tag:blogger.com,1999:blog-89790156367396480032024-03-08T02:59:31.637-08:00Put It On The HouseOn The Househttp://www.blogger.com/profile/05681798739439578919noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-8979015636739648003.post-36405390635758383832012-06-20T11:56:00.001-07:002012-06-20T11:56:53.305-07:00More Good News<!--[if gte mso 9]><xml>
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<span style="color: #1f497d; mso-themecolor: text2;">The good news continues.<span style="mso-spacerun: yes;"> </span>Yesterday the NAHB reported that new housing
starts are up sharply, although once again the story was reported in confusing
fashion.<span style="mso-spacerun: yes;"> </span>Housing starts for May were up
a whopping 28.5% year-over-year, although the <i style="mso-bidi-font-style: normal;">Wall Street Journal</i> headline was that starts dropped 4.8% from April.<span style="mso-spacerun: yes;"> </span>Housing is highly seasonal, and the best way
to analyze trends is to compare current results to the year earlier period.<span style="mso-spacerun: yes;"> </span>The real story is the recovery continues to
gain traction.</span></div>
<div class="MsoNoSpacing" style="line-height: 200%; text-indent: .5in;">
<span style="color: #1f497d; mso-themecolor: text2;">On Monday, a report on the survey of
builder confidence inched higher, to its best level in five years.<span style="mso-spacerun: yes;"> </span>And a recent report from online housing
company Zillow indicated that prices are now beginning to rise in more markets,
and in particular that performance is beginning to vary by neighborhood.<span style="mso-spacerun: yes;"> </span>The good news is that if you own a home in
decent condition in a stable community, the housing market is now in full
recovery.<span style="mso-spacerun: yes;"> </span>This is comparable to the stock
market.<span style="mso-spacerun: yes;"> </span>Not every company prospers in a
bull market.<span style="mso-spacerun: yes;"> </span>Apple is selling iPhones as
fast as they can build them, and Android phones are also flying off of the
shelves.<span style="mso-spacerun: yes;"> </span>Meanwhile, Rim, the parent
company of Blackberry, and Nokia are losing market share and their stock prices
are spiraling downward.<span style="mso-spacerun: yes;"> </span>Good profits at
Whole Foods haven’t stopped American Airlines from filing for bankruptcy, and
so on.</span></div>
<div class="MsoNoSpacing" style="line-height: 200%; text-indent: .5in;">
<span style="color: #1f497d; mso-themecolor: text2;">The unevenness of the recovery by
zip code augers well for the home builders.<span style="mso-spacerun: yes;">
</span>Many homes are more than thirty years old, in poor condition, and in
communities with sagging economies and under-performing schools.<span style="mso-spacerun: yes;"> </span>With new home construction at depressed
levels for five years running, even the current uptick only brings the annual construction
rate up to 708,000 units, still more than 50% below long term historical rates
of 1.5 – 2.0 million.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNoSpacing" style="line-height: 200%; text-indent: .5in;">
<span style="color: #1f497d; mso-themecolor: text2;">The prognosis – expect more good
news on housing, and a great environment for home builders for years to come. <span style="mso-spacerun: yes;"> </span>And this is in a crummy economy.<span style="mso-spacerun: yes;"> </span>Just imagine what happens if we actually have
a real recovery.</span></div>On The Househttp://www.blogger.com/profile/05681798739439578919noreply@blogger.com0tag:blogger.com,1999:blog-8979015636739648003.post-46180701873914368672012-05-25T21:50:00.005-07:002012-05-25T21:50:58.931-07:00A Pretty Good Week<!--[if gte mso 9]><xml>
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<span style="color: #17365d; mso-themecolor: text2; mso-themeshade: 191;">All in all, a pretty good week.<span style="mso-spacerun: yes;"> </span>On Wednesday, the National Association of Realtors announced that existing
home sales for April were up 10% from a year ago.<span style="mso-spacerun: yes;"> </span>Median prices rose 10.1%, inventory was at a 6.6
month supply vs. 9.1 months a year ago, and distressed sales represented 28% of
all transactions down from 37% a year ago. Every trend is pointing in the right direction.</span></div>
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<br /></div>
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<span style="color: #17365d; mso-themecolor: text2; mso-themeshade: 191;">Then on Thursday, the Census Bureau announced that April new
home sales up 9.9% from a year ago, with a 5.1 month supply of inventory.<span style="mso-spacerun: yes;"> </span>Total inventory of 146,000 units remains
barely unchanged from last month’s figure of 144,000, the lowest number on
record since this data began being collected in 1963.</span></div>
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<br /></div>
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<span style="color: #17365d; mso-themecolor: text2; mso-themeshade: 191;">Adding the slew of good announcements, Toll Brothers (TOL), known
for building McMansions, released their Q2 financial results.<span style="mso-spacerun: yes;"> </span>Earnings beat estimates, and the highlights
included:</span></div>
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</span></span></span><span style="color: #17365d; mso-themecolor: text2; mso-themeshade: 191;">Orders up 47% from the prior year</span></li>
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</span></span></span><span style="color: #17365d; mso-themecolor: text2; mso-themeshade: 191;">Average prices up from $570,000 to $585,000, as compared to
the prior year </span></li>
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</span></span></span><span style="color: #17365d; mso-themecolor: text2; mso-themeshade: 191;">Best traffic since 2007</span></li>
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<span style="color: #17365d; mso-themecolor: text2; mso-themeshade: 191;">Finally, Yahoo Finance ran a story with the headline “<i style="mso-bidi-font-style: normal;">Don’t Look Know, But Here Comes Housing</i>.”<span style="mso-spacerun: yes;"> </span>Of course, I’ve been advocating this for
months, but it’s nice to see the financial media realizing the recovery is
finally underway.</span></div>
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<br /></div>
<div class="MsoNoSpacing">
<br /></div>On The Househttp://www.blogger.com/profile/05681798739439578919noreply@blogger.com0tag:blogger.com,1999:blog-8979015636739648003.post-82251603147060168982012-05-20T10:18:00.000-07:002012-05-20T10:18:25.329-07:00Making Good News Bad<!--[if gte mso 9]><xml>
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<div class="MsoNoSpacing" style="line-height: 200%; text-indent: .5in;">
<span style="color: #1f497d; mso-themecolor: text2;">Most news about business and
finance, like most news in general, usually has a negative slant.<span style="mso-spacerun: yes;"> </span>For example, last Friday’s IPO for Facebook may
have been the most perfect transaction of its type in US financial history.<span style="mso-spacerun: yes;"> </span>The deal valued the company at over $100
billion, and $18 billion of stock was sold in the offering.<span style="mso-spacerun: yes;"> </span>Founder Mark Zuckerberg ended the day as the
29<sup>th</sup> richest person in the country (I suspect he is going to move up
the list in the next few years). And, amazingly, the stock closed just
slightly above the offering price, meaning that the underwriters accurately
gauged investor interest for a deal that was unprecedented in size and demand.<span style="mso-spacerun: yes;"> </span>It was a display of professional excellence comparable
to the tossing a grapefruit out of an airplane and having it land on a pocket
handkerchief.</span></div>
<div class="MsoNoSpacing" style="line-height: 200%; text-indent: .5in;">
<span style="color: #1f497d; mso-themecolor: text2;">And, given all of this, what were
the headlines: Facebook IPO “Sputters.”<span style="mso-spacerun: yes;">
</span>Somehow, the fact that investing in Facebook didn’t produce an immediate
profit by the end of the first day of trading – maybe a new stockholder might
have to actually hold on for, like, a year or two – means the
deal was a disappointment.<span style="mso-spacerun: yes;"> </span>As usual, the
negative bias of new reporting made the business equivalent of winning the
Super Bowl into a discussion of questioning the coach at the post-game press
conference as to why the commercials weren’t better.</span></div>
<div class="MsoNoSpacing" style="line-height: 200%; text-indent: .5in;">
<span style="color: #1f497d; mso-themecolor: text2;">Which leads me to the amazingly
good news about mortgage defaults and foreclosures that came out last
week.<span style="mso-spacerun: yes;"> </span>On Wednesday, The Mortgage
Bankers Association reported that <span style="mso-spacerun: yes;"> </span>borrowers <span style="mso-spacerun: yes;"></span>either more than 30 days past due or in
foreclosure had declined for the second consecutive year, from 14.7% of all mortgages
outstanding <span style="mso-spacerun: yes;"> </span>two years ago, to 12.8% one
year ago, and now 11.8% currently.<span style="mso-spacerun: yes;"> </span>And
the headline in the <i style="mso-bidi-font-style: normal;">Wall Street Journal</i>
reporting this?:<span style="mso-spacerun: yes;"> </span>“Foreclosures
Show No Sign of Decline.”<span style="mso-spacerun: yes;"> </span>It’s the same
as running a “Dewy Defeats Truman” headline and then never printing a
retraction.</span></div>
<div class="MsoNoSpacing" style="line-height: 200%; text-indent: .5in;">
<span style="color: #1f497d; mso-themecolor: text2;">And then on Friday, RealtyTrac
reported that foreclosures in April fell 5% from March and 14%
year-over-year.<span style="mso-spacerun: yes;"> </span>The four states that
have accounted for the worst of the foreclosure mess registered the following
year-over-year declines: Nevada, a stunning 67%; Arizona, 44%, California, 30%;
and Arizona, 26%.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNoSpacing" style="line-height: 200%; text-indent: .5in;">
<span style="color: #1f497d; mso-themecolor: text2;">My prediction is that this steady reduction
in foreclosures and mortgage defaults is only just getting going.<span style="mso-spacerun: yes;"> </span>This is a trend I saw coming last December,
when I first starting writing my new book. When the housing crisis started in
mid-2007, an immediate response by lenders was the tightening of underwriting
standards.<span style="mso-spacerun: yes;"> </span>Fast forward to 2012, and
that means that the new mortgage loans and refinancings closed over the past
five years have been more carefully scrutinized and borrowers are much less
likely to default.<span style="mso-spacerun: yes;"> </span>The US mortgage industry
got out of the “liar’s loan” racket years ago.<span style="mso-spacerun: yes;">
</span>And banks have discovered that rushing to foreclose is probably a bad
business decision.<span style="mso-spacerun: yes;"> </span>The average time to
foreclosure on a defaulted loan has doubled nationally to 370 days.<span style="mso-spacerun: yes;"> </span>In Florida, it’s now 891 days, or more than
two years.<span style="mso-spacerun: yes;"> </span>Banks have learned that taking
over the responsibility for taxes, maintenance and home owner association dues,
and then trying to unload a home in a weak market, may actually be a worse
business decision than sitting tight on a non-performing loan for a year or
two, letting the market improve, and then taking action.<span style="mso-spacerun: yes;"> </span>In short, the wave of foreclosures the “experts”
have been predicting just isn’t going to happen. You could say I wrote the book
on it.</span></div>On The Househttp://www.blogger.com/profile/05681798739439578919noreply@blogger.com0tag:blogger.com,1999:blog-8979015636739648003.post-30046880094747498642012-05-09T09:11:00.000-07:002012-05-09T09:11:00.995-07:00More Good News<!--[if gte mso 9]><xml>
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<div class="MsoNoSpacing">
<span style="color: #1f497d; mso-themecolor: text2;">From the
<i>Wall Street Journal</i> this morning, in an article entitled:</span></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<b><span style="color: #1f497d; font-size: 12.0pt; mso-bidi-font-size: 24.0pt; mso-font-kerning: 18.0pt; mso-themecolor: text2;">“Median Home Prices
Up in 51% of Metros”</span></b></div>
<div class="MsoNoSpacing" style="tab-stops: 61.0pt;">
<b><span style="color: #1f497d; font-size: 14.0pt; mso-bidi-font-size: 24.0pt; mso-font-kerning: 18.0pt; mso-themecolor: text2;"><span style="mso-tab-count: 1;"> </span></span></b></div>
<div class="MsoNoSpacing">
<i style="mso-bidi-font-style: normal;"><span style="color: #1f497d; mso-themecolor: text2;">Here’s another sign that the housing
market has found its bottom after nearly six years of price declines: Home
prices actually rose in more than half of U.S. metropolitan areas in the first
quarter of the year…The results were a turnaround from the fourth quarter of
last year, in which median prices rose in only 29 out of 149 cities tracked by
the real estate in that quarter.</span></i></div>
<div class="MsoNoSpacing">
<br /></div>
<div class="MsoNoSpacing">
<span style="color: #1f497d; mso-themecolor: text2;">Yes,
after the long nuclear winter of the housing crisis, a recovery is really
underway.<span style="mso-spacerun: yes;"> </span></span></div>On The Househttp://www.blogger.com/profile/05681798739439578919noreply@blogger.com0tag:blogger.com,1999:blog-8979015636739648003.post-68994431015341915592012-05-05T12:28:00.000-07:002012-05-05T12:31:36.604-07:00More Encouraging News<br />
<div class="MsoNormal" style="text-indent: .5in;">
<span style="color: #1f497d;">One of the great truisms of the housing crisis is that
the wave of foreclosures that hit the market from 2009-2011 will be followed soon
by an even greater wave that is just about to land with a thud and deliver a
death blow to the nascent housing market recovery. You can’t read an article about housing
without this “fact” accepted as received wisdom. I just this morning saw a bald man with dark
glasses on CNN repeating this as he gleefully predicted the impending collapse.</span></div>
<div class="MsoNormal" style="text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="text-indent: .5in;">
<span style="color: #1f497d;">But businesses, such as banks, are run by people, and
people often display herd behavior. The
great rush from 2009-2011 to foreclose is now being followed by the “great hesitancy.” A recent multi-party series, “Bad Neighbor
Bankers “, by the south Florida-based <i style="mso-bidi-font-style: normal;">Sun-Sentinel</i>,,
epicenter of the real estate crisis, dealt with the emerging problem of banks
actually refusing to foreclose on properties, allowing them to sit and rot,
rather than deal with the headaches of actual ownership, such as taxes,
maintenance, homeowner association dues, legal liability and the like. </span></div>
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<br /></div>
<div class="MsoNormal">
<span style="color: #1f497d;"><a href="http://www.sun-sentinel.com/news/local/bad-neighbor-banks/"><span style="color: #1f497d;">http://www.sun-sentinel.com/news/local/bad-neighbor-banks/</span></a></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="text-indent: .5in;">
<span style="color: #1f497d;"> The <i style="mso-bidi-font-style: normal;">Wall Street Journal</i> also recently
reported that foreclosures continue to decline on a year-over-year basis.</span></div>
<div class="MsoNormal" style="text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="text-indent: .5in;">
<span style="color: #1f497d;">There probably are several reasons for this trend,
including the recently $25 billion settlement the big banks signed with the
government, which includes provisions to help underwater borrowers and more
carefully document foreclosure paperwork.
But the biggest reason is simple economics
– foreclosing on millions of homes fast was a disaster for everyone involved,
both the banks and the unfortunate homeowners who got hustled out onto the
street, often trashing the property on the way out the door. With the hardest-hit markets such as south
Florida and Phoenix recovering, and investors complaining about an actual <i style="mso-bidi-font-style: normal;">shortage</i> of properties, expect this trend
to continue. Also, banks stopped making
stupid loans for home buyers four years ago, and tightened standards for
refinancing, so loan quality has improved substantially. The pool of borrowers
in trouble, while large, won’t get any larger.
</span></div>
<div class="MsoNormal" style="text-indent: 0.5in;">
<br /></div>
<div class="MsoNormal" style="text-indent: .5in;">
<span style="color: #1f497d;">My prediction: as measured on a year-over-year basis (i.e.,
May 2012 compared to May 2011, etc.; the only meaningful way to track the real
estate market, by the way) the national number of foreclosures will continuously
decline on a monthly basis for at least the next three years. Given how many analysts are predicting there
is another foreclosure shoe yet to drop, this will translate to yet one more
piece of good news for a healing market.</span></div>
<div class="MsoNormal">
<br /></div>On The Househttp://www.blogger.com/profile/05681798739439578919noreply@blogger.com0tag:blogger.com,1999:blog-8979015636739648003.post-80059953851948227282012-04-10T21:57:00.000-07:002012-04-10T21:57:03.098-07:00A Spring Bike Ride<div style="color: blue;">
The weather finally turned nice this weekend and I went for the first bike ride of the season through the neighborhood. I was struck by how few homes were on the market. I noticed four properties that have had "for sale" signs in front of them since last summer, indicating they are over-priced, but only a handful of newer listings, and most of those already had "sold" signs on them. On a typical spring day, I should have gone past over a dozen homes for sale; this past Sunday, only about five or six.</div>
<div style="color: blue;">
<br /></div>
<div style="color: blue;">
I also noticed two small subdivisions, each with about 15 homes, one priced in the $600's and the other in the $700's, that appeared to very little unsold inventory. I looked up one of the houses on a real estate website: 3,400 square feet, 5 bedrooms, 3.5 baths. Price: $689,000. The subdivision had a nice look and feel, and, as they say in real estate, was just minutes from the freeway. Before the housing crisis, this home would have been close to $1 million, given the property features and location.</div>
<div style="color: blue;">
<br /></div>
<div style="color: blue;">
I am a housing bull, but not for every type of property. A new home has a competitive advantage over a previously-owned resale. Brand-new carpets, brand-new roof, brand-new appliances, up-to-date design, 100% modern wiring and plumbing, 0% wear and tear, no previous owner, no bank or other complications associated with closing, etc. etc.</div>
<div style="color: blue;">
<br /></div>
<span style="color: blue;">This is the primary reason I am bullish on housing stocks. Home builders, right now coming out of a depressed market, have the advantage. I think within two years there will be a shortage of new inventory in most major markets, and then existing homes may gain the upper hand.</span>On The Househttp://www.blogger.com/profile/05681798739439578919noreply@blogger.com0tag:blogger.com,1999:blog-8979015636739648003.post-71833574137517658712012-01-24T20:59:00.001-08:002012-01-24T20:59:25.049-08:00HousingHousing is going to recover in 2012. The recovery will take people by surprise.On The Househttp://www.blogger.com/profile/05681798739439578919noreply@blogger.com0