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alstry (35.03)

Analysts Outright Lying????

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March 30, 2008 – Comments (6)

FloridaBuilder in his recent post tells us land values have crashed.  Recent publicized land sales have closed at less than $0.20 cents on the dollar.  Calculated Risk tells us about an improved deal selling for $0.15 cents on the dollar. 

http://calculatedrisk.blogspot.com/2008/03/land-at-15-cents-on-dollar.html

The analysts are well aware of the recent land deals.  They also know that a material part of HB assets on the books is land.  Further, it is clear that most public HBs have not impaired their land to anything close to current market value.  Yet they still come out with ridiculous bordering on outright deceptive analysis......for example S&P's recent SPF recommendation:

"We believe SPF's high lot inventories in Cal. will become attractive when the housing market turns around. Applying aprice-to-book slightly below 0.5X to a forward book value of $14.75, in line with small builders, we are maintaining our 12-month target price at $7. /K. Leon-CPA"

Mr. CPA analyst knows that CA land is one of the most challenged in the country.  Mr. CPA analyst knows much of SPF's assets is land.  Mr. CPA analyst knows that SPF has not impaired its land to anywhere close to current market value.  Mr. CPA analyst knows SPF's debt is MUCH MUCH MUCH more than the market value of its assets.  Mr. CPA analyst knows SPF is losing hundreds of millions of dollars.  Mr. CPA analyst knows that forseeable outlook is even more negative.  So if Mr. CPA analyst applied an actual real world valuation to SPF's assets, SPF would have a likely have a NEGATIVE book value.

With a negative book value, what would .5X of a negative value be?  How can this idiot(or something else?) maintain a $7 dollar price target and still keep a straight face.

 

6 Comments – Post Your Own

#1) On March 30, 2008 at 12:35 AM, alstry (35.03) wrote:

MORE EVIDENCE OF LAND LIABILITY:

“‘‘We’re seeing it throughout Southern California.....The reality is that firms like KB Home will probably wind up building those new (smaller) homes and making little, if any, profit, just to use up the lots,’ said Nevin. ‘In the world of publicly held builders, land is a liability, not an asset, so they try to remove themselves from heavy lot positions, and one of the ways they can do that is by downsizing their homes.’”

http://www.nctimes.com/articles/2008/03/29/news/inland/fallbrook/eb34fdd06717a74c88257419007b7544.txt

Let's repeat what S&P's Mr. CPA analyst said:

"We believe SPF's high lot inventories in Cal. will become attractive when the housing market turns around."

Become attractive????? Bulldonkey.  Land is a liability and he knows it!!!!!!!!!  His own collegues at S&P say the recovery is years away. 

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#2) On March 30, 2008 at 5:40 AM, klemenv (99.76) wrote:

Forward book value?

Price per forward book value?  :) :) :) 

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#3) On March 30, 2008 at 9:13 AM, abitare (56.29) wrote:

Analysts Outright Lying????

Of course, or covering their book, a great time to sell anlyst upgrade, buy a day or two after analyst downgrade. 

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#4) On March 30, 2008 at 9:45 AM, dwot (97.00) wrote:

Good points.  Homebuilders have a lot of hurting to do yet.

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#5) On March 30, 2008 at 10:06 AM, dwot (97.00) wrote:

That link is funny, the expectation that the market will recover to where it was before the downturn...

The woman doesn't seem to understand she paid too much and that is gone and not coming back, and she seems to think the problem is something else.

I would have to say I do think there is a different crowd you get in a neighbourhood based on affordability.  My first home you'd hear the neighbours fighting all the time.  My second home was peaceful and then the price went down about 15% over 5-6 years and I hated the last two years in my home because of fighting, yelling and screaming I'd constantly hear from two of the households that moved in when the prices were down, and probably touched a level of affordability.  My third home complete peace and quiet again. 

And when I was renting, supporting myself and going to school I was always in the cheapest place I could find and my goodness, the years I slept with ear plugs...

So, certainly if I was looking to buy in a higher price range I would actively choose a place that had homes of similar or higher value around me.  Of course, those smaller homes they are building with the nicer homes around them would appeal to me as well and I think they are a wonderful size.

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#6) On March 30, 2008 at 12:37 PM, klemenv (99.76) wrote:

Forward book value?

Price per forward book value?  :) :) :) 

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