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Trouble on the Home Front |
HenryTo
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 Posted: Wed Jan 25, 2006 9:14 am Post subject: Trouble on the Home Front |
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FYI:
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Trouble on the Home Front
By Nicholas Yulico
TheStreet.com Staff Reporter
1/25/2006 9:48 AM EST
URL: http://www.thestreet.com/markets/realestate/10263958.html
Homebuilders Centex (CTX:NYSE) and Ryland (RYL:NYSE) both reported strong quarterly earnings, but their new-order numbers, which will drive future growth, look dismal.
Calabasas, Calif.-based Ryland said its net income rose 49% to $162 million, or $3.32 per share, compared to $108.7 million, or $2.17 per share, a year earlier. The results handily beat the consensus $3.12 estimate on First Call.
But Ryland's unit orders fell 5% year-over-year for its latest quarter. The lackluster performance led A.G. Edwards analyst Greg Gieber to cut his rating on Ryland to sell. He also dropped his 2006 EPS estimate to $10.25 from $10.90. In a research note Wednesday morning, Gieber noted that the only area of strength in Ryland's orders came from Texas, where unit sales were up 27%. However, the average selling price in Texas is 36% below the company's average, with equally low gross margins, he said.
"Using our new 2006 EPS estimate, Ryland currently trades at a 7.3 times multiple. That is a 12% premium to the group's current average 2006 multiple of 6.5 times. We don't believe Ryland warrants any premium to the group," Gieber wrote.
Centex, which reported a 30% increase in its quarterly earnings, reported order growth, but it was weaker than analysts expected.
The Dallas-based builder said its new orders rose 4% to 8,128 homes. Sales were strongest in the Southwest, where orders spiked 28% year over year. On the West Coast, orders rose 10%. But orders fell 15% in the Southeast, 8% in the mid-Atlantic and 3% in the Midwest.
"This is not particularly positive to hit only 4%, though we don't know all the details behind it," says Gieber, who was expecting nearly 11% order growth.
Centex said net income rose to $329.3 million, or $2.49 a share, for its fiscal third quarter ending Dec. 31, up from $253.8 million, or $1.91 a share, a year earlier. Excluding discontinued items, Centex posted earnings of $332.7 million, or $2.52 a share. Analysts expected earnings of $2.48 a share, according to Thomson First Call.
Revenue rose 25% to $3.74 billion, shy of analysts forecast of $3.81 billion.
Centex's earnings growth came amid an 18% increase in home closings, which rose to 9,504 units from 8,047, and a 130-basis-point jump in operating margin.
The weak orders will likely be a focus on both companies' conference calls Wednesday morning. Homebuilder Meritage (MTH:NYSE) will also report earnings today at an unspecified time.
The existing home sales data comes out at 10 a.m. EST from the National Association of Realtors.
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Trouble on the Home Front Replies |
rffrydr
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| Posted: Fri Aug 22, 2008 4:59 pm Post subject: |
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"Time is our friend," wise old words from the Madman:
The Road Map to a Housing Bottom
| Quote: | By Jim Cramer
RealMoney.com Columnist
8/22/2008 9:51 AM EDT
Click here for more stories by Jim Cramer Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW
I am kind of amazed at some of the things that no one seems to care about. When the FDIC seized IndyMac, it was a godsend -- get that crummy lender out of the picture. Then the FDIC announces a radical plan to allow homeowners who borrowed from them to get off the toxic 2-and-28s and teasers and go into fixed-rate loans with some forbearance. We got that this week. No one cared! No one!
How can that be? The FDIC is offering us a plan that would make it so we can root against Washington Mutual (WM) and know if that scourge of all lenders went under, we would have far fewer foreclosures because of the FDIC takeover. Also, once the loans are all under fixed rates or sent to the FHA for rehab -- as the housing legislation makes clear will happen -- we are going to see a dramatic decline in the rate of foreclosures.
Now, right now, when we see this, we are skeptical. When Wells Fargo (WFC) decided to give its borrowers more grace -- the same grace that other banks give -- we immediately figured it was a canard to mask things. But John Stumpf, the CEO, said it seemed like the right thing to do, and the bank would do better trying to work things out with lenders than throw them out on their butts. Instead, of course, the rate of foreclosures went down, and I bet ultimately the number of foreclosures will go lower.
We need time. We need time to solve the housing depression. The elements of time play out positively, because we are a growth nation that cannot have as few homes built and as few homes bought as in 1991, when we had 248 million people in this country. We now have about 310 million people. We have more than 60 million more people in this country, and we are buying as many homes as we did back then? How long can that last?
The answer, of course, is that given the dramatic overbuilding and the foreclosed homes, the oversupply will take months to burn off. But not years. The trick is to restrict supply, which wasn't being done by the homebuilders until last year, when they finally cut back the numbers -- they are now building about half the homes they did in 2006. Then we need to make it easier for people who bought homes to stay in them, so far the hardest part of the equation. Given that 14 million people bought homes between 2005 and 2007, and half took exotic mortgages to pay them, I figured there was no way that more than 3.5 million people could lose their homes (half of the half that took the 2-and-28s and the pick-a-pays and all the other nonsense). That was wrong. I am now thinking that all -- that's right, 100% -- of the people who bought homes between 2005 and 2007 are going to default. All of them! It makes too much sense not to given the home price declines.
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HenryTo
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HenryTo
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| Posted: Tue Aug 12, 2008 1:11 pm Post subject: |
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Also says that 45% of new homes that were bought last year are now under water. I would've thought the number was greater, but I guess some people did believe in actually putting 10% or 20% down.
Thanks for posting, DK. |
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dknoester
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rffrydr
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| Posted: Wed Aug 06, 2008 11:12 am Post subject: |
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Refunding (implicitly the national debt) driving rates higher. Last time found good buying 4.5-4.6. We need that buying.
Morgan Stanley cuts high-net worth individuals HELOCs.
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HenryTo
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HenryTo
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| Posted: Thu Jul 31, 2008 9:23 am Post subject: |
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Starting to see some light at the end of the tunnel in Stockton, CA. Even Chris Thornburg is now getting somewhat more optimistic about California housing prices/demand:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aAL047pyn7t4&refer=home
| Quote: | "California is having a wrenching decline in wealth, but this is a cathartic event that will lay the foundation for a recovery,'' said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, in an interview. ``This signals the beginning of the end.''
Almost $1.3 trillion of homeowner equity was lost in California since home prices peaked in December 2005, Zandi said. Discounts of as much as 50 percent will extend into 2010, helping clear a glut of foreclosures and leading to a more balanced housing market, said Ryan Ratcliff, an economist at the Anderson Forecast at the University of California in Los Angeles, and Christopher Thornberg, principal of Beacon Economics LLC in Los Angeles.
``Half off in a decent neighborhood is close to the bottom,'' said Bill Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., manager of the world's biggest bond fund. Property markdowns of 30 percent to 40 percent give the market ``price illumination if not sunshine,'' he said.
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California led the U.S. in default notices and bank seizures for the 18th straight month in June and had seven of the 10 metro areas with the highest foreclosure rates, according to Irvine, California-based RealtyTrac Inc., which sells default data. That drove down prices and led to ``discounted distressed sales,'' with two-thirds of transactions under $500,000, compared with 40 percent a year earlier, the California Association of Realtors said.
The amount of time it would take to deplete the supply of homes decreased to 7.7 months from 10.2 months a year earlier, and the median price fell 38 percent to $368,250 last month, according to the Realtors.
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About 1 million U.S. homes will be in some stage of foreclosure by the end of the year, and properties seized by banks will eventually sell at an average discount of 30 percent to 33 percent, said Rick Sharga, executive vice president for marketing at RealtyTrac.
Discounts will be higher in areas such as Stockton, about 80 miles east of San Francisco in California's agricultural Central Valley, and Riverside, 50 miles east of Los Angeles, that experienced above-average levels of new construction at the peak of the housing boom and where lenders made a disproportionate number of subprime loans, Sharga said.
PMZ, the Stockton-based brokerage, closed 1,707 home transactions in the second quarter, about 80 percent of them foreclosure sales, said Michael Zagaris, the company's president. Foreclosed homes are now getting multiple bids and the supply of homes for sale in San Joaquin and Stanislaus counties shrank to 4.9 months in June from 18.2 months a year earlier, he said.
``We've found the bottom,'' Zagaris said. ``The financial institutions have seen the light and are allowing the market to find its own level.'' |
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HenryTo
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rffrydr
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HenryTo
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| Posted: Mon Jul 28, 2008 11:35 am Post subject: |
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BCA's latest update on US housing. As we discussed in our latest commentary, the latest passage of the $300 billion housing bill and the explicit guarantee or GSE MBS and debt is not sufficient to prop up the housing market. More needs to be done - including: 1) Treasury coming in and buying up agency MBS in order to lower mortgage rates, 2) Requiring the GSEs to raise $30 billion in capital immediately, or 3) outright nationalization.
http://www.bankcreditanalyst.com/public/story.asp?pre=PRE-20080728.GIF |
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HenryTo
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| Posted: Sat Jul 26, 2008 10:47 am Post subject: |
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Congress passes the massive housing bill. The test will come Monday, once we start trading in the pre-market.
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Congress approves housing bill
Saturday July 26, 11:47 am ET
By Kevin Drawbaugh
WASHINGTON (Reuters) - Congress approved a massive housing market rescue bill on Saturday, offering emergency financing to Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News), creating a new regulator for the mortgage titans and setting up a $300-billion fund to help troubled homeowners.
The bill was approved by the Senate in a 72-13 vote. It was passed by the House of Representatives on Wednesday. President George W. Bush was expected to sign it promptly.
With foreclosures rising, home sales sluggish and property values down, America is in its deepest housing slump since the Great Depression. The crisis will be eased, but not ended by this election-year bill, said housing activists and scholars.
"We have a housing market going into cardiac arrest. This bill is like CPR to stabilize the situation," said David Abromowitz, a senior fellow at the Center for American Progress, a think tank in Washington.
The National Community Reinvestment Coalition, an alliance of 600 community investment and development groups, estimated 2.5 million U.S. households will face foreclosure this year.
While Congress' legislation is welcome, the coalition said, it "will likely have little effect on the foreclosure crisis gripping the financial markets and economy."
The 694-page bill would establish the $300-billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under exotic mortgages they cannot afford.
The success of the temporary fund will depend on lenders' willingness to accept losses on original loans to shift overstretched borrowers into new loans. An estimated 400,000 families could be helped by the program, effective October 1.
The measure also offers temporary, contingency financing for Fannie Mae and Freddie Mac. The two government-sponsored enterprises, or GSEs, own or guarantee almost half the country's $12 trillion in outstanding home mortgage debt.
The stock market has whipsawed their stock prices lately on uncertainty about the companies' ability to weather the slump.
If they run into trouble, the GSEs could draw on a temporary line of U.S. Treasury credit or the government could buy shares in them, under a provision inserted in the bill late in its development at the urging of the Bush administration.
Texas Republican Sen. Kay Bailey Hutchison said the housing bill had positive aspects. But she added, "I am troubled by the inclusion of an unlimited U.S. Treasury credit line to Fannie Mae and Freddie Mac" and possible government stock purchases.
The bill would also create a new regulator for the GSEs with sharper teeth than the existing one, including authority over how much money the companies pay their top executives.
It would send about $4 billion in grants to communities to help them buy and repair foreclosed homes. The White House had vowed to veto the bill over the grants, but dropped its threat on Wednesday. Hours later, the House approved the bill.
The legislation also offers tax breaks to spur home-buying; sets up the first national licensing system for mortgage brokers and loan officers and raises the limit on the size of mortgages that can be guaranteed by federal agencies. |
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HenryTo
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rffrydr
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rffrydr
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| Posted: Tue Jul 15, 2008 7:22 am Post subject: |
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Yeah, that article was weak and no place for Barrons Cover. My faith in the major publications (as well as analysts) has been shaken of the last years. Where there should be contrarian indicators many times there are just what look to be plants.
Fed involement with the GSEs will be better for the housing market--proven in the last couple days. And Abelson did his job inthe 90's while missing some very powerful trends masked by the excesses--including the biggest trend of all, the money.
But here's some better thoughts from the N. Califonia epicenter:
http://www.sacbee.com/103/story/1074999.html
| Quote: | • "Standing inventory," the number of finished or nearly finished homes with no buyers, reached almost a three-year low.
Paquin said there were 2,605 such homes on the market, down 47 percent from a peak of 4,934 at the same time last year. The reduction means buyers are being offered reduced financial incentives to purchase – $11,020 on average per house in the second quarter compared with $12,837 the same time last year. |
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HenryTo
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| Posted: Sun Jul 13, 2008 12:25 pm Post subject: |
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Not sure where he gets his housing starts numbers from, but housing starts just hit one million in December and did not decline below the one million number until March of this year:
http://research.stlouisfed.org/fred2/series/HOUST/downloaddata?cid=97
Make no mistake: The Feds will bail out the GSEs if their hands are forced. Ben Bernanke and Tim Geithner, president of the NY Fed, are two of the most dovish Fed presidents in the last 10 to 15 years, and Hank Paulson must know the consequences of not bailing out the GSEs. Even if they do not want to, Congress would not allow it. It is going to get done soon.
Perversely, the market forcing the Fed's hand with the GSEs will actually increase liquidity in the mortage markets, and bring mortgage rates down as the Feds inject liquidity into the GSEs. That is, the near collapse of the GSEs is actually bullish for housing, and not bearish.
As for Alan Abelson - one cannot be more wrong by reading him during the late 1990s. The late 1990s was a mere expression of new-found economic freedom and our "animal spirits" as much of the world starts to adopt capitalism and as we saw significant Schumpeterian Growth (in the form of the adoption of the PC and the World Wide Web) and Ricadian Growth from the liberalization of borders across the globe. Moving to bubble to bubble is a mere part of the capitalist process. You can call it "excesses" or whatever, but it was inevitable and once the trend started in early 1995, you could either buy in or sit on the sidelines, but to continually read Alan Abelson while he criticizes the bubble was a major waste of time unless it led you to time the top perfectly by shorting in July 1998 (right before the onset of the Russian and LTCM crises) or March 2000. |
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