Lennar Florida Market Not So Sunny

[Pamela Crowley (Florida)]

http://www.thestreet.com/_googlen/funds/ni...o/10247239.html

Lennar Florida Market Not So Sunny

In red-hot housing markets around the country, most homebuilders have enacted strict anti-flipping clauses to deter speculators from buying in their new communities. Now, Lennar, one of the country's largest builders, has quietly taken the unusual move of dropping the restrictions at several of its South Florida developments.

Local brokers say the decision shows just how much Lennar needs the flippers to keep order numbers up at certain communities.

"When you go from making sales to making no sales, you've got a problem," Mike Morgan, broker-owner of real estate brokerage firm Morgan Florida, says about Lennar's decision for its Palm Beach properties. "With the investor policy, there was no way they were going to make their next quarter numbers."

Sooo.....

Who's going to actually live in all this over-supply???

Lennar is doing what they have to do to get themselves out of it. If almost all the buyers are speculators, who are they going to sell to to get themselves out of it???

 

[Terrel L. Shields]

They will pass the hot potato around until they drop it....bite zee big one, space cadets...Don't put money in a REIT...you bite zee big 'un too.

 

[Big ole Boy]

I was in Williston, FL today ....

Southwest of G'ville bout 20 miles - things have slowed for the last 6 to 8 weeks - little more than back to school slow ..... I'ms seeing for sales signs more and more in G'ville and Williston saying ....... "price reduced" ....

ain't no Lennar around these parts .... but, I reckon things is a slowing down all round bout now ......

davy

 

[RHM]

This is the condo market on Pensacola Beach as of yesterday:

Since 06/01/2005 Sales = 21
Active Listings = 183

I am not quite sure about the pending sales because I haven't researched which ones are pre-sales waiting project completion but all the scuttlebut around here is the wf market is d e a d. Talking with appraisers who work around the Panama City Beach area indicates that the same thing is playing out over there.

I think a lot of the flippers may have to start stroking a mortgage payment they never, ever dreamed they'd have to make. With the asking prices of the units being unreal now (darn near $1,000.00 sf in some cases) there is no way the units will cash flow even with 30-40% down. I think the rubber may be meeting the road real soon.

Of course I could be completely wrong.

RHM

 

[Pamela Crowley (Florida)]

Of course I could be completely wrong.

You mean you don't have the working crystal ball? :blink:

Here's another related article:

http://www.theledger.com/apps/pbcs.dll/art...2/1001/BUSINESS

Home Builders' Stock Sales: Diversifying or Bailing Out?

Home builders have never had it so good. Low interest rates and creative financing have caused a frenetic pace of new-home construction across the country. Builders are reporting blistering earnings and their shares are trading at or near record highs.

Now they are cashing in. Executives and directors at many of the nation's largest development companies sold stock at a record pace this summer. Insiders at the 10 largest home builders by market value, including D. R. Horton, KB Home, Toll Brothers and M.D.C. Holdings, have sold nearly 11 million shares, worth $952 million, so far this year. That is a huge jump from the 6.8 million shares, worth $658 million, that insiders sold during all of last year, according to data compiled by Thomson Financial.

Home builders say the stock sales are not a signal that they believe the property boom is waning. Instead, most executives said that they were selling because they needed to diversify their personal wealth. Some outsiders are not so sure.

"The previous times we've had insider selling that was that high, it was followed by a 20 percent decline in the index of home builder stocks," said Mark A. LoPresti, senior quantitative analyst with Thomson Financial. Since its July 28 peak, the Philadelphia Stock Exchange Housing Sector Index, an index of 21 home building stocks, has dipped 10 percent.

Among those cashing in some chips is Zvi Barzilay, the president and chief operating officer of Toll Brothers, based in Horsham, Pa. He sold 460,400 shares worth more than $39 million, the bulk of it in June and July. That was more than four times the 150,000 shares, worth nearly $8.7 million, that Mr. Barzilay sold last year.

Likewise, David D. Mandarich, the president and chief operating officer of M.D.C. Holdings, sold 285,499 shares, worth nearly $25 million, in three days in July, compared with the 192,115 shares, worth $13.8 million, he sold in all of 2004. M.D.C. Holdings is based in Denver.

Not all executives are taking profits at the same rate. Stock sales at Pulte Homes and NVR, the nation's second-largest and seventh-largest home building companies, are down from last year's levels. Still, Dwight C. Schar, the chairman of NVR, who sold $155 million worth of stock last year, tops the list of insider sales so far this year. In eight days in May, Mr. Schar sold $88.4 million worth of stock in NVR, based in Reston, VA.

But if the market is so great and if, as most home builders argue, their stocks are undervalued, why are executives selling now? asked Richard Bernstein, chief United States strategist at Merrill Lynch. Mr. Bernstein issued a report in late August saying that insider sales at home builders mimicked what happened in the technology sector before those stocks peaked in 2000.

"People say these companies are closely held and that the executives are trying to diversify, but why now?" asked Mr. Bernstein, adding that similar sales levels were not apparent in other top-performing industries this year. "They could have diversified their holdings 2, 5 or even 10 years ago."

The spin by the builders is making me dizzy.

"These are record times for the industry, and there's not much chance it's going to get a whole lot better," said Gregory E. Gieber, a home builder analyst with A. G. Edwards. "These guys know that the good times don't last forever, and they've been out there in the cold before."

 

[Chris Colston]

The slowdown is starting to hit all over...

http://www.floridatoday.com/apps/pbcs.dll/...340/-1/archives

The number of houses for sale in Brevard County has more than doubled in the last year, real estate officials say.

And that may be a sign the market is starting to cool off, since it's taking a little longer to sell a home now than it did a year ago, possibly because buyers are balking at unreasonable asking prices.

In addition, the president of the National Association of Realtors on Wednesday predicted that the national real estate market would cool off a bit next year because of rising mortgage interest rates.

There were 5,795 single-family homes and condos listed for sale in Brevard at the end of September, up from 2,205 a year ago, according to data compiled by the Space Coast Association of Realtors.

I have a problem, though, comparing last September to this September, in most of Florida. A little thing like FOUR hurricanes can really mess up the stats.

However, I can say I have also noticed more FOR SALE signs and they appear to be on the properties longer than they were about 3 months ago.

 

[Terrel L. Shields]

Home builders say the stock sales are not a signal that they believe the property boom is waning

I opt to believe this one...slow down, everyone thinking...yep, maybe wait it out 3 mo, 6 mo....about the 1 yr. mark when the construction loans start dominoing and they have to pay back principal too....builders don't get zero interest loans ya' know. Dump city.

And builder concessions out the wazoo...free upgrades, better cabinets [the cabinet makers will be sweating too], lawn allowances, anything but to do the inevitable..mark down the price.

 

[Roger Abuata]

Don't know bout you guys, but here in Southern Cal, it is still not bad..YET, there are more listings than before, but most of the listings I know of sell fast, I have not seen more than a handfull of listings that stayed for more than 30 days on the market. but it will all come to an end someday... Have fun and make money while you can..
:rofl:

 

[Sean Wagle]

It is amusing to read investor forums now, and see posts like "My house has been on the market for a WHOLE month, and there have been no 'bids' on it."

Oh well, it's all some people have known for 3-4 years. The concept of negotiating is new to them.

 

[hastalavista]

Originally posted by Pamela Crowley (Florida)@Oct 13 2005, 07:35 PM
Sooo.....

Who's going to actually live in all this over-supply???

Lennar is doing what they have to do to get themselves out of it. If almost all the buyers are speculators, who are they going to sell to to get themselves out of it???

Lennar may be opening a can of worms for itself:

I cannot swear to it, but it seems that in the last cycle where I live (Alameda County, CA), in the late 80's, some of the developers had occupancy requirements until the market started going south. Speculators (I find it funny that they are called "investors") purchased the latter phases at or near the top, couldn't 'flip" for the quick profit or rent them out to cover their payment, and started selling at a loss. Some of the HOA’s had problems with their budgets. Some developers were sued because the earlier purchases believed that all the buyers were required to live on-site (as they were).

I can’t remember how it turned out.

However, if I’m an appraiser and appraised the homes for the initial buyers, this may be just the thing I need if the market tanks. I could argue (and maybe successfully), that the developer “changed” the market/buyer pool by removing the owner occupancy restrictions, allowing the speculators to move in, which created a “force multiplier” on the downward value trend.

(Note to self: Start asking if developer has owner occupancy requirements when appraising in new tract development- include finding in report)