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Latest Comments494 Comments
On Short-Sellers and Dishonest Executives
Transformation in Retail Shopping Gains Momentum
Down Payment Assistance Cancelled For Builders [Housing Tracker]
Thanks for this thread. I wonder why down payment assistance on an FHA loan would be necessary--after all, the program will finance 97% of a home's appraised value.
If someone can't come up with 3% down, then why are they buying a house in the first place?
I think that the DPA programs should apply only to conforming mortgage transactions, not government sponsored low-down loans like FHA and VA products.
Can One Profit From Poor Customer Service?
We try to make our store look like it did the day it opened. So you see people cleaning, straightening shelf displays, and generally taking care of things throughout the store--even outside their normal departments.
But when customers are in the building, that's where we shine. Some customers claim that we're too attentive--they'd rather be left alone to shop. But we'd rather err on the side of overkill than ignore a customer.
There's a metric in retail called 'lifetime value.' In other words, what will that customer spend in their lifetime in your store? If you give a poor experience, the customer will take their dollars elsewhere. And give that lifetime value to someone else.
We at Worst Buy take that seriously. And with nearly 1000 stores in the US now, it's getting more and more challenging to keep everyone focused on the customer. But after all, that's the only thing worth focusing on--meeting customer needs quickly, efficiently, and completely.
High End Joins Low End In Housing Crisis [Housing Tracker]
Gleanings From Pulte Homes Q2'08 Conference Call
Great commentary, thanks.
What was of interest to me was the comment about whether a developer should dump the land on the books now or hold onto it in anticipation of a recovery. I think it boils down to how badly the developer needs to raise cash. If cash reserves are strong, and the carrying costs won't eat into the liquidity reserve, then holding and waiting makes sense. On the other hand, if current projects are getting squeezed, then liquidating land might be a better choice.
This is truly an environment where the strong will survive.
Homebuilders Woo Back First-Time Homebuyers [Housing Tracker]
In this market, a $250,000 house is 'good value for the money.' Not too long ago, those same homes were selling for $400,000.
Since income is now a primary determinant for mortgage qualification, as long as home prices stay above the median household's ability to afford them, prices will continue to drop until the market reaches equilibrium.
In this area, equilibrium seems to have occurred. Now all that's left to do is work off the glut of inventory--nearly a year's worth at current selling rates. What's interesting to me is that even though sales are up both from month to month and year over year, inventory levels are still high. I think it's the 'foreclosure effect'--with new foreclosures entering the market faster than listed homes can be sold off, inventory levels remain high, but median prices drop.
It's happening all over the country.
Office Vacancies Rise [Housing Tracker]
Excellent compilation, as usual.
The office market in Northern NV has suffered the same impacts as noted in other areas. Contraction within the real estate, mortgage and related industries have pushed class A space vacancies above 15% overall, and above 20% in previously 'hot' areas around town. Real estate offices have closed, mortgage companies folded up, and title companies closed branch offices, leaving high-value space empty. No new Class A spec office space has been finished this year; the only projects moving forward are build to suits that were approved last year. And while general office vacancies are up, 'hard' medical office space (physicians, radiology clinics and the like) is at a premium. 'Soft' medical (psychology clinics, family counseling services) are suffering from lack of insurance coverage for those services, so spaces catering to those specialties are languishing.
Propety owners are loading up vacant properties with concessions as generous as 6 months free rent for a 5-year lease. Some buildout credits are as high as $10/s.f. for class A space.
Some developers are still self-financing small spec spaces on in-fill lots they purchased in 2004-2006, but volume is only a fraction of what it was just 18 months ago. Most of this space is Class B office, and concessions have begun to surface in this market as well.
The office market looks as dead as residential did the beginning of the year. The good news about residential is that it appears that new foreclosure notices peaked in May 2008. That suggests the worst is over from that perspective. But it doesn't indicate a return to a balanced market anytime soon: There's still nearly a year's worth of existing home inventory to work through.
Homebuilders: Scant Good News [Housing Tracker]
Redux to my previous comment, and it's my pleasure to give you proper credit for this compilation:
When I said "Northern NV market," I was referring to Reno/Sparks. Carson City is considered part of the Northern NV market by most national surveying outfits, because it's only 30 miles south of Reno. In truth, Carson City residents consider themselves a separate community, even though there's some commuter traffic between Carson and Reno.
Right now there's construction on a freeway extension that will speed up the commute significantly. The interesting thing about the freeway extension is that it was first proposed fully 30 years ago. It may be completed by 2010, at a cost nearly triple the first set of bids. Such is the nature of NV road construction!
Auto Retailers' Ability to Pay Debt - What It Means
How long that takes to show up in interest coverage remains to be seen. But at least management isn't asleep at the switch.
Homebuilders: Scant Good News [Housing Tracker]
Excellent compilation, and thanks for including the story about Carson City land. The state capital was swept up in the boom as well, and now land has gone begging for buyers.
The owner of the property you mentioned also has huge land exposure in the Central Valley of California, from Sacramento to Bakersfield. Some of the subsidiaries have experienced foreclosures on land purchased in 2004 and 2005. The holding company also has exposure in the Northern NV market.
Excellent reporting as usual. Thanks!
Who Can Buy Circuit City AND Successfully Turn It Around?
Every CE retailer uses addons to increase profit margins. But with CC, that strategy hasn't worked in 6 consecutive quarters--which lines up nicely with the decision to fire the top sales people back in March 2007.
Accessory attachments can make or break a CE store. Without the attachments, you might as well be selling at WMT.
The Retail Slump and Malls [Housing Tracker]
I believe that the retailers who weather this period well will be the ones who keep well-trained people, continue to invest in them, and view customer satisfaction as a priority.
Wal-mart is an example of a company that has succeeded by promoting good value through low prices and a streamlined delivery system. Other retailers, specialty and discount, can differentiate themselves only if they provide a superior delivery system. Wal-mart clones have failed--ShopKo, Kmart, Linens & Things--which bodes ill for others trying to do the same thing.
What Conference Calls Tell Us About Mortgage Trends [Housing Tracker]
Excellent reporting, thank you.
The quote of the day is telling, and speaks to the new paradigm in mortgage lending: Good credit, down payment, reserves and ability to pay have superceded the quest to 'stretch the envelope' and make deals work regardless of the outcome.
The CDO market for conforming mortgages will eventually come back to the volumes we saw in 2006. The main difference now is that new originations have much better underwriting standards than old ones, which will help both firm up the secondary market (because it will be easier to validate repayment streams) and reduce defaults (because of the more thorough underwriting process).
This is a welcome change to the industry. And just because there will be people shut out of home ownership isn't a bad thing. As we've all seen, the folks who couldn't afford homes are now losing them.
ForeclosureS.com: One Million Foreclosures By Year's End [Housing Tracker]
Thank you for correcting me. I meant to say that the initial bid is typically the amount owed, just as you described. That amount can include other costs incurred (filing fees, attorney's costs), not just the outstanding loan balance. But you're right that the property goes back to the lender if no one bids higher than the opening bid.
Thanks again for the clarification.