provided by the Lennar/Morgan Stanley team will allow us to maximize the value of this portfolio and provide a footprint to capitalize on inefficiencies in today's residential real estate market," said Stuart Miller, president and chief executive officer of Miami-based Lennar Corp., in the filing. "This transaction provides us with increased liquidity and flexibility at an opportune time."
Lennar had a homebuilding operating loss of $787.7 million in the third quarter, which resulted in an overall loss of $513.9 million, or $3.25 a share, on revenue of $2.3 billion, according to documents filed with the SEC. That was down from the $206.7 million, or $1.30 a share, the company earned on revenue of $3.9 billion for the same period in 2006.
Metro Development has offices in Orlando and Jacksonville, and last year generated sales of $200 million.
Lennar shares closed up 44 cents to $16.25. The 52-week high was $56.54 on Feb. 2. The 52-week low was $14 on Nov. 27.
Monday, December 10, 2007
Homebuilder Decline Continues - New Home Prices Falling - Record Foreclosures - Housing Slump Gets Worse
Sad to say, it's becoming increasingly clear that the national housing picture has turned much more gory than anyone might have imagined; likewise, repeated Wall Street forecasts that a meaningful housing rebound will kick off by mid-2008 appear to have little or no legitimacy.
Some housing industry experts suggest the implications are ominous, that the worsening housing slump will accelerate the likelihood of a recession despite a rise in the number of working Americans, and will play havoc with the stock market.
Taking note of the growing number of negative housing stories appearing on TV and in newspapers, a veteran real estate developer, Robert Sheridan, tells me: "The press, unlike Wall Street, is finally getting the message. Housing is not in a slump, but in a deepening recession that has at least another two to four years to run; it's also in the midst of a serious readjustment of prices."
He figures that the readjustment will eventually see prices of single-family homes plummet 10% to 20% and condominiums tumble 20% to 40%. "The picture is getting darker and darker by the day," he says. "Turning around housing will be like turning around a battleship."
Further, the CEO of Chicago-based Robert Sheridan & Partners, who has been developing homes around the country since 1975, says he believes it will take another year or two before the mortgage market stabilizes. He also sees at least 2 million foreclosures over the next two years.
Ridiculing repeated Wall Street forecasts of a second-half turnaround in 2008, Mr. Sheridan argues: "They're dead wrong; the forecasters must be smoking something."
The latest worrisome housing trends and figures strongly indicate the Street may indeed be way too euphoric about an impending recovery. In brief:
• Amid slowing housing demand, a near record 4.45 million existing homes are on the market, versus roughly 2.5 million in the late 1990s.
• Foreclosure filings are ballooning. There were 224,451 forclosures in October, up 94% from October 2006.
• New home prices last month fell 13% from year-earlier levels, the biggest drop since 1970, while the median price of existing homes dropped 5.1%, the single largest monthly decline ever.
• A recent Federal Reserve study shows a record 40.8% of lenders have tightened their lending standards on prime mortgages, which should further depress housing sales.
• At the end of September, about 6% of mortgage borrowers were behind in their payments, according to the Mortgage Bankers Association. That's up from 4.6% a year earlier, and it's the worst reading since 1986.
• Record Foreclosures - A record 0.78% of all American mortgages entered foreclosure in the September quarter, and the overall foreclosure rate jumped to 1.69%, the highest since 1982.
• Estimates are making the rounds that over the next year new home prices will drop 13%, while existing home prices will fall 15%.
Reflecting these developments, investment adviser Michael Larson, a dogged housing industry tracker, concludes that the housing downturn has at least another year to go and could easily spill over into 2009. As a result, he sees further sales weakness and at least another 5% to 10% decline in home prices. "I think the sellers are finally getting the message and cutting prices," he says.
He takes a dim view of the government's plan to ease the crisis by freezing rates on subprime mortgages. "That's no panacea, certainly not a cure-all," Mr. Larson, associate editor of the Safe Money Report, a monthly newsletter in Jupiter, Fla., says. "It's difficult to see how you're going to get everyone on the same page," he observes, referring to such participants as the developer, banker, investor, and those who service the mortgage. "You have to get a lot of parties to agree to a freeze; it won't be easy." He further notes that 40% to 60% of homeowners whose loans are modified eventually still default.
Some smaller homebuilders have already filed for bankruptcy, and Mr. Larsen looks for more of the same from the larger publicly owned ranks. In particular, he points to Standard Pacific and Beazer Homes. His newsletter has already expressed similar sentiments about troubled Countrywide Financial, the country's largest mortgage lender.
Making matters worse, the mortgage and housing crises, Mr. Larson says, could cost investors and banks some $400 billion from write-downs and losses on mortgage-related securities. He further cites estimated total losses to household wealth of between $2 trillion and $4 trillion.
It all sounds pretty ugly, but our two housing bears see an even uglier tone, with both telling me "the worst is yet to come."
Thursday, November 29, 2007
From The Central Coast Housing Bubble Blog:
"Here is a SLO case # CV 050606 against RW Hertel for Fraud, Grand Theft, etc... he first tried to sue his own buyers for reporting the homes Leak and Have MOLD the judge ruled under the Anti-SLAPP against Hertel now Hertel is facing not only massive civil judgments for Fraud and Theft but trying to cover up defective homes and lying about it a story is being written in a Major Magazine on Hertel later this summer I got interviewed recently and it is going to be very revealing against Hertel many of his former and two current employee's have been interviewed the two current ones are quitting just before the story goes to Print and the State is again investigating him for FRAUD and LOAN SCAMS."
"Hertel going Bankrupt will NOT protect his or his partners assets he is now investing in Eagle Point Oregon and the Authorities in Oregon and Utah and elsewhere are working with State Contractors Board investigator and the IRS on his many scams. Sorry to learn so many got screwed by Hertel's cheap and Crappy homes but hang tough help is on the horizon and it will take some time but I suspect Federal Prison is in his future."
"Sounds like the same as RW Hertel & Sons who has built the most defective homes in SLO in the cities History I am told Hertel is on the Bankrupt track as well. As a well known Fraud Builder Hertel is doomed"
"Home Builder, RW Hertel & Sons of san Luis Obispo, CA built our home in the rancho Obispo Development today I learned most the homes have massive defects with Leaks, and TOXIC MOLD, my neighbor at 1720 Singletree Ct has Smith & Sons MOLD people at her home all day I asked what for and..."
"RW Hertel has been a lying crook for the last 5 years I have know him and his company. He has always cheated the buyer's SO BUYER BEWARE if you get a RW Hertel Home they are a Horrible Mess every project and home in Rancho Obispo is a total mess. The State Inspectors said they are the ..."
"RW Hertel what a fraud and lying scamer, MOLD again in Rancho Obispo this morning I noticed many and I mean many MOLD Trucks from SERVPO at 1708 Farrier Ct. when I asked what is happening, knowing the development has been declared a disaster zone from defective homes.."
"RW Hertel SCAMS Low income owners, more defective homes, more criminal investigations FRAUD, CON ARTIST, Housing RIP OFFS, SCAMS now i learned up in Dublin, CA at the Low Income housing of ARROYO VISTA RW Hertel tried to sneak into building low income homes but HUD discovered Hertel has lied and cheated far too many owners. That all the low income homes built in RANCHO OBISPO, down in San Luis Obispo are leaking have Mold and are NOT built to code so once more development he is a major suspect in trying to Fraud the Government and the poor low income people."
It goes on and on...someone let me know if they have info.
Wednesday, November 28, 2007
Building Market is Rough - Homebuilder (Global Homes) in Port St. Lucie Turns to Drugs and Kiddie Porn
Authorities arrested 10 people, including the owner of Global Homes, and uncovered 10 indoor marijuana farms during pre-dawn raids Tuesday morning, officials said.
They also said they confiscated $57,000 cash, 38 grams of cocaine, 4 guns, 9 cars and a boat.
Authorities said Global Homes had an interest in several of the homes raided Tuesday morning, although they would not elaborate on the home builder's involvement.
Officials said only that the arrangement bore similarities to previous busts in which immigrants were offered homes on the condition that they operate an indoor pot farm for some period of time. The investigation began in September and involved eight agencies - state, local and federal, officials said.
Port St. Lucie police seized 420 pounds of marijuana and 400 marijuana plants during an 18 home grow house raid in St. Lucie County Tuesday morning.
Investigators arrested 10 people in the raid, including the owner of Global Homes, a home building company that police said has connections to several houses in the case.
Detectives would not comment on what they believe the company's involvement was with the grow houses, but they did say that the case was similar to previous busts in which immigrants were offered homes as long as they operated an indoor marijuana farm for a period of time.
"We believe that there is a connection between Global Homes and Global Homes employees and these grow operations," said Deputy Chief Garry Wilson with the St. Lucie County Sheriff's Office.
Wilson said police seized about $57,000, 38 grams of cocaine, nine cars, four guns and a boat during the raids. Police said the investigation began in September and involved 80 law enforement officers spanning eight different agencies including state, local and federal departments. Authorities said that the case is still under investigation and that the charges being considered are much more than just drug charges.
"Besides mortgage fraud, we're looking at potential child pornography charges and a number of other issues," said Chief John Skinner with the Port St. Lucie Police Department.
Ooops, I would say between Global Homes drug bust, kiddie porn and mortgage fraud they might be in just a wee-tiny bit of trouble!!
Monday, November 26, 2007
The commercial real estate market largely has shrugged off the housing market's woes, but that happy trend might not last forever.
With builders and mortgage companies downsizing and in some cases going broke, there's suddenly a lot of empty office and industrial space coming on the market.
For instance, DiVosta Building Corp.'s former industrial complex in Palm Beach Gardens now is available for lease. The downsizing company last week sold five buildings totaling nearly 100,000 square feet, and Asset Specialists Inc. of West Palm Beach is marketing the space.
DiVosta isn't the only builder adding space to the market. Bonita Springs-based WCI Communities has announced layoffs, and Grubb & Ellis is subleasing about 26,000 square feet of offices in Broward and Palm Beach Counties that WCI no longer needs. That includes 3,800 square feet in Palm Beach County, said Owen Sagar, senior vice president at Grubb & Ellis in Boca Raton.
And Mercedes Homes is selling a 5-acre truss-manufacturing plant in Delray Beach. Sagar sees such sales as evidence that the residential downturn is hurting the commercial market.
"We're definitely starting to see the slowdown," Sagar says.
It's not just the builders that are adding space to the market. HomeBanc Mortgage Corp. went broke this year, and First NLC Financial Services announced layoffs soon after moving from Deerfield Beach to Boca Raton - and before it found a taker for its Deerfield offices.
With the dollar marked down to fire-sale prices, foreign investors should be swooping in to buy Palm Beach County's commercial properties on the cheap, right? Not exactly.
Foreign investors have been selling more than they've been buying, even as the greenback has plummeted in value against the pound, the euro and the Canadian loonie.
True, GLL Real Estate Partners of Munich, Germany, in September paid $180.2 million for the Legacy Place shopping center in Palm Beach Gardens, and a German group in August paid $37.25 million for Wellington Green Square on Forest Hill Boulevard.
But GLL in May sold the office building at 3601 PGA Blvd. for $21 million to an American investor.
Other foreign sellers: Hans Vogler, a German who in June sold 537 acres at Florida Research Park for $162 million; Siemens AG, the German telecom giant that in July sold land and offices in Boca Raton for $37 million; and Canadian investor Murray Dalfen, who got $37.7 million for the Boynton Commerce Center last month.
All three sales were to American investors. But Manuel de Zárraga, executive managing director at Holliday Fenoglio Fowler in Coral Gables, reads nothing more into those sales than simple profit-taking.
"They're harvesting some pretty big gains," he said.
While foreign investors have been flocking to Florida to buy vacation homes and iPods, buyers of commercial real estate tend to focus on a property's income stream, not on the discount provided by a weak yield, said Bob Sullivan of RJS Realty in West Palm Beach.
"Real estate is a very different commodity," Sullivan said. "You're buying a yield."
Friday, November 23, 2007
You don't have to be particularly creative in a market glutted with homes. The painful reality is that homes are commodities. There are more than 4 million of them out there unsold and more coming on the market every day due to foreclosures. If you really need to sell, price is the one lever that will move a property.
Buyers are waiting for prices to fall even more. US existing-home prices are expected to drop almost 2 percent this year nationally, according to the National Association of Realtors, and are likely to fall further in areas saturated with homes for sale.
"Buyers just want price," says Mike Morgan, a Stuart, Fla.-based lawyer, real estate broker, and consultant who researches property markets for hedge funds and financial institutions. "Buyers have become educated, and they can easily cut through the fluffy incentives."
Morgan doesn't see any national rebound until at least 2010; maybe longer if builders keep constructing homes, and if banks continue dumping foreclosed properties on the market.
About 2 million properties may be foreclosed (more foreclosure stats) on in the coming year alone, resulting in an estimated loss of $223 billion in US home equity, particularly in California, New York, Florida, and Illinois, according to the Center for Responsible Lending, a North Carolina-based nonprofit.
Living near a foreclosed home may even trim as much as $5,000 from your home's market value, the center says. Some 44 million households will be affected, or about a third of all US housing units.
Selling has become a trying proposition in this dour market. Morgan has found that traditional deal-sweeteners such as paying broker bonuses and giving cash back on closing to the buyer aren't working as well as price cuts.
"On one $429,000 home a client wanted me to sell, the seller wanted to give the broker a $30,000 bonus on top of the commission. I told him it wouldn't help. I told him to just drop the price."
Because the market is so price-sensitive - buyers want bargains and sellers want to get prices they saw at the market's peak - you have to be flexible when advertising your home.
Morgan suggests you sell exclusively through Internet-based property sites and local Multiple Listing Services. He says newspaper ads, signs, and open houses don't work as well as the Internet.
When you price your property, you need to employ a strategy that can run counter to your emotional perception of the home's value - sometimes listing at a price far below what you hoped for.
Like any commodity, a home's price will follow supply-and-demand trends. In theory, custom homes in desirable neighborhoods should hold their value. Other properties should be discounted depending on how many similar homes or condos are on the market. Every market is different, though.
"If you don't get any calls on your listing price after a week, drop your price $10,000 or about 2 percent of your original asking price," Morgan says.
"The market will tell you what the price of your home is. You better be priced 10 percent under your competition - and then be prepared to think about accepting offers under that."
Selling in Miami? You are up against almost 80,000 listed condos and single-family homes, according to ZipRealty, an online brokerage service.
There are almost 30,000 units in Las Vegas; 42,000 in Boston; 35,000 in Seattle; and 110,000 in Los Angeles. Those inventories are through October.
Price-cutting is the order of business in most major markets. The service's price-reduction index, for example, shows that more than half the listings surveyed in Boston and Orange County and Sacramento, California, are discounted.
"People were telling me Boston and Seattle were OK," said Morgan, who recently visited both cities. "I've got news for those folks. They aren't OK." Is now the time to buy a home?
Wednesday, November 21, 2007
The financial collapse of one of America's legendary home builders has left people throughout Central Florida stuck with unfinished houses, liens against their properties, unopened clubhouses and community pools, and warranties that could be worthless.
Many of the victims, scattered throughout the Southeastern United States, don't know whether their houses will ever be finished." We're just kind of in limbo here and waiting to hear," said Vincent Santanelli, a resident of Cascades at Groveland who helped his elderly father-in-law with a $20,000 down payment on an unfinished house in the Lake County community.
"We haven't even heard a word from Levitt. "In Central Florida alone, several hundred families purchased lots and homes in communities from St. Cloud to Winter Springs that remain unfinished. Levitt and Sons hasn't offered them much reassurance.
A company Web site says Levitt's future is uncertain, the status of homeowners associations that it previously ran is "not yet clear" and it can no longer honor home warranties.Homeowners seeking work under warranty would have to go directly to vendors who provided items such as flooring. With only 72 employees left out of about 500, Levitt and Sons "just does not have the resources to continue to serve as intermediary," said Paul Singerman, lead bankruptcy counsel for the builder. Levitt filed for Chapter 11 bankruptcy protection Nov. 9, citing excess housing supply, reduction in demand resulting from less credit availability and falling prices.
The company listed assets of less than $1 million and debts of more than $100 million.Residents say they never expected this from the builder that pioneered the suburban planned community with Levittown on Long Island in 1949."They had a good reputation," said Kerri Day, who, with husband Robert Walker, bought a $450,000 home in Turtle Creek in St. Cloud. Their home is finished, along with about 20 others in the community planned for more than 400 homes.
Though relatively small when compared to today's home-building companies, "the Levitt name carries a lot of weight in the industry," said Mike Larson, a real-estate analyst with Weiss Research in Jupiter. "It's a sign of the times that even a company like that could get to this level of stress."Other smaller builders have filed for bankruptcy, and TOUSA, whose home-building companies include Engle Homes, is considering a possible Chapter 11 filing. Levitt and Sons' unfinished communities in Central Florida include Jesup's Reserve in Winter Springs and Cascades at Groveland.What happens to the homeowners associations and common areas in those communities will be "decisions that the lender makes . . . who's got mortgage liens on the property," Singerman said.
Levitt is going to try to reach an agreement with lenders to sell partly completed developments to other investors, he said. Levitt already has received permission to return deposits made by customers after Aug. 29 on homes that remain substantially incomplete. On other homes, it would be up to lenders to decide whether to return other deposits or try to finish the work.Concepts in Greenery, an Orlando landscaping company, has filed liens against common areas where it had done work. The company had to lay off 20 of its employees -- about half its staff -- as a result of not getting paid by Levitt, said
Steve Brownley, Concepts in Greenery's vice president .Levitt, he said, owes the company about $700,000. "We definitely have scaled back our operations, which we have never done in 30 years of being in business," Brownley said. "We have never laid anybody off, ever."Singerman said he did not know Tuesday how many liens had been filed against Levitt and Sons. Some of them have been filed against individual homeowners' properties. Residents and vendors working with Levit said they began to get an inkling a few weeks before the bankruptcy filing of just how bad things were getting.
"Work seemed to be slowing down," Santanelli said.Monday night, about 200 Cascades residents appeared in front of the Groveland City Council requesting financial relief -- primarily a break on water bills so they can water the landscaping in common areas. At least 40 customers have put down deposits but don't yet have houses completed, resident Eric Sorkin said.At Jesup's Reserve, the pool and cabana are off-limits because construction is incomplete. A "No trespassing" sign warns residents that the area is a construction site and that entering it without permission is a felony.
Resident Maggie Martin fears a closed cabana and pool will be "a tremendous drain" on property values. With almost 70 units of a planned 161 complete, there should be enough money coming in from association dues to keep things running for a while. "I think they can limp along" and raise enough money to pay for maintenance of common areas, said Matt Jordan, a property manager with Specialty Management"We want to at least maintain the bare minimum," Martin said.
But the situation is more precarious in Turtle Creek, with only a few homeowners around to pay the bills through their monthly assessments. The budget calls for $18,000 a month to be spent on landscape maintenance.Jordan said he's not "getting the direction I'd like" from Levitt and residents are "scared to death."
Tuesday, November 20, 2007
Wow, Southwest Florida seems to be getting hit particularly hard with the layoffs. WCI, Centex, Lennar Bonita Bay Group all announce major layoffs and restructuring...Stories of more homebuilder layoffs follow:
Bonita Springs-based builder WCI Communities Inc. has eliminated 575 jobs as part of a restructuring plan announced last week amid the continued housing slump. About 80 percent of the cuts are due to restructuring in Florida — the core of the company's operations — and the rest come from changes to operations in the Mid-Atlantic states and the Northeast, said Jim Dietz, chief financial officer."In Florida, we've combined our tower and traditional homebuilding teams," Dietz said.
Many of the jobs cut were division leaders and managers whose jobs were redundant when the two operations merged, Dietz said.The move will cut the company's work force to about 2,100 jobs — down about 46 percent from a 2006 peak of 3,889 — and generate annual savings of about $46 million in salaries and benefits. One-time costs of the restructuring, including severance, are about $5.4 million.
"This prolonged downturn requires that we continue to assess our overhead and make reductions in order to remain viable through the trough of this cycle," President and Chief Executive Jerry Starkey said in a statement.The cuts are the latest in a wave of job losses that have hit the home-building industry in Southwest Florida since the real-estate boom fizzled:• First Home Builders in Fort Myers, which two years ago was Lee County's biggest residential contractor with almost 1,200 employees, will be down to about 50 following its layoff — announced Oct. 29 — of 200 workers effective Dec. 28.
• The Bonita Bay Group, based in Bonita Springs, has trimmed about 60 jobs since May.
• On Sept. 4, Lennar Homes announced the layoff of 72 people from its Southwest Florida division, from Naples to Manatee County.
• In March, Centex Homes laid off 141 employees from Naples to Sarasota.WCI reported a net loss of $33.2 million in the quarter ended June 30 and is expected to announce quarterly results today. Alex Perez, an advertising director in the marketing department, was among those let go. Perez said he was notified when he got to work."They give you a severance package you can take and they are paying for the week, but they basically tell you to gather your things and leave," Perez said. Perez, 42, had been with the company for about 18 months. He said his severance package offers six weeks pay and some extended medical coverage."I came just after the last cuts and you kind of wonder if that is it," Perez said.WCI cut about 600 jobs in July 2006, citing the slowdown in construction.
The company also announced David Fry will assume the post of chief operating officer and will be responsible for WCI's Florida tower homebuilding in addition to his previous responsibilities for the company's traditional homebuilding, real estate services and amenities lines of business. In the new organizational structure, the Northeast and Mid-Atlantic traditional homebuilding regions will be combined, reporting to Fry. The Northeast and Mid-Atlantic Tower
Homebuilding divisions also will be combined and will report directly to Starkey.
The company's board also announced that seven members will take no compensation for the rest of 2007 and all of 2008 and the remaining two members — Hilliard M. Eure III, chairman of the audit committee, and Jonathan Macey — will accept reduced compensation of $50,000 each.
Board members earned between $140,000 and $180,000 in 2006.The move will save the company about $1 million, Dietz said. Billionaire investor Carl Icahn was elected to the board of directors in August and then was named chairman, ending months of a proxy fight for control of the company. In March, Icahn had offered $22 per share for the company, but the move was blocked by the board at the time.
WCI Layoffs, Centex Layoffs, Lennar Lay offs, Bonita Bay Group Layoffs
Meritage Homes lays off 12 or so employees:
Meritage Homes, the nation's 12th-largest homebuilder, is the latest to cut costs in Sacramento by consolidating operations.
The company has closed its Sacramento office, laid off about a dozen employees and called others back to its Concord office, including Sacramento division president Mike Heim.
The company plans to continue sales and construction at its eight new-home projects around Sacramento, regional president Dennis Welsch said.
"We had support staff there (in Sacramento)," he said from the Concord office. "It didn't really make sense to keep operating in multiple locations. We're consolidating those support functions, brought a few people here, and unfortunately we've had some layoffs."
Monday, November 19, 2007
Numbers dismal but better balanced
By Linda Rawls
Palm Beach Post Staff Writer
Monday, November 05, 2007
In Palm Beach County's new-home developments there is evidence that supply is working its way toward a better balance with demand, according to a study released last week.
There were 755 single-family move-ins during the third quarter of this year - the fewest in more than a decade, according to MetroStudy, a West Palm Beach-based housing consultant.
That's also 52 percent fewer than the same quarter last year, when there were 1,585 move-ins. There were 1,135 move-ins in the second quarter of this year.
There were 486 single-family home starts in Palm Beach County developments in the third quarter of this year, MetroStudy said, a 52 percent drop from the third quarter of 2006, when there were 1,017 starts. There were 408 in the second quarter of this year.
In the peak construction year of 2003, MetroStudy noted, starts averaged more than 2,600 a quarter as builders throughout the county feverishly pounded nails to feed the boom.
Brad Hunter, an analyst at MetroStudy, said the move-in pace (755) was greater than the starts pace (486) in the third quarter of 2007. That's a healthy situation, he says.
Another good sign, Hunter said, is that total new-home inventory in Palm Beach County dropped to 2,989 units in the third quarter from 3,258 units in the second quarter.
The number of units under construction fell to 1,464 units in the third quarter from 1,776 in the second quarter.
Here's some good news for Port St. Lucie house hunters, especially first-time buyers.
Mercedes Homes' Treasure Coast Division, reacting to the still-slumping housing market, has introduced The Cottage Series, with two designs that can be built on your lot or on a Mercedes Homes lot.
The Paige, a three-bedroom, one-bath home, has 1,212 square feet of living space and starts at $103,990, the builder says. The Nicole Deluxe has 1,404 square feet and starts at $109,900. It has three bedrooms and two full baths.
Both have two-car garages and open kitchens that flow into "great rooms."
Got more money? There are plenty of options.
"I believe we've got the lowest prices in town," said Robert Smithwick, division president.
Log on to mercedeshomes.com if you don't believe him. Or even if you do.
Many other local builders are offering incentives to attract buyers in what has become the worst housing slump in 16 years.
Some of them are impressive indeed, although to date Mercedes takes the prize for most affordable. Truth be told, we don't have room to list them all in this column.
We see news releases from CentexHomes and DiVostaHomes on our desk, for instance. It's a trend we expect to continue well into next year as builders seek to work off their bulging inventories homes and condos.
Linda Rawls writes about residential real estate. Contact her at The Palm Beach Post, 2751 S. Dixie Highway, West Palm Beach, Fla. 33416-4700; (561) 820-4722; e-mail: firstname.lastname@example.org.
Kati Trisler, director of marketing for America's First Home, an active builder in Central Florida, helped create an interactive Web site for the company's new Frey Homes line. "With so many people starting their home search online, we recognize the importance of giving them the tools they need," Trisler said. The builder's 11 new luxury-home styles, designed for move-up buyers, are in two communities: Eagle Pointe Estates in Groveland and a project in Cape Coral. The Web site will soon include an interactive floor plan and furniture spacing option. . .
Mercedes Homes has a new designer showroom in Altamonte Springs. Ann Marie Meyer, design center coordinator, said visits are by appointment only.
The Federal Reserve recently warned that the housing market is unlikely to recover anytime soon.
Shira Boss, the author of Green with Envy, says first-time buyers probably shouldn't rush to get a mortgage.
"Nobody knows where we are on the curve," Boss tells Renee Montagne about the housing market. "It could be a little bit cheaper now or it could be getting cheaper for the next five or six years. You really don't know."
Boss says people should examine their individual situations "and not really rush and try to time the market."
In recent years, prospective buyers have been able to purchase homes with small down payments, or even no money down, and borrowing more than the house is worth. But these days, Boss says, buyers should count on saving enough to put 10 percent or 20 percent toward a home purchase.
"You shouldn't even look at houses until you have that kind of down payment," she says.
Before deciding to buy a house, you should also consider how stable your job is, and the likelihood that you will be required to relocate in the near future.
"Friends of mine bought a house and had it for less than year," Boss says. "And he got laid off and spent months job searching and this week accepted a new job in another city. Next week, their house is going on the market." It probably hasn't appreciated since the couple bought it, Boss says.
"Real estate is not a sure thing in terms of easy and quick profit.... There are situations where you can be stuck and lose money."
Boss says young people often feel pressured to buy a home.
"That's something I would love to caution young people against ... that feeling that, 'Oh my gosh, owning real estate is something to aim for, and if we're renting, we're basically losing money every month....' You can get in this kind of panic attack when you're young about having to buy.
"It's not necessarily something everybody can do or everybody should do," Boss says. "We should ... relax and not push people into real estate as something they have to do."
Thursday, November 8, 2007
Management continues to focus on improving its balance sheet and on generating cash flow; during the fourth quarter total debt was reduced by $390 million. The Company retired the remaining $140 million of its $150 million 10-1/2% senior notes and reduced the amount drawn under its $1.5 billion unsecured revolving credit facility by $250 million, from $456 million at July 31, 2007 to $206 million at October 31, 2007.
Net contracts for the quarter were 2,781 homes, a decrease, excluding net contracts from unconsolidated joint ventures in both periods, of 10% from last year's fourth quarter. During the month of October, the sales pace in most of the Company's markets significantly deteriorated when compared to the sales pace of recent months. Cancellations for the fiscal 2007 fourth quarter were 40% of gross contracts, compared to the cancellation rate of 35% for both the third quarter of 2007 and the fourth quarter of 2006.
The primary reason for the increase in the Company's cancellation rate is the tightening of mortgage underwriting standards, which has lead to some customers cancelling their contracts due to an inability to obtain mortgage loans. Contract backlog, as of October 31, 2007, excluding unconsolidated joint ventures, was 5,938 homes, a decrease of 30% from the same quarter a year ago.
Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, Chairman, is headquartered in Red Bank, New Jersey. The Company is one of the nation's largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Kentucky, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia. The Company's homes are marketed and sold under the trade names K. Hovnanian Homes, Matzel & Mumford, Forecast Homes, Parkside Homes, Brighton Homes, Parkwood Builders, Windward Homes, Cambridge Homes, Town & Country Homes, Oster Homes, First Home Builders of Florida and CraftBuilt Homes. As the developer of K. Hovnanian's Four Seasons communities, the Company is also one of the nation's largest builders of active adult homes.
Wednesday, November 7, 2007
Anders Bylund October 19, 2007
Yeah, you read that right: I'm bullish on homebuilders.
That's kind of like waving a Yankees pennant at Fenway Park, but there it is. It just makes sense when you think about it.
Remember that other bubble that popped seven years ago? Of course you do; the downfall of Yahoo! (Nasdaq: YHOO) and Amazon.com (Nasdaq: AMZN) and the Nasdaq as a whole was too obvious and deliciously ironic to miss. Anything with "dot-com" in its name got pumped up to ridiculous valuations, and then the whole thing came crashing down all at once.
That's what's happening to the housing market right now. Home prices climbed too close to the sun, followed by insane loan terms designed to let people buy houses they really couldn't afford. The joyride is done, my neighborhood is full of unsold flip-me properties, and homebuilder stocks are going the way of property prices -- down, down, down.
And that's where you'll find some of the most amazing deals you'll ever see on the stock market.
Look back at the tech bubble again. Yes, it hurt to hold stock in the big Y or Amazon back in 2000. But if you bought those stocks when they bottomed out in 2001, you'd be sitting on better than a four-bagger in Yahoo today, and a Lynch-esque 10-bagger in Amazon -- better than a 40% annual return, my friend.
That's the kind of rebound opportunity we're seeing in the housing market today. An entire industry just can't roll over and die, especially one as ingrained into the American economy and culture as homebuilding. And some of these companies are brilliantly run operations that will simply ride out this storm, rising phoenix-like from the ashes in a couple of years.
So the trick is to find the good homebuilders, those that will survive the shakeout and pounce on a less competitive market when the credit crunch is over. Take a look at these candidates, for example:
Again, you're not dreaming or hallucinating. You can still find profitable homebuilders whose stocks are priced well below their annual sales or tangible book values. They're household names like Ryland and Toll Brothers, and most of them back up their numbers with strong cash flows, too.
It's just a matter of diving into that pile of excellent value propositions and finding the ones most likely to survive the breakdown. Every crash has a bottom, and while it's tough to call the lowest point with precision, I think we're close enough now to warrant some trash-picking.
Thursday, November 1, 2007
Declining demand for housing in Middle Tennessee has spurred the state's largest home builder to cut staff from its Murfreesboro-based operations, a move that many companies tied to the real estate market have already made, experts said Monday.
John Floyd, owner of Ole South Properties, said he put off the downsizing, which pares the staff size from 33 to 25, hoping new home orders would return to levels seen in the recent boom years.
Ole South had staff in place to build up to 700 homes a year, but with actual numbers likely to be in the high-500s this year, people "just didn't have anything to do," the owner said. Next year, Floyd is conservatively estimating between 300 and 400 new orders.
"We've held out and held out, thinking the tide would turn and that home building would pick back up," Floyd said. "But now it's apparent that it's not picking up and that next year won't be picking up either."
Real estate analyst Doug Timmons agrees that the Midstate housing market isn't likely to rebound to previous levels anytime soon, but says the job growth and population surge in Rutherford County puts local builders in a much better position than others across the country.
"The strength in the regional economy bodes well for us," the MTSU business and economics professor said. "Certainly, if you're going to be in a slow-down market, you want to be in a community like this."
Timmons said builders have outpaced demand by putting too many houses on the local market and now face a period of contraction. "That's the economic cycle, and that's just the way it is," he said.
Housing permits in Murfreesboro declined by 34.1 percent through September compared to the same period last year, according to city records. The county reported a similar declines of 16.8 percent with 634 total home permits compared to the 762 the previous year.
Still, nearly 1,000 new homes and condos have been built or are under construction in the Murfreesboro.
And even though demand is down, Murfreesboro Planning Director Joseph Aydelott said it's good to have housing available for companies looking to relocate because they need housing for their employees.
"It's good to have more than a year's supply (of housing) in any given time," said Aydelott.
Karyn Beaty, the executive officer for the Rutherford County Homebuilders Association, said her members aren't panicking, they're just repositioning themselves to unload excess inventory.
"Sales agents for builders are definitely becoming a bit more aggressive," Beaty said. "But everyone knows it's important that we avoid a wholesale dumping; no one wants to see the house values go down because that hurts the whole community."
"The strength in the regional economy bodes well for us. Certainly, if you're going to be in a slow-down market, you want to be in a community like this
Home builders continued cutting back in the Orlando area this summer, as new-home starts plunged 47 percent in the third quarter compared with the same period a year ago.
MetroStudy, a Texas-based real-estate-research company, also said in its latest survey that the July-to-September home construction in Metropolitan Orlando was down 20 percent from the previous quarter.But the number of home buyers closing on their purchases, and moving into their new houses, in the four-county metro area slipped only 5 percent from the second to third quarters.
Economists and industry experts said the sharp drop in housing starts is painful in the near term but helpful in the long run because it means the inventory of unsold homes can be absorbed faster. It also means a rebound in the region's housing market might begin sooner, and perhaps be even stronger, than after previous downturns, they said."They are anxious to work their way through the inventory.
Now is not the time to be building," said Terry Eckert, a longtime Orlando-area home builder. Builders are smart enough to know the cyclical nature of the market, Eckert said, and most builders are not starting work on any homes unless it involves a confirmed sale with lender-approved buyer.
Eckert, a former president of the Home Builders Association of Metro Orlando, worked for years for major-production builders -- the companies that fill subdivisions rather than erecting custom homes on single sites. He recently became director of construction for Habitat for Humanity-Orlando, the charity that builds for families who ordinarily could not qualify for a regular home loan. In contrast to the area's conventional builders, Eckert's nonprofit group is on pace to build a record 17 single-family homes in the region by the end of its fiscal year next June 30.
But only the major commercial builders have the scale and financing to build homes in the volume required to meet overall demand, and the MetroStudy report released Wednesday showed that housing starts in the Orlando area during the third quarter fell 46.9 percent year-over-year to 4,851 units.Anthony Crocco, director of MetroStudy's Central and Northeast Florida divisions, said the sharp decline in Metro Orlando -- which comprises Orange, Seminole, Osceola and Lake counties -- is a reflection of "the slow sales paces and high cancellation rates of late summer and early fall." His survey of subdivisions showed that the number of homes sold and occupied in the third quarter totaled 3,850, down 29.8 percent from the same period in 2006 but off only 5 percent from this year's second quarter.
Orlando economist Hank Fishkind told builders, developers and Realtors last week that this housing downturn does appear to be different in Central Florida when compared with past housing slumps, in that home builders have slammed on the brakes harder than ever.That should help clear out the inventory of unsold homes and set the stage for a more robust rebound in sales of both new and used homes, perhaps in 2009, Fishkind said during his quarterly forecast for Stirling Sotheby's International Realty Global Gallery.
MetroStudy's report did, in fact, show a drop in the area's new-home inventory. Total inventory -- homes under construction, finished-but-vacant units and model homes -- totaled 10,412 at the end of the quarter, down 36.3 percent from a year earlier.But at the recent slow sales pace, that still amounted to a 6.6-month supply. And the critical finished-but-vacant category fell just 9.9 percent from a year ago, to 5,264 homes -- still, a sign that the large stockpile of homes is finally starting to get whittled down.
Tuesday, October 30, 2007
The Orlando Sentinel tells us that the RE market may be coming to a head. "'It's insane,' said Gary Balanoff, broker-owner of Re/Max Select. 'Where does it end? I don't know.' The 21-year industry veteran said he has never seen such price escalation."
"There was a sign that change could be coming, with April sales throughout the region falling nearly 5 percent compared with April 2004. That was accompanied by a 5 percent increase in the inventory of available homes."
"Barbara Vance said she is dealing with more investors than ever before, with many buyers quickly becoming sellers."This is a quote for the ages. "If there is a slowdown, Brenda Rogers of the Lake County Association of Realtors wouldn't mind: 'I kind of wish we would. We've been so busy.'"
“This is a painful action, but a necessary one to right-size the company,” said Tim Graney, vice-president of finance. “We are now positioned to operate more efficiently at a lower volume than we have enjoyed in the past few years.”
Despite the layoffs, First Home Builders will continue targeting first-time buyers for the sale and construction of new homes, according to a company press release.
Company spokesman Ray Casas said the layoffs are a reflection of a sluggish Southwest Florida real-estate market.
“The conditions are what they are, and this action had to be taken to right-size the company,” Casas said, adding that recalls remain a possibility in the future. “Obviously market conditions could change.”
Bill Berry, owner of WB Home Builders in Lehigh Acres, wasn’t surprised by First Home Builder’s announcement.
“The market is down for most builders, and First Home Builders built up so quickly that when the market crashed, I don’t think they were ready for that,” Berry said. “Right now, it’s a buyer’s market, and instead of building, people are snatching up foreclosures because they can buy them $20,000 to $30,000 less than what it costs to build.”
Sluggish market or not, Berry believes business could pick up quickly in Lee County.
“Lee County is such a fast-paced market that I think the market could correct itself pretty fast — stabilize and become normal in anywhere from eight months to two years,” he said.
Though operating on a much smaller scale than First Home Builders, Berry said he also recently had to let two employees go.
“I had to let a trade guy and an office lady go, mainly because work is so slow and there’s no work to give out right now,” he said.
That said, the slow building market hasn’t yet cast its shadow over the world of home-improvement sales, according to John Sandford, manager of the Lowe’s at 14960 S. Tamiami Trail in Fort Myers.
“We’re pretty happy with the way things are going now,” Sandford said. “There have been brisk sales in the remodeling portion of the business, with kitchen upgrades and upgrades of people’s current housing. Overall, the real-estate and building industry is down, but we’re happy with our business, happy with the average homeowner continuing to improve their home.”
Saturday, October 27, 2007
The number of new-home and existing-home sales in September fell to the lowest monthly total this decade as home prices continued to tumble, according to statistics released Tuesday by a Las Vegas research firm.
The release of the data by SalesTraq comes as a local housing analyst said Wall Street investment bankers are concerned that at least one and maybe other major public builders will pull out of the Las Vegas housing market.
Steve Bottfeld, executive vice president of Marketing Solutions, declined to name the builder analysts named, but said they are concerned because Las Vegas has been so profitable for builders.
The worry centers on the rising cost of land and a move toward mixed-use developments and mid-rises, Bottfeld said. A number of builders have sold their land holdings and aren't interested in urban villages, he said.
Builders didn't show much confidence in the Las Vegas housing market in September when they took out 591 housing permits. That's the lowest monthly total this decade, said SalesTraq's Larry Murphy.
"We have not reached the bottom of this market in either new homes or existing homes," Murphy said. "The short-term outlook for this market is not good. It will take another 12 to 18 months before we will see any significant improvement in my opinion."
New-home sales plummeted to 1,328 in September, down 52 percent from September 2006, when there were 2,565. The median prices fetched for new-home sales in September was $308,055, 13 percent below the market's peak in April 2006 when the price was $355,435.
As for existing-home sales, there were 1,466 in September, down 50 percent from September 2006 when there were 2,946. Of those homes that sold, the median price of $263,075 is nearly $27,000 or 9.2 percent below its peak of $290,000 in October 2006. That's the lowest median price since it was $263,000 in March 2005.
Some analysts have predicted existing-home prices could fall 20 to 30 percent from their peak as inventory remains at record levels with a 19-month supply.
The fall in prices comes as a credit crunch makes it harder for buyers to qualify for loans. Analysts said that's an even bigger problem in Las Vegas where there are a lot of first-time and second-time homebuyers. In addition, casino workers who in the past have relied on stated income loans aren't qualifying today.
The latest report is good news for buyers waiting for prices to drop even more before they jump in the market and bad news for those hoping to cash in on the appreciation of their homes from price increases 2004 and 2005.
Builders continue to offer substantial incentives ranging from bonus commissions to real estate agents to as much as $100,000 in free upgrades to buyers, Murphy said. Earlier this month, Lennar Homes dropped prices 25 percent in about 30 of its new-home subdivisions, Pulte had a sale advertising a 15 percent cut in prices while Astoria Homes had price cuts of $70,000 or more. KB Home has had major price reductions twice this year already, he said.
Despite the prices and sales continuing to nosedive, Bottfeld remains optimistic about the future of the housing market and suggested September may have been the bottom. One reason he cites is that the inventory of existing homes on the market in September at 27,417 virtually matched the August total.
"As far as a correction goes, what we have had is pretty mild," Bottfeld said. "If we are not at the bottom, then we will have one more bad month before we see it turn around. I am willing to bet that prices will go up at the end of this year, not down."
Despite his concern about the market over the next 12 to 18 months, Murphy said the housing market future remains bright with resort development along the Strip that will generate more jobs and need for housing.
As for a major builder or two pulling out of the market, Monica Caruso, spokeswoman with the Southern Nevada Home Builders Association, said she is not aware of any such plans, but she noted that builders could do that without an announcement. The number of builders in the market was 97 in 2005 and fell to 77 in 2006 and is expected to fall even further through consolidations, closings or pulling out of the market, Caruso said.
"It is a trend we have been watching and we believe with the decline in sales activity compared to 2005 and 2006, that many homebuilders are operating on reserve funds and that can only go on for so long," Caruso said. "Many if not all of the home builders have had layoffs and cut back expenses to make it through this period."
Many builders are counting on resort development, including developers like CityCenter, to generate more jobs and with it a greater demand for housing, Caruso said.
"We know there are many homebuilders who are holding out because of the opening of two major resort properties," Caruso said. "They feel it is going to create instant demand because of the thousands of new jobs created. People must live somewhere."
Forget it. While Centex, KB Homes and Lennar Corp., all of which have developments in Polk County, are suffering, now might not be the time to invest."Any time you start sector betting, you're concentrating your risk in one area," said Laura Hawley, a financial planner and vice president of Allen & Company in Lakeland.
On a national level, the home market isn't showing any signs of rebounding.Just 5.04 million homes were sold in September, down 19.1 percent from 6.23 million in September 2006.
This past week's home sales reports, released by the National Association of Realtors on Wednesday, sent builder stock prices tumbling.
Centex shares dropped 37 cents to $24.27. DR Horton Inc., one of the nation's largest builders, fell 49 cents, or 3.9 percent, to $12.22, while Lennar Corp. slid 37 cents to $22.07. Beazer Homes USA Inc. had shares decline 11 cents to $9.69."It is really just buyer beware," she said.Hawley likened the scenario to the dot com market bust in 2000."A lot of those companies that were blue chip stocks never recovered," she said. "It doesn't mean these companies are going to come roaring back like they were."
And when it comes to building new homes, it doesn't get much better. The Commerce Department reported Wednesday that construction of new homes fell 10.2 percent in September to a seasonally adjusted annual rate of 1.191 million units. The decline was more than double the 4.2 percent drop that analysts had been expecting and it pushed activity down to the lowest level since March 1993.
"I think the real estate market in general isn't done," Hawley said. "I think we still have a lot of weakness there."But Polk County, Florida is some ahead of the building bust curve. Contractors across the county pulled 271 new home permits last month, which is an 8.1 percent decline from 295 permits in September 2006. And while it is still the 19th consecutive month permit totals have declined, the lower decrease is encouraging. For more than a year, builders have sought some relief to the sluggish housing market.
Thursday, October 25, 2007
The company said late Monday that it had been unable to secure adequate funding to operate its business and had closed its sales, production and customer service offices. It said it has laid off most of its employees, but did not give a number.
Chief Executive Kenneth Neumann blamed the situation on a "significant downturn" in housing markets in Detroit, Chicago and Denver.
"Even after the significant help we have received from our lenders this year, the company can no longer weather this storm," he said in a statement.
Neumann Homes expanded to the Detroit area in 2005 by buying Tadian Homes, an acquisition that made it the 35th-largest U.S. homebuilder at the time. But that market has been hard-hit since by auto industry layoffs, and the company said the move has cost it more than $60 million.
This year, the housing market nationwide has been battered by a steep drop-off in both price and demand.
Steven Hovany, president of the consulting firm Strategy Planning Associates Inc., said Neumann fell victim to an overaggressive and mistimed expansion into new markets. "As a result, they've got a lot of projects and few sales," he said.
Neumann has 15 active developments in the Chicago area, mostly in distant suburbs such as Antioch, Grayslake and Oswego.
Monday, October 22, 2007
This Site RealOpportunityCfl.com is aimed at getting central florida homebuyers off the fence. It is a million dollar marketing campaign to, and I quote "serve only one interest - that of the homebuyer,". WHAT A LOAD OF BS. I mean seriously....don't you think if that was the interest it would be a consortium of Orlando or Central Florida homebuyers and not the Homebuilders Assosiation of Central Florida. Consider this blatant scare tactic by the Orlando HBA - "As a first-time buyer, should I wait until prices go lower to buy a home? No. If you continue to wait, you may never be able to afford to get into the housing market."
I am still involved with the homebuilding industry in Centrla Florida....as a marketer...and this is enough to make me want to puke. Yes, it is a down market and builders need to sell homes to survive. Layoffs are plenty. The Orlando HBA is trying to sell homes, but that statement is one of the biggest, whitest, blatant lies I have seen in my marketing career. The orlando real estate and homebuilding market is one of the 5 worst markets in the nation right now. Too much inventory, overpriced homes, etc. Same old story. This site is aimed to take advantage of PEOPLE and put money in the pockets of Orlando Homebuilders. Now, hey...if you need a home and the price is right, it very well MAY be a good time to buy. The builders are dopping their prices (and pants) to make sales, yet the safe bet is the market drops for at LEAST anoter year...and the builders know and are planning on this.
Maybe the Orlando Homebuilding Association think that they can help nudge the market in the right direction. Seems a bit lofty to me, but I respect the concept. The execution however resluts in just doing the same thing they have done for the past 5 years in a hot market....screwing nervous, undereducated homebuyers. More greed and self preservation.
I have no agenda other than to report on the current state of the homebuilding market. The Orlando market is very clearly in shambles....When I cool down I will edit this post to include the stats...
Anyways, more to come on this.
Stats on the Orlando Housing and Real Estate Market for August 2007:
The latest real estate market numbers released today by the Orlando Regional Realtor Association reveal a rising inventory and mortgage rates alongside declining values and number of sales in Central Florida. The inventory as of the end of August stands at 26,313 homes on the market and average mortgage rates have jumped 40 basis points in the past 12 months to 6.6% vs. 6.2% 12 months ago. The median price has dropped from $250,000 12 months ago to $245,000 at the end of August. The more alarming number is that the number of sales sales have dropped more than 40% than a year ago. August 2006 recorded 2,249 sales while August 2007 sales were a mere 1,343. The inventory based on sales in the Orlando market is 19 months of supply.
Friday, October 19, 2007
MEMORANDUM TO: All Associates
FROM: Ara K. Hovnanian
DATE: October 3, 2006
A few months ago I wrote to you about the changing market conditions in our industry and our concerns about how long the downturn in homebuilding may last. Since that time, the market has slowed further still, representing one of the steepest declines in new home sales in our memory. Most of our markets have been affected, some severely. At this point, we are preparing for a long period of slower sales, at least through 2007 and perhaps beyond.
What does this mean for you and for our Company? These new market conditions have affected us in many ways and will continue to affect us in the months ahead. In the area of land acquisition we have been re-evaluating our current land positions and the contracts for new land in the light of these new conditions (Land Folks are half the reason for the new decline...although ultimately the builder executives approved the bad deals). Many of those contracts no longer make good financial sense when you factor in lower prices and a slower sales pace. In cases where we have been unable to renegotiate these contracts with more favorable terms, we are canceling them, at times forfeiting our deposit monies.
We continue to work on ways to reduce costs. We have also had to make adjustments to our pricing in order to make sales, either through added features, free options, waived premiums or outright base price reductions. In a market where our competitors are making dramatic pricing concessions, we must make similar adjustments in order to remain competitive. Obviously, this has a significant impact on our profits on those homes that we sell at a discount. The most difficult adjustment we have had to make to the changing market is in the area of staffing.
In many locations, including corporate headquarters, we have been forced to face the fact that we no longer have enough work for all of our Associates. We were hoping that normal attrition and a reduction in new hires would prevent us from needing to take further action. Those steps helped, but did not solve the problem of having too little work for our entire team. As a result, we have had to make staff reductions.
We consider this action to be a last resort, but business realities demand action in order for our Company to remain healthy and to maximize our performance in a difficult market environment.
Thursday, October 18, 2007
The retrenchment includes cutting 760 jobs, selling 190 homes and about 1,200 developed home sites, St. Joe (formerly Arvida), based in Jacksonville, Fla., said yesterday. This quarter’s earnings will be reduced by a $30 million charge. The company will also have $7 million in severance costs this year and next.
St. Joe is shifting from building homes in Florida, where sales plummeted 41 percent in the second quarter, according to the National Association of Realtors, to developing planned communities.
“This is not a fire sale,” the chief executive, Peter S. Rummell, said yesterday in a conference call. “We are not dumping stuff on the market and we are not going to make stupid decisions, but there are things that we believe have reached their height in pricing. I firmly believe that we would be doing this whether the market was good or bad.”
St. Joe shares fell 4 cents, to $34.11.
This is another example of a Florida builder that made huge mistakes. This company owns more land than the Florida govenment...miles and miles of beach. The locals in Florida's Panhandle, or as JOE wants to call it Florida's Great Northwest hates this company. They are developing pristine plats of preserve quality land. I think they are actually a pretty "green" builder. Anyways, this one is stunning...I don't care what Peter Rummell says. Laying off 80% of your staff IS a fire sale. I am stunned they didn't at least do it in phases where they didn't need to announce it.
Full article here.
Beazer Homes USA on Monday offered creditors cash for backing off demands that the company immediately repay $1.5 billion in debt.
Beazer already is battling bondholders in court over the issue, where it seeks to prevent trustees from demanding the money because the company has missed deadlines for filing required Securities and Exchange Commission reports.
Now the company wants creditors to adopt a covenant that obliges Beazer after May 15, 2008, to file reports with the SEC and deliver those reports to trustees. The covenant also would require Beazer to pay an additional 0.5 percent interest per year "if Beazer fails to comply with such obligations on a timely basis." Beazer, which offered to pay a "consent fee" for every $1,000 in principal outstanding, repeated its belief that it's not in default.
"If they thought they'd win (in court), why are they doing this?" said credit analyst Vicki Bryan of Gimmie Credit. "They blinked."
She predicted Beazer will strike a deal, similar to the arrangement KB Home struck with bondholders after the homebuilder was late filing an earnings report last year. The company delayed its filing to complete an internal review of its historical stock option grants and related accounting.
In a research note Monday, Bryan said Beazer's "most pressing issue is its dramatically poor performance in this weak homebuilding cycle, which is worsening by comparison to other builders that compete for the same buyer."
(Hey Look.....another big builder owned mortgage/loan scandal. Go figure.)
Last week, Beazer said it found evidence its employees violated unspecified federal housing regulations, "particularly in relation" to down-payment assistance programs for Federal Housing Administration insured loans dating to at least 2000.
Beazer said it would try to reach a settlement with regulators for between $8 million and $15 million.
Beazer also reported some financial results for the quarter ending Sept. 30. Home closings dropped 39 percent from the same time last year. New home orders declined 52 percent, "driven by an unusually high cancellation rate" of 68 percent, the company reported.
The revelations were part of an interim internal investigation, launched in April after the Observer published a series that questioned Beazer's business practices and its high foreclosure rate in the Charlotte area.
Beazer's mortgage subsidiary was among the most active in the Federal Housing Administration home loan program in the Charlotte area. Many foreclosures involved loans where an arranged gift from a charity or nonprofit was used to cover a borrower's down payment. The Observer found that Beazer incorporated the cost of the down payment into the price of some homes in Southern Chase, a Concord subdivision.
Work is starting Tuesday (October 07) morning to dig up dozens of yards in Orange County, Florida to search for old bombs.
On Monday, crews for Lennar Homes spent the day marking the neighborhood that sits on what used to be the World War II era Pine Castle Jeep Range.
All spots marked during the survey will be dug up. More than 50 homes could be affected.
So far, several old live munitions have been found nearby and close to Odyssey Middle School.
The work to find more bombs could take several weeks.
Lennar Homes told News 13 that they will dig up anything made of metal. The company said they are doing it to bring peace of mind to the people who live in the community.
They said it will take about two weeks to dig around 21 homes in the Lee Vista area.
Some people will have to leave the area while the work is going on.
Since July, the Army Corps of Engineers have been looking for bombs after the initial discovery near the school.
A home builder in Orange County (lennar) is searching under homes near Odyssey Middle School for unexploded bombs.
In July, two live bombs were found near Odyssey Middle School and a planned high-tech corridor, prompting a study by the Army Corps of Engineers. The school had been build on top of a former bombing range.
The home builder, Lennar Homes, will be using a machine to go through the Lee Vista Square and Warwick neighborhoods to make sure that there are no old bombs underneath the homes.
The machines are used to detect unexploded bombs that could be underground.
Lennar Homes said it was caught off guard by the news that the subdivision sits on a former Army bombing range. Now, the company is assuring residents they are trying to do everything they can to keep them safe.
What does this mean? In my opinion Lennar (like all of the big builders) rushed into another land deal. Obviously they did not budget to have to dig through all of the land to look for bombs. What a PR nightmare...and in this market. I am glad that someone caught this homebuilders mistake before either a worker or child was harmed. Whooopsie!
Why? Prices still disconnected from fundamentals. House prices are still far beyond any historically known relationship to rents or salaries. In extreme bubble areas like California, yearly rents are 3% of purchase price. Mortgage rates are 6.5%, so it costs more than twice as much to borrow money to buy a house than it does simply to rent an equivalent house. Worse, total owner costs including taxes, maintenance, and insurance are about 9%, which is three times the cost of renting. Salaries cannot cover mortgages and loans are harder to get nationally. Anyone who buys now will suffer losses immediately, and for the next several years at least.
Buyers borrowed too much money and cannot pay the interest. Now there are mass foreclosures, and senators are talking about taking your money to pay for your neighbor's McMansion.
Banks happily loaned whatever amount borrowers wanted as long as the banks could then sell the loan, pushing the risk onto Fannie Mae (ultimately taxpayers) or onto buyers of mortgage backed securities. Now that it has become clear that a trillion dollars in mortgage loans will not be repaid, Fannie Mae is under pressure not to buy risky loans and investors do not want mortgage backed securities. This means that the money available for mortgages is falling, and house prices will keep falling, probably for 5 years or more. This is not just a subprime problem. All mortgages will be harder to get. A return to traditional lending standards means a return to traditional prices, which are far below current prices.
Interest rates increases. When rates go from 5% to 7%, that's a 40% increase in the amount of interest a buyer has to pay. House prices must drop proportionately to compensate. The housing bust still has a very long way to go. For example, if interest rates are 5%, then $1000 per month ($12,000 per year) pays for an interest-only loan of $240,000. If interest rates rise to 7%, then that same $1000 per month pays for an interest-only loan of only $171,428. Even if the Fed does not raise rates any more, all those adjustable mortgages will go up anyway, because they will adjust upward from the low initial rate to the current rate.
Extreme use of leverage. Leverage means using debt to amplify gain. Most people forget that losses get amplified as well. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss or an interest rate hike, he's bankrupt in the real world. It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is 6%. On a $300,000 house, that's $18,000 lost even if prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.
Shortage of first-time buyers. The percentage of San Francisco Bay Area households who could afford a median-price house in the region plunged from 20 percent in July 2003 to under 10 percent in 2006.
Surplus of speculators. Nationally, 25% of houses bought in 2005 were pure speculation, not houses to live in, and the speculators are going into foreclosure in large numbers now. Even the National Association of House Builders admits that "Investor-driven price appreciation looms over some housing markets."
Fraud. It has become common for speculators take out a loan for up to 50% more than the price of the house he intends to buy. The appraiser goes along with the inflated price, or he does not ever get called back to do another appraisal. The speculator then pays the seller his asking price (much less than the loan amount), and uses the extra money to make mortgage payments on the unreasonably large mortgage until he can find a buyer to take the house off his hands for more than he paid. Worked great during the boom. Now it doesn't work at all, unless the speculator simply skips town with the extra money.
Baby boomers retiring. There are 77 million Americans born between 1946-1964. One-third have zero retirement savings. The oldest are 61. The only money they have is equity in a house, so they must sell.
Huge glut of empty housing. Builders are being forced to drop prices even faster than owners. Builders have huge excess inventory that they cannot sell, and more houses are completed each day, making the housing slump worse. The best summary explanation, from Business Week: "Today's housing prices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low interest rates of a weak economy. Either the economy's long-term prospects will get worse or rates will rise. In either scenario, housing will weaken."
Just some thoughts on the current decline in the homebuilding market. Why is the market collapsing?
- When will it rebound. As far as the why, and how did we get here...In my opinion....GREED.
- Buiding too many houses with no buyers in a crappy market - GREEDY Homebuilders
- Financing unqualified home buyers to sell them a home - GREEDY Homebuilders
- Poor Planning and getting the money while the market is hot - GREEDY Home builders
- Buying ANY land they could get their hands on and making bad land deals - GREEDY Homebuilders
- Saturated Markets- Greedy Homebuilders
- No one can qualify for new home loans because of aforementioned fiancing games - Greedy Home builders
Anyone care to add more?
NEW YORK (CNNMoney.com) -- The mortgage bomb hit the demand for new homes even harder than expected in August, leaving the nation's builders with their weakest level of sales since the summer of 2000, when the nation was struggling with a stock market collapse, rising interest rates and a looming recession.
And the government's latest snapshot of the battered housing market, released Thursday, may actually be understating the problem: It does not account for the rising cancellation rates or sales inducements that builders have reported in recent months. New home sales hit a 7-year low in August in the face of problems in the mortgage market.
According to the Census Bureau, new homes sold at an annual pace of 795,000 in August, down 8 percent from the revised 867,000 sales pace in July.It was the slowest pace of sales since June 2000, as legions of buyers had trouble finding mortgages or selling their existing homes. Economists surveyed by Briefing.com had forecast that sales would fall to a pace of 825,000.
The report also showed the median price of a new home fell 7.4 percent from year earlier levels to $225,700 in the month, as prices were pressured by both the problems in mortgage finance and the excess supply of homes on the market. The inventory of new homes on the market rose to an 8.2 month supply, as the glut of completed homes without a buyer was near a record high, with 180,000 completed homes listed for sale, just off the record high of 182,000 set in May of this year. The July report wasn't the only month revised lower by the Census Bureau; it also dropped its sales estimates for May and June, leaving sales 34,000 below the previous estimates.
The decline in sales came despite a pickup in sales in the Northeast and Midwest compared to July. But the South, which accounts for nearly half of the nation's new home sales, saw a nearly 15 percent drop from July levels, while sales in the West declined more than 20 percent. Sales in each of the four regions were off more than 10 percent from year-earlier levels, and nationwide the pace of sales is down 21.2 percent from a year ago.
This is just the latest sign of trouble for the housing market. On Tuesday, a report from the National Association of Realtors showed the pace of existing home sales dropped in August for the sixth straight month to their lowest level in five years. And the new home sales report likely did a better job capturing the turmoil in the real estate market in August, as it is based on contracts for new homes signed in the month. The existing home sales figures are based on when a deal is closed, typically a month or two after the contract is signed.
The new home sales report, besides serving as a leading indicator of the overall housing market, is closely followed because of the importance of construction to the overall economy. The home building boom helped support the nation's economic and employment growth during 2003 to 2005. But economists are growing increasingly concerned that the current weakness could become a large enough drag on the economy to help tip the nation into recession. The latest report on gross domestic product, also released Thursday, shows investment in housing subtracted 0.6 percentage points from the nation's overall growth in the second quarter. Still, as weak as the new home sales report is, experts caution it could actually be masking other signs of weakness.
Builders have reported significantly higher cancellation rates for buyers who have signed a contract but then back out of the sale. So demand could be weaker than the report suggests. Also about three quarters of builders surveyed by their trade group report offering incentives, such as paying for closing costs or offering additional features on a new home for free, in order to maintain demand.
So the drop in prices could actually be more severe than the report indicates. The nation's major home builders have been hammered by the downturn in both home sales and prices in the last year. On Thursday, KB Home, the nation's No. 5 home builder, reported a loss in its most recent quarter, compared to a solid profit a year ago, as the company warned it expects conditions to worsen through 2008. Lenar, the nation's No. 1 home builder by revenue, posted a bigger than expected loss Tuesday. In addition, No. 2 homebuilder D.R. Horton and No. 3 Centex both reported losses far bigger than Wall Street had expected, while No. 4 Pulte Homes and No. 6 Hovanian Enterprises both have reported losses for the last two quarters and analysts project losses for at least the next year.
Now, they are still using their mortgage companies. This time to offer sweet-looking deals, still getting underqualified buyers into homes with loans that will balloon in just a short year or two. It is a huge gamble as a new homebuyer. Be cautious. Do your homework.
Ruth Simon, Wall Street Journal Thinking of buying a new home in this softer market? Chances are your builder is going to try to sell you a mortgage. Builders have long encouraged their customers to use their mortgage affiliate for financing, and not just to make a little extra money. It also gives them control of the transaction, making it less likely that a mortgage snafu will create problems at closing. Now, as sales slow and cancellations rise, builders are increasingly rolling out special deals that may be tied to using their affiliated lender.
But you may well be able to find a better deal on your own. Builders' mortgage offers "clearly are worse in all the cases I've seen," says Jack Guttentag, professor emeritus at the University of Pennsylvania's Wharton School and founder of the mortgage-advice Web site www.mtgprofessor.com. When Randy Gowler, a Olathe, Kan., architect, wanted to buy a new four-bedroom home this year, the builder offered to pick up the first $8,500 in mortgage payments.
The catch: Gowler had to use the builder's affiliated lender and pay the full $287,000 asking price. Gowler crunched the numbers and turned down the deal. Instead, he went with an outside lender that offered a lower interest rate and paid $274,000.Unlike Gowler, most home buyers stick with the builder's lender. Pulte Homes Inc. says Pulte Mortgage provides financing for 90 percent of its buyers who need a mortgage. Centex Mortgage finances 80 percent of Centex Corp. customers. Most builders either have a mortgage affiliate or preferred lenders they work with.
Builders say their rates are competitive and that their mortgage affiliates give them more control over the sale. Indeed, getting a loan through your builder can be a plus if construction is delayed, says Greg McBride, a senior financial analyst with Bankrate.com, because a builder's mortgage unit is more likely to be flexible if there are construction delays. As the housing market has cooled, many builders have sweetened the pot with special deals. A September survey conducted by the National Association of Home Builders found sharp increases from last year in the number of builders offering to pay closing costs and other fees and in those reducing home prices.
In many cases, home buyers must use the builder's financing arm to qualify for these offers. That's particularly true if the incentive is mortgage-related, such as when the builder pays closing costs or picks up several months of mortgage payments. Buyers may also be required to use the builder's mortgage unit to qualify for a reduced purchase price, builder upgrades or other concessions. Some competitors say that these requirements put buyers at a disadvantage." They prevent consumers from shopping to see if there's a better deal out there," says Marc Savitt, vice president of the National Association of Mortgage Brokers. The savings from incentive programs are often illusory, he says, because the home buyer is charged a higher mortgage rate or more in fees and closing costs by the builder's mortgage affiliate.
The builders disagree. "This is really about special interests trying to limit competition - and increase their profits - by legislating home builders out of the mortgage business," the National Association of Home Builders said in a statement. Federal rules prohibit builders from requiring that home buyers use their mortgage affiliates. The rules also require that any discounts offered to buyers who use these affiliates must be true discounts and not made up through higher charges elsewhere.
The Department of Housing and Urban Development says it is getting more complaints not only from mortgage brokers, but also from consumers. One builder canceled a purchase contract and refused to return an $11,845 down payment after the buyer decided to use an outside lender. After HUD intervened, the builder's mortgage company agreed to buy down the rate to make the loan more competitive. Another builder agreed to waive $5,360 in mortgage-origination fees that a buyer was being required to pay in order to qualify for $13,450 in incentives.
To make sure you're getting a good deal, ask the builder not only for the mortgage rate, but also for details on closing costs, points, any fees that will be paid to the lender or third parties, and the terms of the loan. Prof. Guttentag advises comparing that offer to a quote for the same mortgage obtained on the same day from an online lender. He also suggests shopping for financing at the same time you look at houses. Whether the builder's deal is worth taking can also depend on how long you plan to stay put.
A slightly higher mortgage rate may not be a problem if you plan to move in a few years, but it could wipe out the benefits of any incentives if you plan to stay in your home longer. You should also check what comparable homes are selling for to determine whether the builder is offering a real discount. It can pay to negotiate. When Scott Lazaroff, an engineer, bought a new home in Lyons, Colo., in September, the builder offered to knock an extra $15,000 off the price if Mr. Lazaroff used its affiliated lender. He decided to use his own lender, but still convinced the builder to reduce the price by $10,000. Dan Gracey, another Colorado home buyer, said his builder came back with a lower mortgage rate after he "pushed back" on its original offer, which was higher than the competition.