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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 |
HenryTo
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| Posted: Mon Oct 31, 2011 11:38 am Post subject: |
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Another view of the housing market.
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Home Prices Heading for Triple-Dip
The besieged housing market has even further to fall before home prices really hit rock bottom.
According to Fiserv (FISV - News), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.
Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv's chief economist.
Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.
The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.
In the second dip, which was reached last winter, prices were down 33%before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.
Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.
Earlier this month, RealtyTrac reported the first quarterly increase in foreclosure filings in three quarters. Even more discouraging: new default notices were up 14%.
There's also a "shadow inventory" of homes in foreclosure that have yet to go back onto the market.
The specter that those foreclosed homes could flood the market at any time and drive prices significantly lower is a huge concern, said Mark Dotzour, an economist for Texas A&M University. "That's the elephant in the room," he said, noting that there are 6 million home currently in shadow inventory.
Biggest Losers
Many of the regions that will be hardest hit were already beaten up during the previous two dips.
Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.
Other cities expected to be hit hard include the not-so-lucky Las Vegas, which is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).
There will be some winners, however, led by Madera, Calif. and Carson City, Nev., which will each gain 15.5%. That's some consolation for hard-hit residents: The average home in each of these metro areas has lost more than half its value.
Other metro areas Fiserv expects to recover nicely are Yuma, Ariz. (up 9.5%), Yuba City, Calif. (9.2%) and Farmington, N.M. (8.3%).
Slow Recovery Ahead
Even after the housing market begins its comeback in mid-2012, the recovery is predicted to be modest at best. Nationwide, Fiserv is projecting that home prices will climb just 2.4% between June 2012 and June 2013.
A few individual metro areas will do better, with 31 of the 385 markets Fiserv monitors expected to pile up double-digit gains. Another 71 markets are expected to post increases of 5% or better.
Many of the markets that will record the biggest increases are vacation or retirement communities that had taken some of the biggest hits during the bust.
The biggest "winner" will be Ocala, Fla., with a 22.4% spike for the 12 months ending June 30, 2013. Ocala was one of the hardest hit communities in the U.S. over the past several years, with home prices falling some 50%.
Others anticipated gainers will be Napa, Calif., which Fiserv projects will improve by 20.9% over that same period; Panama City, Fla. (an estimated 18.2% jump) and Bremerton, Wash. and Carson City, Nev. (both expected to see home prices climb 17.9%).
Some cities will continue to fade, however. Fort Lauderdale, Fla.'s forecast is for a 9.2% drop through next June and another 6.7% the 12 months after that. Its neighbor, Miami, will endure 13.5% and 5.2% declines, respectively. |
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rffrydr
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rffrydr
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rffrydr
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| Posted: Wed Sep 28, 2011 7:17 am Post subject: |
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My impression with the boosted limits was that it really created a new category, jumbo conforming, which wasn't exactly the slam dunk that sub 400K was. Realtors screaming as usual--remember that Aug '08 full-page ad ran acorss the country, "There's Never Been a Better Time to Buy a House." Glad to see "service" comes first.
Case out, with Washington and...wait for it.....Detroit leading some kind of charge. Most flat...with surprise slip in San Fransisco.
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HenryTo
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rffrydr
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rffrydr
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rffrydr
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| Posted: Wed Jun 22, 2011 7:12 am Post subject: |
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....One of the cruel ironies of massive stimulus/rescue policies--easy money, which we have determined you don't deserve. This has gone a long way toward fueling the political discontent, detachment and radicalism we have been witnessing. If we don't get anything you don't get anything.
Rates are making it easier for new entrants. How many of these are the rich and unionized we'll have to see. But paying 4% rates on an asset set to decline 10% is a far bigger proposition than paying 7% on one set to climb 10%.
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HenryTo
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| Posted: Tue Jun 21, 2011 11:59 pm Post subject: |
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Bridgewater on the latest home refinancing numbers:
| Quote: | | The pickup in mortgage refinancing over the last couple of months has been even more muted than the refinancing activity that took place early in prior bond rallies of this deleveraging cycle. To a significant extent, this is because mortgage rates are still about 30bps higher than their lows last year, and many of the homeowners who were in a position to refinance already did so then. But even if rates were to fall further, the 35% or so of homeowners who are underwater on their mortgages would remain unable to refinance, and the flow-through from lower rates through this channel is still not likely to be impactful. Most of the ways that low rates flow through to higher spending remain equally or even more compromised. Most importantly because home prices are at lows, the ability to extract capital gains, or borrow against appreciated assets, or just spend more due to perceived higher wealth are still absent. While we continue to monitor how the various channels of stimulation are flowing through to growth, we expect that the effects of lower long-term rates on growth will be relatively modest over the next six months and less important than other drivers (i.e., fiscal tightening, end of quantitative easing, oil etc). |
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rffrydr
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| Posted: Wed Apr 20, 2011 8:08 am Post subject: |
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[img]https://lh3.googleusercontent.com/_EwRguxSQOxU/Ta7oXJ-w3kI/AAAAAAAAAtU/mGbDaKfavuc/s640/housingRATES.JPG[img][/img]
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rffrydr
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rffrydr
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| Posted: Tue Feb 22, 2011 12:17 pm Post subject: |
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Deflation is not banished: can still bring us down. Here's one for the '92, '92 vulture generation. That's current retirees--bet they go out on a whimper:
US residential property
Published: February 22 2011 15:01 | Last updated: February 22 2011 16:04
| Quote: | Good news at last for landlords. Last quarter the US residential vacancy rate declined to 9.4 per cent, an almost 1 percentage point drop compared with the third quarter and the steepest quarterly fall since 1966. This new-found demand means rents could grow at more than 2 per cent this year, says Deutsche Bank. So with rental yields almost two-thirds higher than their 2006 trough, and house prices still about 30 per cent below their corresponding peak, according to the Case-Shiller index, it might appear a good time to buy. The good news, though, may already be priced in.
buy-to-let investor’s rationale may seem sound. Rental yields – at about 5 per cent – are about the same as mortgage rates. That means a tenant’s rent covers the interest bill and the owner pockets any capital appreciation. But although yields have risen strongly, they have merely returned to their 50-year average after being decimated during the housing bubble.
For yields to push higher, either house prices need to fall or demand for rental properties needs to rise. Given the unemployment rate is forecast to remain relatively stable at just below 9 per cent for at least the rest of the year, significant additional demand appears unlikely for now. Furthermore, when the Federal Reserve raises base rates – a move most economists expect by the end of the year – the symmetry between mortgage rates and rental yields may be blown away.
Unlike post-recession economic growth in the US last decade, tighter property lending criteria this time around means capital appreciation will probably be muted. So with rental yields at normal levels and mortgage rates itching to rise, the never-ending supply of would-be property barons should be wary of dashing into the market.
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rffrydr
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| Posted: Tue Feb 22, 2011 8:57 am Post subject: |
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Lotta hits on the '09 lows in prices today. Our two-tiered society hasn't helped here. Projections of 1.5million household formations are off the mark by close to 100%. Tripling up, not hooking up.....and migrants fleeing south complete the picture.
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