Friday, August 25, 2006

Builders and Realtors Wary

From the Record:

Builders deal with decline

Builder Charles Panahi is constructing only five luxury homes right now. Last year at this time, he was building 11.

"I'm slowing down because I'm watching the market," said Panahi, who owns Diamond Engineers and Developers Inc. in Closter.

Panahi -- like many builders and Realtors – sees the signs of a weakening market in North Jersey and beyond.

Sales for new homes nationally dropped by 22 percent in July compared with the same month in 2005, the Commerce Department said Thursday. The pace of new home sales fell a staggering 43 percent in the Northeast.
...
Ron Durante, who owns Rocket Building Supply in Waldwick, said higher construction materials costs have cut into builders' margins.

"Builders are hoping the market demand comes back up rather than cutting prices," Durante said.

"I've heard a few people having such high cost bases that they can't afford to cut much without a loss."

Jeff Zilahy, an agent with Liberty Realty in Hoboken, says the numerous condo buildings sprouting up along the Gold Coast are adding to the supply of available dwellings and making it difficult to find enough buyers.
...
This fall, he'll be starting a new job as a public school math teacher but will continue to sell homes part-time.

He left teaching in 2004, near the peak of the housing boom, to become a Realtor.

"I got into real estate to make money," Zilahy said.

"Now, ironically, I'm going back to teaching."

29 Comments:

Anonymous gary said...

I wonder what Suzanne will be doing in 6 months from now.

8/25/2006 07:20:00 AM  
Anonymous Anonymous said...

When 85 % of the "realtors" are out of the business, the bells will start, (emphasize start), to toll for me. This could be one sign of capitulation.

BC Bob

8/25/2006 07:46:00 AM  
Anonymous Anonymous said...

FYI,

Housing Gets Ugly
By PAUL KRUGMAN
Bubble, bubble, Toll’s in trouble. This week, Toll Brothers, the nation’s premier builder of McMansions, announced that sales were way off, profits were down, and the company was walking away from already-purchased options on land for future development.

Toll’s announcement was one of many indications that the long-feared housing bust has arrived. Home sales are down sharply; home prices, which rose 57 percent over the past five years (and much more than that along the coasts), are now falling in much of the country. The inventory of unsold existing homes is at a 13-year high; builders’ confidence is at a 15-year low.

A year ago, Robert Toll, who runs Toll Brothers, was euphoric about the housing boom, declaring: “We’ve got the supply, and the market has got the demand. So it’s a match made in heaven.” In a New York Times profile of his company published last October, he dismissed worries about a possible bust. “Why can’t real estate just have a boom like every other industry?” he asked. “Why do we have to have a bubble and then a pop?”

The current downturn, Mr. Toll now says, is unlike anything he’s seen: sales are slumping despite the absence of any “macroeconomic nasty condition” taking housing down along with the rest of the economy. He suggests that unease about the direction of the country and the war in Iraq is undermining confidence. All I have to say is: pop!

Now what? Until recently most business economists were predicting a “soft landing” for housing. Even now, the majority opinion seems to be that we’re looking at a cooling market, not a bust. But this complacency looks increasingly like denial, as hard data — which tend, for technical reasons, to lag what’s actually going on in the market — start to confirm anecdotal evidence that it is, indeed, a bust.

Why the sudden crackup? When prices were rising rapidly, some people bought houses purely as investments, betting that prices would keep going up. Other people rushed to buy houses, or stretched themselves to buy houses they couldn’t really afford, because they feared that prices would rise out of reach if they waited. And all this speculative demand pushed prices even higher. In other words, there was a market bubble.

But eventually prices reached a level beyond what even optimistic potential buyers were willing to pay, especially after interest rates rose a bit. (They’re still low by historical standards.) As demand fell short of supply, double-digit price increases declined into the low single digits, then went negative everywhere except in the South.

And with prices falling in many areas, the speculative demand for houses has gone into reverse, as people try to get out with a profit while they still can. There’s now a rapidly growing glut of unsold houses. This is a recipe for a major bust, not a soft landing.

Moreover, it could be both a deep and a prolonged bust. Since 2000, much of the nation has experienced a rise in home prices comparable to the boom in Southern California during the late 1980’s. After that bubble popped, Los Angeles house prices began a slow, grinding deflation, eventually falling 20 percent (34 percent after adjusting for inflation). Prices didn’t begin a sustained recovery until 1996, more than six years after the downturn began.

Now imagine the same thing happening across a large part of the United States. It’s an ugly picture, and not just for people and companies in the construction business. Many homeowners — especially those who bought their houses with interest-only loans or with minimal down payments — will find themselves in financial distress. And the economy as a whole will take a hit.

As far as I know, Nouriel Roubini of Roubini Global Economics is the only well-known economist flatly predicting a housing-led recession in the coming year. Most forecasters consider his call alarmist, and many Federal Reserve officials remain optimistic. Last week, Richard Fisher, the president of the Federal Reserve Bank of Dallas, dismissed “Eeyores in the analytical community” who worry about a possible recession.

Call me Eeyore. While I don’t share Mr. Roubini’s certainty, I see his point: housing has been the main engine of U.S. economic growth over the past three years, and with that engine now going into reverse, it’s hard to see how we can avoid a serious slowdown.

8/25/2006 07:59:00 AM  
Anonymous Anonymous said...

I spotted this atricle in the Globe and Mail while in Canada (Globe and Mail is the larget newspaper to our freindly neighbors to the North).
8/24/06
Here is the atricle

New U.S. home sales drop
Associated Press
Washington — Sales of new homes dropped in July by the largest amount since February while the inventory of unsold homes climbed to a record high.
Piling on more proof that the housing boom is over, the Commerce Department reported Thursday that new home sales fell by 4.3 per cent last month to a seasonally adjusted annual sales pace of 1.072 million units. The decline was the largest since an 11.5 per cent plunge in February.
The July level of 1.072 million units sold was down 21.6 per cent from a year earlier and below the 1.100 million that had been expected by analysts.
“Builders are offering many extras to entice buyers,” said Peter Morici, a professor at the University of Maryland's business school. “Overall, values are falling and builders' profits are threatened.”
Sales of both new and existing homes set records for five consecutive years as the housing industry enjoyed a boom powered by the lowest mortgage rates in four decades. But rates have been steadily rising this year as the Federal Reserve tightens credit conditions as a way to slow the economy and keep inflation under control.
Analysts expect home sales to drop by some 10 per cent this year.
In other economic news, orders to U.S. factories for big-ticket manufactured goods fell 2.4 per cent in July as demand for aircraft and automobiles weakened.
And the Labor Department reported Thursday that the number of Americans filing claims for unemployment benefits last week slipped by 1,000 to 313,000.
Prospective home buyers have turned cautious about making such a big-ticket purchase as mortgage rates have gone up and uncertainty has risen over whether the economy and job creation will keep slowing, analysts said.
The government reported that the median price of a new home was $230,000 (U.S.) in July, down from $233,800 in June and up from $229,200 a year ago.
The inventory of unsold new homes reached 568,000 at the end of July, up from 562,000 in June and an all-time high.
The data follow another report Wednesday that also provided evidence of how much the once-sizzling housing market has cooled. Sales of previously owned homes dropped 4.1 per cent in July from June to a 2 1/2-year low, while the inventory of unsold homes climbed to a record high, the National Association of Realtors reported.
Wall Street declined for a second straight session Thursday after the new data on home sales and durable goods buttressed investors' belief that the economy is moderating faster than the Federal Reserve anticipated. In early afternoon trading, the Dow Jones industrial average lost 12.65, or 0.11 per cent, to 11,285.25.
New orders for durable goods decreased by $5.3-billion last month, the Commerce Department said. The 2.4 per cent decline, which followed two straight monthly increases, was a poorer showing than the unchanged level that analysts had expected.
Much of the weakness came from a 9.6 per cent drop in demand for transportation equipment, which included a 10 per cent decline in new orders for commercial aircraft and parts, and a 7 per cent fall in orders for motor vehicles and parts.
U.S. auto makers continue to struggle with lagging sales in the face of rising gasoline prices, which have cut demand for previously popular models such as sport utility vehicles.
Analysts believe that output in the manufacturing sector will rise in coming months but at a slower pace than before, reflecting an economy that is slowing under the impact of surging energy prices, rising interest rates and a cooling housing market.
For July, orders for durable goods — items expected to last at least three years — totalled $212-billion, a decline of $5.3-billion from the June level.
Excluding transportation equipment, orders were up 0.5 per cent in July.

Related to this article
Latest Comments
• If life were as simple as some doom and gloom guys above I guess...
• I know what's going to happen. This pig is going down - hard...
• Markets heat up. Markets cool down. Prices go up. Prices go down...
• 12 reader comments | Join the conversation

8/25/2006 08:21:00 AM  
Anonymous Anonymous said...

And a year ago this is what Toll and his buddies were doing.
8-Sep-05 BLANK, ROBERT S.
Director 40,000 Direct Option Exercise at $6.3907 per share. $255,628
8-Sep-05 BLANK, ROBERT S.
Director 40,000 Direct Sale at $46.6313 per share. $1,865,252
8-Sep-05 BLANK, ROBERT S
Director 40,000 Direct Planned Sale $1,900,0001
29-Aug-05 TOLL, ROBERT I.
Chief Executive Officer 292,000 Direct Option Exercise at $4.3282 - $4.5 per share. $1,289,0002
25-Jul-05 TOLL, BRUCE E.
Director 400,000 Direct Planned Sale $22,400,0001
25-Jul-05 TOLL, BRUCE E.
Director 387,000 Indirect Sale at $56.0257 per share. $21,681,945
25-Jul-05 TOLL, ROBERT I.
Chief Executive Officer 133,000 Indirect Disposition (Non Open Market) at $56.6169 per share. $7,530,047
22-Jul-05 TOLL, ROBERT I.
Chief Executive Officer 673,300 Indirect Sale at $57.125 per share. $38,462,262
21-Jul-05 TOLL, ROBERT I.
Chief Executive Officer 193,700 Indirect Sale at $57.0893 per share. $11,058,197
21-Jul-05 TOLL, ROBERT I.
Chief Executive Officer 1,000,000 Direct Planned Sale $56,000,0001
20-Jul-05 BARZILAY, ZVI
Officer 100,000 Direct Planned Sale $5,824,1101
20-Jul-05 BARZILAY, ZVI
President 100,000 Direct Option Exercise at $6.3907 per share. $639,070
20-Jul-05 BARZILAY, ZVI
President 100,000 Direct Sale at $58.2411 per share. $5,824,110
20-Jul-05 SICREE, JOSEPH R
Chief Accounting Officer 7,400 Direct Option Exercise at $9.6563 per share. $71,456
20-Jul-05 SICREE, JOSEPH R
Chief Accounting Officer 7,400 Direct Sale at $57.55 - $57.99 per share. $427,0002
18-Jul-05 SHAPIRO, PAUL E.
Director 100,000 Direct Option Exercise at $4.875 - $6.3907 per share. N/A
18-Jul-05 SHAPIRO, PAUL E.
Director 100,000 Direct Sale at $56.2059 per share. $

8/25/2006 08:27:00 AM  
Anonymous UnRealtor said...

Anon,

If you value credibility, please do not cite former Enron advisor Paul Krugman.

8/25/2006 08:51:00 AM  
Blogger grim said...

From Bloomberg:

H&R Block Shares Decline After announcement of Loss Provision

H&R Block Inc. shares fell as much as 11 percent the day after the largest U.S. tax preparer said it will set aside more money for losses on its mortgage loans as defaults rose in the first quarter.

The shares dropped $2.27, or 10 percent, to $20.52 at 9:39 a.m. in New York Stock Exchange composite trading, after reaching $20.20 earlier today. The company said yesterday it will record a $102.1 million provision in the first quarter for possible losses linked to mortgages. UBS AG analyst Kelly Flynn downgraded the stock today to ``neutral'' from ``buy.''

Mortgage lenders are feeling the contraction in the housing market after the Federal Reserve increased the benchmark short- term U.S. interest rate to 5.25 percent from 1 percent in the past two years in an effort to contain inflation. New-home sales in the U.S. fell more than economists forecast in July and the number of unsold houses climbed to a record, the Commerce Department said today.

``Even if HRB has already tightened standards to address prepayment risks, defaults on loans originated in last 4-6 months will worsen,'' Flynn wrote in a report. ``We also worry that worse than expected experience on new loans provides further downside risks.''

8/25/2006 09:27:00 AM  
Blogger RichInNorthNJ said...

Fraudulent FHA Loans Breaking Brokers
Despite passing federal tests, four Denver firms were infiltrated by fraud and ended up dissolving
....
Primero's owner, Michael Richardson, said his business was effectively closed by December 2004 - six months before the Denver field office terminated its right to approve FHA loans.
"My company got infiltrated by a mortgage-fraud ring," he said. "In about seven months, they did enough damage to me to put me out of business."
Richardson said he fired five employees in one day after discovering they had been recruited by a man who supplied false loan-application information - Social Security numbers, driver's licenses, pay stubs - to qualify buyers for homes.
"Anything that particular borrower was missing, they'd fix it," he said.
Richardson, who had been in the mortgage business for 26 years, wrote a book on mortgage fraud, "An American Epidemic," and is trying to launch a new career as a fraud-prevention expert.
....

Would you trust someone who can’t even do background checks on employees?

8/25/2006 09:42:00 AM  
Blogger Math, like gravity, is law. said...

UnRealtor said...
Anon,

If you value credibility, please do not cite former Enron advisor Paul Krugman.

8/25/2006 09:51:20 AM

Unrealtor: probably the only time I disagreed with you, for 2 reasons: the Enron debacle, probably sharpened his wits, I doubt he was calling the shots and was lied to. Second "The enemy of my enemy, is my friend".

8/25/2006 09:49:00 AM  
Anonymous Anonymous said...

The bottom line is that those who bought after June 2005 are under water and the 30% of those buyers that took out specialty loans should pray for a miracle.

8/25/2006 09:53:00 AM  
Blogger Metroplexual said...

Grim,

Food for thought. I am sure you and many other people on this blog drive by subdivisions with for sale signs sprouting at the entrance. What if we all pick a subdivision take down the addresses and match them up on NJACTB.ORG to see when they were purchased. I would be curious to see how many are within the last three years. Think ARM resets.

8/25/2006 10:19:00 AM  
Anonymous Anonymous said...

Unrealtor has a stick up his bum about anybody who didn't take the Bush blood oath.

Talk about a lack of credibility.

At least Krugman always disclosed his association.

Why does Unrealtor hate us for our freedoms?

8/25/2006 10:27:00 AM  
Anonymous UnRealtor said...

Math, you may notice Krugman never mentions his well-paid association with Enron, even as he scathingly references the former company.

Such actions from Krugman indicate dishonesty, poor ethics, poor journalism, and poor editors for letting it continue repeatedly.

Lastly, former Enron advisor Krugman wrote this just a few months after 9-11:

"I predict that in the years ahead Enron, not Sept. 11, will come to be seen as the greater turning point in U.S. society."

"The Great Divide"
By Paul Krugman
The New York Times
January 29th, 2002


http://www.nytimes.com/2002/01/29/opinion/29KRUG.html


Aside from being a career-killing absurd statement, he also did not reference his well-paid association with Enron in that article either.

8/25/2006 10:29:00 AM  
Anonymous Anonymous said...

The realtor quoted in the article is going back to teaching??!!! I would not want a realtor (ex or otherwise) washing my car, let alone teaching my children. Scary.

- EMU

8/25/2006 10:31:00 AM  
Anonymous UnRealtor said...

Anon,

1) Pick a name.

2) No one mentioned "Bush."

3) You're incorrect; Krugman does not disclose his well-paid Enron role as he condemns the former company.

8/25/2006 10:33:00 AM  
Blogger Metroplexual said...

Unrealtor,

There is no there, there.

http://www.wws.princeton.edu/pkrugman/enron.html

8/25/2006 10:37:00 AM  
Anonymous UnRealtor said...

Here's a free link to Krugman's career-killing article written a few months after 9-11:

http://tinyurl.com/mwvqs

As you read the deranged scribblings, note that Krugman was a well-paid Enron advisor, yet never disclosed it.

8/25/2006 10:42:00 AM  
Anonymous UnRealtor said...

Metro, your link, combined with Krugman's own deranged article (linked above) clearly illustrates Krugman's dishonesty (not to mention the deranged notion of stating that a company -- one he advised -- going out of business is worse than 9-11).

8/25/2006 10:47:00 AM  
Blogger RichInNorthNJ said...

I think THIS is an excellent place for the “Krugman Debate”.

8/25/2006 10:55:00 AM  
Anonymous Anonymous said...

i miss REInvetor101 ....

8/25/2006 11:29:00 AM  
Anonymous Anonymous said...

some more doom and gloom for the bubble sitters..

http://biz.yahoo.com/special/re0912_06_article2.html

MJ

8/25/2006 11:39:00 AM  
Anonymous Anonymous said...

Anonymous said...
i miss REInvetor101 ....

Me too. What is he up to now?

8/25/2006 11:47:00 AM  
Anonymous Anonymous said...

The truth is always doom and gloom. NOT!
The truth hurts but face facts.
If your neighbor loses his job it's a recession. You lose your job it's a depression. blah blah blah.

8/25/2006 11:58:00 AM  
Blogger Richie said...

Taken from an msnbc article..

H&R Block Inc. sank $2.11, or 9.3 percent, to $20.68 after reporting late Thursday it is setting aside $102.1 million to cover possible losses from having to buy back mortgage loans as borrowers are increasingly missing their early payments.

ha ha ha!!

8/25/2006 12:18:00 PM  
Blogger grim said...

Crazy..

Recent buyers with new mortgages failing to make payments?

These aren't even due to ARM resets spiking payments upward.

grim

8/25/2006 12:42:00 PM  
Anonymous Anonymous said...

A TSUNAMI TIDAL WAVE HITTING ALREADY!

OH MY!

THE INSANITY...WHAT WERE THESE BAGHHOLDERS THINKING WHEN THEY SIGNED THE DOTTED LINE?

CAN'T WAIT TO SEE THE MASSIVE BACKLASH AGAINST THE NAR.

8/25/2006 12:50:00 PM  
Anonymous Anonymous said...

We as a nation are so stretched financially that it wont even be possible for the govt. to bailout RE if a repeat of the SnL scandal of the late 80s hits us again.
Its scary to think that HnR might just be the tip of the iceberg. It seems that the mortgage industry had put in adequate checks to ensure that they never get hit with another large scandal like the SnL. But guess what, greed always trumps good governance.

8/25/2006 12:52:00 PM  
Anonymous Anonymous said...

"Builders are hoping the market demand comes back up rather than cutting prices," Durante said"

And Im hoping Heidi Klum and Sofia Vergara will appear naked in my bedroom tonight.

About the same chance of either scenario happening.....

Chaka Chong

8/25/2006 01:17:00 PM  
Anonymous Anonymous said...

UnRealtor, if you think Krugman is unethical all written so far on this thread wouldn't be enough room to cover the misdeeds of this administration for the past six years.


Davey Jones

8/25/2006 06:52:00 PM  

Post a Comment

<< Home