Posts filed under “Corporate Management”

Homebuilders: Earnings & Prices

One of the weaker arguments mustered by the Real-Estate-has-bottomed crowd is the move off of the lows by the homebuilders. "Look how far the homebuilders have rallied" they declare. What more proof do you need that the carnage in Real Estate is over?   

I find this analysis flawed: 1st, a short-term stock move up after a sector gets shellacked is hardly proof that this economic sector has bottomed; with the homebuilders, its more likely proof that they have been a crowded short.>

If you suspect that argument sounds familiar, you are correct: We have seen this movie before:
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Hgxcomp020707

Source: ContraryInvestor.com

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Second, as this table (courtesy of ContraryInvestor.com) reveals, the Homies have not only had a huge run in share prices — their earnings went through the roof also, peaking in 2005. Now, we are on the other side of that mountain, and for many of the major builders, their Earnings are right back to where they were before the big run up began. 

The difference? In 2002-03, rates were down and heading towards 46 year lows. Now, they are elevated and likely heading higher.

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Hgx_index

Source: ContraryInvestor.com 

Lastly, as we learned just yesterday, prices of homes are still falling — and in an increasing number of regions –about half nationwide:

"Home prices declined from a year earlier in about half of all metropolitan areas in the fourth quarter, the National Association of Realtors reported.

It was the first time the trade group has recorded declining or unchanged prices in the majority of cities covered since it began collecting the data in 1979, a Realtors spokesman said. On a national basis, the median home price during the quarter was $219,300, down 2.7% from a year earlier. Prices began falling in many areas last year after a boom that pushed prices up at double-digit annual rates in much of the country in the first half of this decade.

In the latest quarter, the median price declined in 73 metro areas, increased in 71 and was flat in five. The biggest decrease was in the Sarasota-Bradenton-Venice area of Florida, down 18% from a year before. Many of the biggest decliners were in Florida, where a glut of new condominiums is weighing on the market, and in Rust Belt cities like Youngstown and Toledo, Ohio, hurt by shrinking industrial employment."

Not exactly the sort of stabilization Greenie has been chatting about for a few Qs, is it?

click for larger table
Housing_20070215

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UPDATE 2 February 16, 2007 11:32am

Ken Fisher disagrees:

Housing Boom!

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UPDATE February 16, 2007 9:42am

Housing_starts_2
More proof of the bottom! Marketwatch notes:

Housing starts plunge 14.3% to 10-year low; Pace of building new homes down 37.8% on year-over-year basis

"U.S. home builders started the fewest homes in nearly a decade last month, as housing starts plunged 14.3% to a seasonally adjusted annual rate of 1.408 million, the Commerce Department reported Friday.

January’s rate was the lowest for housing starts since August 1997. Starts were down 37.8% compared with January 2006. Also, building permits dropped 2.8% to 1.568 million in January, 28.6% below the same month a year ago. Read the full government report.

The starts figure was much lower than expected on Wall Street, where economists were looking for a 2% drop to 1.60 million annualized units. The permits figure was close to the median forecast of 1.58 million expected in a MarketWatch survey of economists. See Economic Calendar.

The stunning drop in home construction indicates that builders are scaling back their plans on a massive scale, aiming to work down the excess inventory of unsold homes on the market."

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Sources:
Home Prices Decline in Majority of Cities
By JAMES R. HAGERTY
February 15, 2007 11:29 p.m.; Page A2
http://online.wsj.com/article/SB117155660166310014.html

Housing starts plunge 14.3% to 10-year low
Pace of building new homes down 37.8% on year-over-year basis

Rex Nutting
MarketWatch, 9:05 AM ET Feb 16, 2007
http://tinyurl.com/2m7bbj

Category: Corporate Management, Earnings, Investing, Markets, Real Estate

Goldman Sells GSCI to S&P

Category: Commodities, Corporate Management, Index/ETFs

Insider Selling

Category: Corporate Management, Investing, Markets, Psychology

A Merry Corporate Christmas

Category: Corporate Management, Earnings, Economy, Politics

RIAA: More full of S#@$ than ever before

Category: Corporate Management, Music

Backdating Options Scorecard

Here’s a nice free feature courtesy of the online WSJ.com:  They posted an updated look at more than 120 companies that have come under scrutiny for past stock-option grants. Note: This list contains companies that have disclosed government probes, misdated options, restatements and/or executive departures. Some companies that have undertaken or disclosed internal probes but…Read More

Category: Corporate Management, Earnings, Options

IBM Suing Amazon over Patents

Category: Corporate Management, Intellectual Property, Technology, Web/Tech

We’re # 2!

Category: Corporate Management, Retail, Web/Tech

Google Buys YouTube — for Free

Category: Corporate Management, Markets, Technology

Blog Spotlight: Mish’s Global Economic Trend Analysis

Another edition of our new series:  Blog Spotlight.

We put together a short list of excellent but somewhat overlooked
blog that deserves a greater audience. Expect to see a post from a
different featured blogger here every Tuesday and Thursday evening,
around 7pm.

Second up in our Blogger Spotlight:  Michael Shedlock and Mish’s Global Economic Trend Analysis. Mike is one of the editors of The Survival Report, covering stocks and the economy. He also writes for the Daily Reckoning, and co-edits Whiskey & Gunpowder. He also runs stock boards on the Motley Fool, Silicon Investor, and TheMarketTraders. He is an avid photographer, when not writing about stocks or the economy, with over 80 magazine and book covers to his credit.

Mish_geta

Today’s focus commentary is called Falling Dominoes and addresses the impact of Housing’s decline on the economy:

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The Sentinel is reporting State targeting abusive lenders.

The [Massachusetts] state Division of Banks is cracking down this month on what it sees as abusive business practices by mortgage lenders and brokers.

The agency issued a series of new emergency regulations earlier this month, requiring better documentation from lenders and prohibiting them from pressuring consumers into taking out mortgages they can’t afford or working without their own independent lawyers. It also forced four companies — two of them located Worcester — to close immediately and place all pending mortgages with another, more established lender.

Commissioner of Banks Steven L. Antonakes said in a recent interview that division examiners found a pattern of deceptive business practices by some lenders during their most recent round of company inspections.

"We want to spell out in very plain English to send a message to lenders and brokers that these specific acts, whether they’re very obviously unfair or deceptive, or more subtle, they weren’t going to be tolerated," he said. "And you would put your license at risk by engaging in this kind of activity."

Abusive lending practices can destabilize the entire real-estate market. As an example, he described a hypothetical street containing 10 homes, each worth a certain amount of money.

"If loans were originated for two of those homes, in which the loan was made that the broker knows the consumer has no hope of repaying those loans, very likely the borrower will become delinquent," he said. "In the worst case, the home will be foreclosed upon, and that kind of activity could result in the home being sold for less than its value and before you know it, you have a domino effect."

But the slowdown has also put lenders in a tough position, said Christopher J. Iosua, president of the Mortgage Connection Inc. "When business slows down the way it has in the past six to nine months, new loan originators and those without a strong base of customers do things they probably wouldn’t normally do," he said.

The idea that lenders are doing things they may not have done in "normal conditions" may have some merit for some lenders but when 40% of the loans sold in California before the bust were either stated income loans or pay option arms, I think the idea if more fiction than fact. Anything and everything was done to keep the bubble booming, and that was as I said happening well before the bust.

With every bubble comes fraud. The two go hand in hand and housing is not unique in this respect. We are only beginning to scratch the surface of the fraud that supported this bubble. Lending standards are going to tighten as a result, and will continue to tighten as more and more of the fraudulent activity is exposed. I consider fraud and tightening of lending standards to be two big dominoes that are now falling. Tightening of lending standards was previously discussed in Lending Guidelines / Credit Squeeze and The Blame Game.

Read More

Category: Blog Spotlight, Corporate Management, Economy, Real Estate, Retail, Weblogs