Tuesday, December 26, 2006

Gloating Renters

Snip...

[Among all the defiant renters, few roar louder than Killelea, who pays $2,350 a month to rent a snug, two-bedroom craftsman house near Stanford University in Menlo Park, Calif. He figures it would cost him $7,000 a month in mortgage payments and taxes if he owned it.

Most mornings, he sits at a small pine table just off his kitchen and scans emails from acquaintances for any bad news that fits his world view. Before he heads off to work at a bank, he posts the dozen bleakest stories to his Web site - patrick.net/housing/crash.html - under the permanent headline, "U.S. Housing Crash Continues." ]

Full story...

7 Comments:

Blogger Mr Pyane said...

Shares of U.S. home builders rose on Wednesday after a stronger-than-expected report on November new single-family home sales suggested to some analysts that the housing market may have bottomed... so much for bubbles,looks like it's time for the buyers to pick up the pace again ,with price increases up 2% last month ,no time to waste

Wednesday, December 27, 2006 12:12:00 PM  
Blogger SCProfessor said...

Yep Mr. Pyane. Looks like you called it right. What I can't figure out is why information such as that provided below exists given your analysis.

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From Bloomberg. “The number of homes for sale fell to a seasonally adjusted 545,000 during the month from 558,000 the prior month. Even with the decline last month, the number of unsold homes remains near a record high, making it less likely homebuilding will strengthen outright, limiting economic growth, economists said.”

“Sales of new homes were down 15 percent in November from the same month last year, the Commerce Department said in today’s report. The number of homes completed and waiting to be sold rose by 2,000 to 169,000 in October.”

“The number of new homes available have averaged 555,000 this year through October, compared with 351,000 during the past 10 years, according to government figures. Existing home sales inventories are also near a record, averaging 3.515 million this year.”

“Cancellations of purchase contracts, which aren’t counted in the government’s numbers, have mounted. ‘That’s growing,’ said economist Kevin Logan. ‘There is even more inventory than actual inventory numbers suggest.’”

“Hovnanian Enterprises, New Jersey’s largest builder, on Dec. 18 reported a fourth-quarter loss on cancellations of new-home orders. Hovnanian customers canceled 36 percent of their contracts in the period, an increase of 25 percent, the company said.”

“‘We didn’t have this in other slowdowns, customers walking away,’ CEO Ara Hovnanian said.”

“The housing slowdown is costing jobs. Builders shed 53,000 workers in the last two months, according to government reports. Manufacturers shed 59,000 workers in the same period, while goods producing companies, some at companies that produce housing- related supplies or products, cut 102,000 workers.”

“‘Even if sales stabilize at this level, the contraction in construction activity is still in front of us,’ said Kevin Logan, chief markets economist at Dresdner Kleinwort in New York. ‘That’s what’s going to affect the economy in the year ahead.’”

“Building permits in November fell to a 1.506 million-unit pace, the lowest in nine years, the Commerce Department reported.”

From Marketplace. “Should today’s new home sales figures turn out as well as expected, Chris Thornberg, of UCLA’s Anderson Forecast, won’t be impressed. Thornberg: ‘Who cares? In many ways, the last number you should be looking at is new home sales.’”

“For one thing, he says, the number can’t account for building contracts which later get canceled.”

“And the survey’s statistical sample is so small the number routinely gets revised. Take last October, when the Commerce Department reported a surprising 5 percent jump in sales. Thornberg : ‘They’ve already revised it. So new home sales for October ‘06 is now below what it was for September ‘06 once the revision came in.’”

“The more important numbers, Thornberg says? Building permits, which are down, and inventory, which is up. Both point to a continued slump in the New Year.”

The Street.com. “Last week, Hovnanian Enterprises said it recorded $336 million in land charges, the largest such charges among builders to date. Interestingly, Hovnanian said on its conference call that its fiscal 2007 guidance assumes zero additional impairments and land charges. While Hovnanian is optimistic, some investors believe 2007 holds more problems.”

“‘I think there is still more to come in impairment charges,” says Carl Tash, manager of Cliffwood Partners. ‘After a 15-year upside cycle [in housing] , I don’t think the downturn is going to last 12 to 15 months,’ he says. ‘I think that’s pure fantasy.’”

“‘A lot of people are under the impression that this is a one-time event, but that’s not the way it works. The only communities that you get to impair are the ones that are currently experiencing losses,’ says Alex Barron, an analyst with JMP Securities.”

Wednesday, December 27, 2006 3:27:00 PM  
Blogger tl said...

"S&P Downgrades KB Home to Sell"

http://yahoo.businessweek.com/investor/content/dec2006/pi20061227_626033.htm

Keep dreaming, Pyane.

Thursday, December 28, 2006 12:51:00 AM  
Blogger tl said...

URL didn't print well. Here's the text:

KB Home (KBH): Cuts to 2 STARS (sell) from 3 STARS (hold)

Analyst: Thomas Smith, CFA

We think KB Home is appropriately cutting prices and reducing inventory in response to the housing market downturn. But we believe the shares face more uncertainty than peers due to a stock option investigation that is leading to financial restatements and leadership changes including KB Home's chairman and CEO. Adjusting our earnings per share (EPS) estimates for the lower sales we foresee, and guidance for large inventory impairment charges in the Nov. quarter, we are cutting our fiscal year 2006 (ending Nov.) and fiscal year 2007 EPS estimates to $5.70 and $3.75, from $8.25 and $7.45. Our target price remains $48, based on updated price to book.

Thursday, December 28, 2006 12:52:00 AM  
Blogger I Love Broadband over PowerLine said...

Forbes.com video: Housing market to collapse in 2007 here

News: December 2006 existing home price drops 3.1%

Thursday, December 28, 2006 10:11:00 AM  
Blogger I Love Broadband over PowerLine said...

REUTERS: Florida's overbuilt condo market starts to fizzle
By Jim Loney

MIAMI, Dec 28 (Reuters) - On a piece of prime bayfront property near downtown Miami, weeds climb the steps of the sales office for Onyx 2, a planned waterview condo where apartments were to sell for $500,000 to $2,000,000.

A sign reads "For Sale. Land, plans and permits for Onyx 2. Includes fully equipped sales center."

Three blocks north, the land on which a glassy loft-condo called "Ice" was to rise lies idle. A realtor's Web site says: "This project has been canceled and will not be built."

Developers have pulled the plug on some of Miami's most anticipated condominium developments, a sign the city's sizzling, speculator-driven condo market -- where prices of many apartments doubled or tripled in a few brief years -- has finally chilled.

"This market was too good to be true," said Lewis Goodkin, a Miami economist and real estate analyst. "But it was a market fueled by speculators, so it wasn't a true market."

City officials say 15 condo projects, representing nearly 1,900 units, have been officially pulled from the waning market. But analysts say the numbers are much higher when you consider the rest of Florida's overbuilt condo market.

Miami's building boom, the biggest in the city's history, is far from over. Construction cranes dominate the skyline, as they have for years.

The city of Miami alone still has more than 77,000 units, in nearly 300 projects, under construction or in planning.

But the "for sale" signs are not the only warnings of a fading market.

Statewide sales of existing condos dropped 31 percent in October from the same month last year, according to the Florida Association of Realtors. Median prices fell 2 percent.

In Fort Lauderdale, sales dropped 21 percent in October.

The seller of a Miami Beach waterfront one-bedroom dropped his asking price from $445,000 to $400,000 to $370,000 in a matter of weeks.

POSTER CHILD FOR OVERBUILDING

"We're starting to see projects being canceled almost on a weekly basis," said Jack McCabe, chief executive of McCabe Research & Consulting of Deerfield Beach.

Miami was considered one of the most speculative markets in the years-long U.S. residential real-estate boom. Analysts said up to 80 percent of sales at some condo projects were to speculators who intended to quickly resell, or "flip," the units.

Elie Mimoun, sales director of Midtown Miami, a $1 billion-plus redevelopment of a blighted former railroad yard north of downtown, said the softening represents a natural shakeout of speculators.

"The market is now keeping out the crazy people," he said. "I think if the economy stays the same, the worst is behind us."

Midtown Miami, a key cog in the city's redevelopment plans, is a 56-acre site where developers plan to build more than 3,000 condo units, office space, and some 600,000 square feet of retail shops. Of the nine planned condo buildings, three are under construction and another breaks ground in February.

Midtown's developers offered part of the project for sale this year for $375 million, which some took as a sign they were looking to escape a faltering market.

But Mimoun said the developers were simply trying to find a financial partner and "there was never a question of getting out completely."

Mimoun and other optimists believe the unusual demographics of this Latin-flavored city will keep the Miami market strong. About 20 percent of his buyers are Europeans whose spending is bolstered by a strong euro, and 13 percent are South Americans, traditionally eager consumers of Miami real estate.

But Goodkin said rising building costs, hurricane-fueled homeowners' insurance hikes and property-tax increases caused by exploding prices have made Florida increasingly unaffordable.

"You have to have people buying units to live in. Who are the speculators going to sell these units to?" Goodkin said.

Several years ago, McCabe began mustering funds, or "vulture" capital, to buy apartments when the bubble burst. But he has not yet begun buying and said it may take 5-10 years before prices bottom out and begin to rebound.

Thursday, December 28, 2006 10:45:00 AM  
Blogger I Love Broadband over PowerLine said...

New Home Sales: Northeast Meltdown Continues!
http://paper-money.blogspot.com/2006/12/new-home-sales-northeast-meltdown.html

Today, the U.S. Census Department released its monthly “New Residential Home Sales” report for November showing continued weakness to the nation’s new home market most notably in the Northeast region where sales were down an astounding 42.4% as compared to November 2005.

Generally reported as showing “strong” signs of market “stabilization”, the report does, in fact, show an increase to the median and average price for a new home but as we all are well aware, the significant incentives that home builders have been offering are NOT reflected in this report so the price movement is a bit of a “red herring”.

Additionally, the report showed significant increases to inventory and months supply on a year-over-year basis.

Thursday, December 28, 2006 11:45:00 AM  

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