Sunday, December 16, 2007

More Homebuilder Layoffs in Las Vegas - Toll Brothers and more

As Las Vegas homebuilders continue to slash prices and cut back on construction because of soft demand, companies are continuing to trim staff levels.

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 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

Lennar Dumps Thousands of Lots in FLorida - 8,300 To be Exact

Lennar has sold nearly 8,300 home sites in Pasco, Hillsborough, Polk, Sarasota, Lee, DeSoto and Brevard counties to Metro Development Group.
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

From Dan Dorfman NY Sun - Today
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."