Jun 24 2008 8:59AM | Permalink | Email this | Comments (1) |

I had a conversation recently with housing industry management consultant Fletcher Groves, principal of Ponte Vedra Beach, Fla.-based SAI Consulting, who sees the current housing downturn having a devastating impact on the Total Quality Management movement, which gained a toehold in the housing industry in the early 1990s, fueled--at least in part--by the National Housing Quality award program sponsored by Professional Builder magazine and the NAHB Research Center.
     Groves is a process-mapper...For more than a decade, he's been working with builders to get their process flow charts down on paper, and then refined to improve efficiency. Just recently, Fletch surveyed all his past clients, to learn (1) how many of them still had the process maps, (2) how many were still amending the maps, and (3) how many were still working on their processes to realiz...Read More

Jun 24 2008 8:12AM | Permalink | Email this | Comments (0) |

If you're looking for some good news, try this: in mid-June billionaire hedge fund manager Edward S. Lampert put his money behind his belief that a U.S. housing recovery is in the works. The Wall Street Journal reported that Lampert's ESL Investments, which controls investments valued at about $11.6 billion, has begun picking up shares of the big public home builders and other housing-related companies. ESL now has stakes in Centex ($10.4 million) and KB Home ($10.8 million), and is also testing the waters of mortgage origination and servicing. Lampert also increased ESL's stake in Home Depot to 22.7 million shares, valued at $590 million.
     If the smart money is betting on housing recovery, how long will it be before others follow suit? And if enough people believe recovery is on its way, doesn't it eventually become a self-fulfilling prophesy? 

Jun 23 2008 3:43PM | Permalink | Email this | Comments (0) |

Don Magruder, vice president and general manager of Ro-Mac Lumber in Leesburg, Fla., told me recently that wood commodities have simmered down slightly from their robust price gains of recent weeks--but the pull back is slight and fuel surcharges are probably offsetting all of it. "Most companies, in the last 30 to 60 days, have added $2 to $5 per thousand in delivery charges, and dealer deliveries to jobsites are adding fuel surcharges in the range of 2 percent," Magruder says.
...Read More

Jun 13 2008 1:43PM | Permalink | Email this | Comments (1) |

Wall Street housing stock analyst David I. Goldberg of UBS Investment Bank acknowledges that housing is a local business, not national, and that there are likely to be big differences in rates of recovery among the many local markets that make up the U.S. national housing market.
     He did an analysis of 13 markets across the country that weighed housing affordability, for-sale housing inventories, as well as macroeconomic and demographic trends. On this basis, he decided Texas and Atlanta will lead the recovery--and Florida, inland California, Phoenix and Las Vegas won't.
     None of this should come as a surprise to builders in any of those markets, because the top markets are already showing more life than California and Florida. They never had the extreme runups in home prices in Texas, Atl...Read More

Jun 11 2008 8:28AM | Permalink | Email this | Comments (0) |

I had a conversation this week with David Drees, president of Ft. Mitchell, Ky.-based giant The Drees Co. (no. 21 in the recently-released Giant 400 rankings). He confided to me that while the firm's credit line with a coalition of banks is intact and Drees is, in fact, paying down its debt, he's looking for alternatives other than bank financing to assure his company has the capital it needs to take advantage of housing market recovery, whenever that happens.

Drees is not confident banks will be able to fund the capital requirements of his firm's growth in recovery. (You'll be able to read more about what David Drees thinks about the future in an upcoming issue of Housing Giants, when the full interview appears in CEO Spotlight.)

From some of the things that have crossed my computer rece...Read More

Jun 10 2008 2:44PM | Permalink | Email this | Comments (0) |

As I recently warned, manufacturers and suppliers have already gone as far as they can on holding the line on prices of building materials and products, and from now on we'll begin to see them passing along the cost increases they've been absorbing--so look for the prices builders pay to start moving up. Dow Building Solutions just announced "up to" a 10 percent hike, effective July 1, in all its product lines, including Styrofoam insulations and Weathermate housewraps.
     "The price of oil has risen drastically over the past year--80 percent--and natural gas prices have increased by 40 percent," says Torsten Kraef, president and general manager of Dow Building Solutions in a press release we just got. "With margins quickly eroding, we must take these steps now in order to be able to meet customer demand and reinv...Read More

Jun 2 2008 9:12AM | Permalink | Email this | Comments (0) |

Wall Street housing stock analyst David Goldberg of UBS Investment Bank ended May with a note that he's focusing on two indicators that may provide an early signal of a bottom to the housing industry trough: (1) improving liquidity for non-performing loans and (2) the availability of higher-quality land, driven by distress among private builders and local banks. But he indicates we're not there yet.
     "We expect these trends to accelerate in (the second half of 2008)," Goldberg writes in a month-end note to investors, "leading to a bottom in fundamentals in (the second half of 2009)."
     He also noted that builders began the second quarter of 2008 on the strength of a number of beneficial trends, but all of them failed to bear fruit and the operating environment actually deteriorated further. Over the l...Read More

May 29 2008 2:01PM | Permalink | Email this | Comments (0) |

Southwest Florida move-up builder Lee Wetherington fell out of the Giant 400 rankings this year, after rising as high as No.220 in 2006 and hanging in there at No. 225 in 2007. With only 54 closings for $48.6 million in 2007 revenue, he didn't make the cut for the 2008 list. But while Lee's still telling a lot of horror stories about the market in Sarasota and Manatee Counties, he's not totally pessimistic. "We're going to survive," he says, "and when the market comes back in 2010, the few builders who are still around will do well. The market won't have to come back much for people like me and Pat Neal and John Cannon to do pretty well."
     Wetherington believes the survivors will gain market share--as Woody Allen said--just by showing up. His mood was brightened in early May by selling six houses in a week. "There are buyer...Read More

May 23 2008 8:44AM | Permalink | Email this | Comments (0) |

Many of the largest home builders lost their shirts in the last couple of years on investments in Southern California's housing land pipeline. And the down cycle in land values has now gone on long enough that it's catching some big fish, including CalPERS, the immense California Public Employees Retirement System.

A real estate partnership involving the huge pension fund is now scrambling to restructure a loan after failing to make a payment on more than $1 billion borrowed to purchase thousands of acres of residential land north of Los Angeles. LandSource Communities Development LLC is now negotiating with a syndicate of more than 100 banks headed by Barclays Capital Inc. &md...Read More

Mar 18 2008 12:25PM | Permalink | Email this | Comments (3) |

Tom Richey called me the other day to vent about the inability of most new-home sales agents to master the art of selling special financing. The Houston-based sales management consultant, who's been at it for more than 30 years, says he's amazed how few sales agents even know how to sell the tax advantages of home ownership over renting, let alone the benefits of a  builder's offer of a 2/1 buydown of the mortgage rate. "Buying down the mortgage rate for two years is better than discounting the sticker price by an equal amount," says Richey, "because it doesn't have the negative psychological impact of a price decline. Home buyers don't want to see the price of the house go down. One never knows where or when the price declines will stop, and as soon as they buy, they want the prices to go up!"
     Richey also laments that ...Read More

Mar 2 2008 8:03AM | Permalink | Email this | Comments (0) |

My last blog, about Florida economist Hank Fishkind's rosy prediction of growth in the Sunshine State's housing market, looks a little more plausible in light of a press release that just hit my inbox. It's from The St. Joe Co., Florida's largest private land owner, reporting a 34 percent jump in residential lot sales for 2007 over 2006 at the firm's luxury beachfront properties in Walton County (in the Florida Panhandle).
     This just reinforces my belief that location is now more important than ever, and that the huge inventories of unsold homes still on the market--both new and existing--will not deter the success of new projects that get the product and location just right.
     At WaterColor, a 499-acre coastal resort and residential community on Highway 30A, St. Joe reports sales for 2007 were up 49 percent and traff...Read More

Mar 2 2008 6:54AM | Permalink | Email this | Comments (0) |

In a recent speech to the Economic Development Council of Southwest Florida's Manatee County, Orlando, Fla.-based housing economist Hank Fishkind admitted he was wrong late last year when he said Florida's housing market bottomed in mid-2007. "I thought the market had stabalized right here," he said, pointing to the middle of a chart showing Manatee County existing home sales for last year. "But then we got the financial panic, and the meltdown in the market, so things took another turn down."
     But Fishkind remains a lot more optimistic than many economists in his view of prospects going forward--both for the Sunshine State and the nation as a whole. He said the U.S. economy will narrowly avoid recession in the first half of this year, but recovery will take hold in the second half. Fishkind sees the aging of the baby boom g...Read More

Feb 29 2008 6:20AM | Permalink | Email this | Comments (0) |

New home production in California took another dive in January, but it's not as simple as a bad market just getting worse. California Building Industry Association executives say part of the 53 percent decline in building permits issued (year over year) from January last year is due to revised building standards that went into effect January 1. That resulted in a rush to get permits in December, before the new codes took effect. In January, just 2,608 permits were pulled in California for single-family homes, down 62 percent from January of 2007, and down almost 28 percent from the previous month.
     Multifamily housing starts--condo and rental apartment permits--totaled 2,092, down 34 percent from the previous January, and down 46 percent from the previous month.
     CBIA Chief Economist Alan Nevin worries that so few new reside...Read More

Feb 28 2008 6:49AM | Permalink | Email this | Comments (0) |

I got a phone call yesterday from Denver-based land planner David Clinger, who shared with me his apocalyptic prophesy for the future of the housing product that propelled the largest public home builders to immense growth over the past decade (until two years ago). He defines that product as "beige boxes in the boondocks"...In other words, large single-family homes, built at four units to the acre, on land bought four years ahead of the market in remote locations that allow the finished homes to be marketed at an attractive price per square foot, to families in the mainstream of the housing market.
     Today, Clinger says, "That dog won't hunt. That dog is dead!"
     Now remember, Clinger has a vested interest in all this. His firm specializes in designing high-density housing developments, esp...Read More

Feb 25 2008 5:47AM | Permalink | Email this | Comments (0) |

With apologies to the Oscar-winning Best Motion Picture, CEOs of the public home builders may feel they are living in an equally freaky Coen Brothers film right now. Not only is their world being torn apart by a hostile housing market, crashed share prices and red ink all over the balance sheet, but they've got to worry about the Laborers Union of North America's Pension Fund, which owns shares of a number of public builders. That group recently pressured Meritage Homes into amending its CEO succession plan, then went after Toll Brothers--sending a letter to other shareholders asking them to withhold their votes for the re-election of Board Chairman and CEO Robert Toll, and to reject the company's proposed CEO bonus plan. LIUNA General President Terence O'Sullivan even accused Bob Toll of contributing to America's "slide into recession."
   ...Read More