 From Los Angeles Times Staff Writer Peter Y. Hong
The California Building Industry Assn. reports dismal sales of new homes in May. In the Los Angeles/Long Beach/Glendale area, May new home sales were down 79.4% from a year ago, according to the CBIA/Hanley Wood Market Intelligence report. That’s 145 new homes sold, compared to 703 in May, 2007. The median sale price of $409,990 was down 23.2% from the $533,990 median price the same month a year ago.
Santa Ana/Anaheim/Irvine fared better, with new home sales down 37.2% in May compared to May 2007. The median May sale price there, $623,000 was down only 1.9% from a year ago.
The CBIA said in a statement that competition from sharply discounted foreclosed homes hurt sales, and called for passage of the housing stimulus bill now in Congress.
Your thoughts? Comments? E-mail story tips to peter.hong@latimes.com
Photo Credit: Associated Press
 If you, like I, were listening to the radio with one ear this morning, you might have heard a story that started off something like this: "A sign of hope today for the troubled housing market..."
Yes, there is a sign of hope. Housing starts were better than expected in April. There will be other signs of hope as the housing market begins to thaw out from near-freeze conditions. But no, these signs don't mean the housing market is anywhere near reaching a bottom.
First the news, from Reuters via L.A. Times: "Construction starts on new U.S. homes rose by a surprisingly strong
8.2% in April and applications for new building permits turned up for
the first time in five months, the Commerce Department said today in a
report showing the hard-hit housing sector still had some spring vigor."
Now, why that's not very significant: "Single-family starts continue to show weakness and [are] coming off a
17-year low," said George Adell, a fixed-income strategist with
Commerce Capital Markets in Jupiter, Fla. "We can't say we've hit a
bottom, but it's better than what we've seen."
There are roughly 2 million vacant homes for sale in the United States right now, prices of homes are falling, and credit is scarce for buyers with less than good credit. It is not a good time to be building houses. Sales of foreclosed houses now make up roughly a third of the housing market in California, and that percentage is likely to rise in the short term. Price declines in bubble markets (hint: we live in one) have been accelerating this spring, causing banks to re-calculate the damage to borrowers' balance sheets. Bank of America said this week those balance sheets are looking even worse now, according to a wire story: "Bank of America Corp. warned Tuesday that its losses on home-equity
loans would be worse than it predicted just three weeks ago, adding to
evidence that more consumers are falling behind on debts." When the biggest consumer bank in America says things are worse now than they were three weeks ago, that is not a sign of a bottom.
But maybe I'm wrong. If you think so, go ahead and school me. E-mail story tips to peter.viles@latimes.com.
Photo Credit: Associated Press
 Breaking News from the Los Angeles Business Journal: The joint venture of homebuilders that is planning to build Newhall Ranch, a 21,000-home development in the Santa Clarita Valley, has missed a payment on its $1.1-billion loan.
From the LABJ: "LandSource, a venture of three homebuilders, defaulted April 22 on a first-lien loan it received as part of a $1.55-billion refinancing in March 2007 led by Barclays Capital Inc. and syndicated with 100 lenders."
More: " '[LandSource] did go into default but they are still talking to the lenders about restructuring the debt or modifying the terms,' said Tamara Taylor, a spokeswoman for LandSource. 'The hope is that they will be able to renegotiate the terms of the loan to everybody’s satisfaction.' "
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Hat tip: WA via e-mail.
Photo Credit: Future site of Newhall Ranch development, by L.A. Times.
 Breaking news from MarketWatch: "U.S. home builders have slashed their prices by a record amount, but sales still plunged by 8.5% to a 17-year low in March, the Commerce Department estimated Thursday ... the supply of homes on the market rose to 11 months, the most in 27 years....
"Inventories are likely understated as well because of canceled sales contracts." From the New York Times: "Sales of new homes in March plummeted to the lowest level since the housing recession of the 1990s, the government said on Thursday, as inventories rose to the highest point in more than a quarter century." The spin you hear from the real estate industry is that falling prices will attract new buyers. It is just as likely the opposite is happening right now: falling prices are scaring buyers. Again from the N.Y. Times: "Prices continue to fall as well, which could discourage would-be buyers from entering the market. The median price of a new home dropped in March to $227,600, down 13.3% from a year ago." Analysis: This is a pretty big economic problem. Home-building is at a standstill because of the inventory glut. It doesn't make sense to build homes if you can't sell them.
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Catalist Homes
 This blog has been teeing off on the proposed tax break for home builders, and this morning I gave the blog over to Daniel Gross' rant that the tax break is "perverse" and "absurd." I thought it only fair to invite someone from the other side of the debate to weigh in. That said, here is guest blogger Patrick Duffy, who blogs at HousingChronicles.com:
"While I can understand and sympathize with bloggers, readers and journalists such as Daniel Gross who remain adamantly opposed to any alleged special treatment of home builders at potential taxpayer expense, such emotionally wrought arguments conveniently ignore both rational discourse and historical precedent.
"Firstly, the argument that all builders overbuilt to simply assuage their own greed is simply inaccurate (some did, most didn’t). In fact, according to Paul Emrath at the NAHB, most builders were trying to meet an artificial demand created by speculators who were lying to sales agents, lying on sales contracts and lying on mortgage applications. No matter how many safeguards they put in place to clamp down on speculative activity –- borne out of a similar scenario in the late 1980s when flipping houses in between phases became a new sport –- speculators knew that builders weren’t really in the business to enforce such contractual provisions, so they took the risk anyway. And other than a few lonely voices in the blogosphere, the conventional wisdom at cocktail parties was that such activity was a surefire way to build long-term wealth. Lesson learned: Never trust people drunk on either alcohol or their own supposed genius.
"Secondly, if we simply had speculators leaving the scene and dumping their existing inventory onto the market, we wouldn’t be seeing the 60% reduction in building activity that we have today. It’s because of the issues with the credit market that nonspeculators can’t sell their homes either, which is a serious handicap in a country that was built on freedom of movement in between job opportunities.
Read more Defending the tax break for home builders »
 Remember back in the day, when builders were refusing to lower prices and were instead offering "incentives"? The flat-screen TVs, the granite counter upgrades? Those days are over, Peter Hong reports in the L.A. Times, and builders in the Inland Empire are resorting to old-fashioned price cuts:
"Stuck with excess inventory, builders throughout California are beginning to offer steep discounts on new homes, sometimes at a loss. Centex Corp. is touting the 'greatest prices in years' in its ads. In San Bernardino County, builder Van Daele Homes is advertising 35% discounts.Until recently, most builders resisted outright price cuts in California so as not to undermine the value of their holdings. Instead, many offered incentives such as big-screen televisions or interior upgrades."
"'Builders don't have the luxury of waiting another year for the market to turn -- they need the cash flow now,' said Patrick S. Duffy, principal of Metrointelligence Real Estate Advisors, a consultant to home builders. 'It's better for them to take 90 cents on the dollar today than to risk no cash flow at all because they're not selling any houses,' he added."
The price cuts on new homes are squeezing sellers of existing homes: "Jack Lloyd, 51, has been trying to sell his Palmdale house for nearly a year. He's cut the asking price several times, and he's now seeking $285,000 -- down from $425,000 originally. But Lloyd isn't hopeful, noting that new houses in nearby developments are $240,000. 'Who's going to buy mine?' he asked.
Good question, Jack.
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: L.A. Times
Coupla quick items about the continuing troubles for big homebuilders: Selling: This Saturday and next Saturday only: "D.R. Horton has announced unheard of savings up to 50% off on a variety of homes at 23 participating neighborhoods throughout Southern California. Unlike any sale homebuyers have ever seen, D.R. Horton's UnAuction presents dramatic sale prices and unbeatable new home value without the auction hassle." Sulking: The Washington Post reports, "The National Association of Home Builders, one of the top 10 corporate donors to politicians, has stopped contributing to congressional candidates after it failed to get what it wanted in recent anti-recession legislation." More: "The powerful lobby said Tuesday that it was taking the unprecedented action of halting its campaign-giving to protest Washington's failure to address 'the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward.' The group did not mention any specific initiatives." Among other things, the builders had wanted changes in the tax laws to reduce their tax liability by allowing them to offset their past profits with future losses. The builders are so ticked off, they even put out a statement announcing that they were suspending contributions. Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: The Associated Press
 Several of you pointed this out: The daughter of the co-founder of Toll Bros. is walking away from a $2.5 million condo she had agreed to buy from her father's company. Man, when it rains, it pours.
From the Wall Street Journal: "Toll Brothers, like the vast majority of home builders, has been struggling with potential buyers walking away from contracts as house prices plummet
"But one recent cancellation hits close to home for the high-end builder.
"The daughter of the company's vice chairman and co-founder, Bruce E. Toll, and her husband are walking away from a $2.5 million condominium that the couple bought in an undisclosed location from the builder, the company said in a filing with the Securities and Exchange Commission."
Thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo Credit: AP
|
|
From Los Angeles Times Staff Writer Peter Y. Hong
