Ryland chief says housing market 'on the mend'

Ryland Group’s chief executive told analysts this morning that he sees the housing market as “on the mend.”

The Calabasas home builder posted a narrower loss Wednesday as the company sold fewer homes amid the construction slump. The loss also came as the government released data showing that new orders for U.S. homes fell unexpectedly last month, raising concerns that consumers will slow their home purchasing as a federal tax credit for first-time buyers approaches its expiration at the end of November.

Nevertheless, CEO Larry T. Nicholson told analysts during a conference call that the housing market appeared to be stabilizing and that was a good sign.

“Well, I think when we say on the mend, we don’t ... mean great leaps forward,” Nicholson said. “I mean we just see inventories continue to decrease. We see price stabilization. We see a lot of things we haven’t seen for a period of time. So I don’t want to sound like we’re overly optimistic. We just see some of the things that have been eroding for a long time have ceased to erode.”

-- Alejandro Lazo

$8,000 first-time homebuyer credit targeted by fraudsters

This year’s $8,000 federal tax credit for first-time home buyers was apparently so popular that it even attracted ineligible claimants – potentially more than 90,000 of them, including former homeowners and 4-year-old children.

A report from the Treasury inspector general for tax administration found that more than $600 million worth of tax credit claims were questionable. The $8,000 offer, enacted by the Obama administration in February and expanding a similar credit from 2008, was designed to boost housing demand.

Eligibility extended to those who had not owned a primary residence in the last three years and earned less than $75,000 as an individual or less than $150,000 as a married couple. The credit could be claimed after purchasing a home between Jan.1 and Dec. 1.

But on 19,351 electronically filed tax returns, taxpayers listed the credit for properties that hadn’t been purchased. An additional 73,799, claiming nearly $504 million, seemed to have already owned a home.

And 582 supposed first-time home buyers turned out to be younger than 18 years old, claiming nearly $4 million. Meanwhile, 48,580 taxpayers still working with the less-generous 2008 version of the credit may have claimed less than they were entitled to.

The Internal Revenue Service has so far discovered 167 criminal schemes, opened 115 criminal investigations and temporarily frozen more than 110,000 refunds. The IRS has also agreed to recommendations from the inspector general to take corrective action.

Through late August, more than 1.4 million claims have been made to some version of the home buyer’s credit.

-- Tiffany Hsu

Economist finds good news about commercial real estate by looking back

News from the commercial real estate front has been so grim for so long that economist Robert Bach at brokerage Grubb & Ellis has taken to writing a short e-mail feature called Good News Friday in an effort to buck up people's spirits.

He often has to dig deep for upbeat assessments, and today's column started off with a typical gloomy caveat:

"For commercial real estate, perhaps the last industry to join the recovery, recent news hasn’t been so good," Bach said. "Both the investment and leasing markets appear to be stuck in molasses."

Bach was able to tease out some "good news" by looking backward.

In the early 1990s, he said, commercial real estate had been badly overbuilt and was viewed by many as a nearly permanently damaged asset class. No new building would be needed until after the millennium, pundits said, but even then demand would be slight because advances in technology, such as computers and cellphones, would reduce the need to work in offices or shop in stores.

Those assessments turned out to be overly pessimistic, and most markets were recovering by the mid-1990s. Things weren't as bad as they looked.

Nowadays, commercial real estate is expected to begin recovering within a year and be strong by 2011 or 2012. "For evidence of this relative optimism, look no further than the growing reservoir of capital being raised to target distressed assets," Bach said.

So be of good cheer. The sharks are circling.

-- Roger Vincent

Will the home buyer tax credit get packed away?

As the time nears to bid farewell to the popular $8,000 tax credit for first-time home buyers, sentiment is building to extend -- and maybe expand -- the program.

The tax credit is set to end Nov. 30, meaning that buyers have to agree to terms soon to get deals closed in time.

The program is part of the federal effort to resuscitate the real estate market. Realtors and home builders, along with many members of Congress, are pushing hard for an extension. They argue that although the housing market has shown signs of recovery, it still needs the help.

"If anyone thinks this housing crisis has ended . . . that's not the case," Rep. Ken Calvert (R-Corona) said. "There's a significant amount of inventory throughout a large part of this country, especially in Southern California."

He has introduced a bill to extend the credit for a year, expand it to provide $15,000 and make it available to anyone who buys a house. "A lot of people are still waiting on the sidelines, waiting for the clear 'buy' signal. I think we need to give them one."

To read the article by Jim Puzzanghera and Tiffany Hsu, click here.

And here's a video about the subject.

KB Home posts a narrower loss, awaits recovery

As the new home market struggles to find its footing, executives at Los Angeles builder KB Home aren't quite ready to call the bottom.

The company said today that its revenue for the three months ended in August fell 33%, to $458.5 million from $681.6 million in the same period a year earlier.

KB Home lost $66 million, or 87 cents a share, in the third quarter. The loss was smaller than the $144.7 million, or $1.87 a share, that KB Home lost in the same period last year, but was worse than analysts had projected. Analysts polled by Thomson Reuters were expecting a loss of 58 cents a share on revenue of about $457.9 million.

KB Home Chief Executive Jeffrey Mezger said in a conference call with analysts that “the precise timing of a market recovery remains uncertain,” and foreclosures and unemployment are the industry’s chief challenges.

“It’s difficult for the housing sector to build momentum as long as potential home buyers lack job security,” he said.

Builders’ expectations are modest in this climate, as KB Home Controller Bill Hollinger said in the conference call, “we are edging closer to breaking even.”

-- Peter Hong

Photo: A KB Home development in Sylmar last July. Credit: Associated Press

Housing crash hammers L.A. GDP

New data today from the U.S Bureau of Economic Analysis quantifies what many of us already see and feel: The housing crash and its accompanying job losses in the construction, real estate and mortgage industries have dragged down the overall Los Angeles area economy.

The Los Angeles-Orange County area shares this pain with much of the Sun Belt, as the BEA puts it:

In 2008, real GDP by metropolitan area declined in 111 of the 366 MSAs. Many metropolitan areas in the Sun Belt, which had previously experienced large growth in the housing market, were adversely affected by protracted housing declines. Much of the decline in the housing-related industries (construction and finance and insurance) can be attributed to metropolitan areas in Arizona, California, Florida, and Nevada. Specifically, the areas of Los Angeles-Long Beach-Santa Ana, CA; Miami-Fort Lauderdale-Pompano Beach, FL; Phoenix-Mesa-Scottsdale, AZ; and Reno-Sparks, NV were hard hit. Metropolitan areas in Florida—Cape Coral-Fort Myers, FL; Punta Gorda, FL; Naples-Marco Island, FL; Palm Coast, FL; and Bradenton-Sarasota-Venice, FL—were among the hardest hit in the nation by the construction slowdown. 

The full release is here. There you'll also be able to graph trends like the decline in LA area GDP growth, below.

--Peter Y. Hong

 

Recession has brought a 'green' development decline, survey finds

So-called green real estate development--almost an industry cliche during boom times--has stalled during the recession and will not pick up for some time after a recovery, a new survey [.pdf] says.

The Newport Beach real estate advisory firm The Concord Group surveyed commercial real estate professionals on the status of sustainable projects. Developers, architects and others said that their motivations for beginning green projects had also changed: it's nice to save the planet, but these days, it's mostly about the money.

Key points:

• Resistance from investors and lenders will stall private developers' ground-up green projects through the recession and into a following recovery.
• The economic downturn has caused environmental benefits to take a back seat to financial gains.
• With private developers on the sidelines, it will fall to the public sector to champion and build sustainable projects.

The survey was conducted between May and June 2009, with a total of 101 respondents, 45% of them from development firms, 25% from architecture and planning, 16% from investment and lending groups and 7% from consulting and law firms and another 7% coming from construction.

-- Nathan Olivarez-Giles

Take your housing complaints to the president

Got a beef about housing prices, loan mods, jobs or otherwise? The White House is standing by to field your comments .

The White House is inviting you to post your questions on the economy and vote on submissions from others. The President will answer some of the most popular in an online town hall on Thursday.

Those of you who would like to let us know what you sent can post it here too. Thanks to commenter NoHoDolphin, who alerted L.A. Land on another thread.

-- Lauren Beale

Thoughts? Comments?

Photo: President Barack Obama speaks during a town hall meeting  March 18 at the Orange County Fairgrounds in Costa Mesa. Credit: Luis Sinco / Los Angeles Times

Job security is job 1

More than half the respondents to a nationwide survey released Thursday think that generating jobs and making existing jobs more secure are the most important things President Obama can do to stabilize the housing market. The survey, conducted two weeks ago for online search engine Trulia by Harris Interactive, included 1,418 homeowners and 595 renters.

"Housing is obviously the epicenter of the economic crisis," said Trulia CEO Pete Flint during a telephone press conference. He said he expected 2009 to be another tough year as job-loss-related foreclosed homes are added to the already clogged foreclosure market.

Comments posted at Trulia Voices sound a lot like those at L.A. Land, including complaints that the government actions will keep homes unaffordable. One former homeowner told how his dream of homeownership turned into a nightmare and that he is glad to be renting -- free of the risks of ownership. Still, the survey found 3 in 4 respondents consider owning a home part of their American Dream.

-- Lauren Beale

Thoughts? Comments?

Californians still wrangling over budget

Just in case you were planning on using that aforementioned $10,000 California tax break to buy a newly built home, perhaps you shouldn't rush out to purchase it just yet. That budget was still not signed Wednesday morning. From "California Budget Negotiations Hit a New Snag" at latimes.com:

As California's government continued its grinding downshift toward insolvency, efforts to close the state's nearly $42-billion budget gap hit a new snag late Tuesday as Republicans in the state Senate ousted their leader.

Around 11 p.m., a group of GOP senators, unhappy with the higher taxes that Senate leader Dave Cogdill of Modesto agreed to as part of a deal with the governor and Democrats, voted to replace him in a private caucus meeting in Cogdill's office.

They chose Sen. Dennis Hollingsworth, a staunchly anti-tax lawmaker from Murrieta, as their new leader....

That plan could still survive the leadership change. Three GOP senators abstained from voting this morning. They also refused to take part in Cogdill's ouster, sitting out the caucus vote on his replacement. Those lawmakers have been in negotiations with the governor and Democrats about possibly supporting the bipartisan budget plan.

A fourth GOP lawmaker, Sen. Abel Maldonado of Santa Maria, voted against the taxes this morning but has stated publicly that he might support them if various government reforms were added to the package. He was sharply critical of his caucus for removing Cogdill.

"I just can't believe in the middle of the night we'd oust our leader," he said outside the caucus meeting. "It's the wrong time to make a change in this process."

The frenetic day had begun with legislators carting sleeping bags, pillows and suitcases to work. Sen. Ron Calderon (D-Montebello) brought a bottle of cologne. Republican Sen. Sam Aanestad, an oral surgeon from Grass Valley, passed out toothbrushes. Cots were ordered from the state Office of Emergency Services.

I know this post is only ever so weakly linked to real estate but I defend it on the grounds it could be useful information for people considering relocating to California.

--Lauren Beale

Thoughts? Comments?

Photo: Senator Dean Flores brushes his teeth in the men's bathroom of the State Capitol at 1:30 am in Sacramento Wednesday morning. State lawmakers were unable to deliver a budget after another day of intense negotiations. Credit: Wally Skalij / Los Angeles Times