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alstry (35.03)

Home Builder headwinds growing here and abroad

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August 27, 2008 – Comments (2)

HONG KONG (MarketWatch) -- Shares of Japan's Sohken Homes Co. were suspended from trading Wednesday after the home builder filed for court-led rehabilitation with the Tokyo District Court, becoming the latest Japanese developer to enter into bankruptcy protection.

Top-25 builder Woodside Homes has been forced into involuntary bankruptcy (Chapter 11). Assets and liabilities are of yet unknown.

"Asahi Homes Co. plunged to the lowest in more than five years in Tokyo trading after its biggest shareholder filed for bankruptcy protection with 62 billion yen ($568 million) in liabilities."

Home Builders are becoming more and more desperate around the world.  On October 1st, Down Payment Financing ends in America.  For some builders that represented more than 25% of sales in an already challenged market.  How desperate are builders getting???

Pulte Homes Inc. and Hovnanian Enterprises Inc. are both urging to visitors to their Web sites to take advantage of the down payment assistance programs before they expire.

Now to add just a little more headwind:

The Federal Housing Administration, a U.S. agency that is rapidly shouldering more of the risk on home loans, raised the premiums it charges for insuring that mortgages will be repaid.

In a posting on its Web site Tuesday, the FHA said the upfront premiums charged to most borrowers will be 1.75% of the loan amount, effective Oct. 1. That is up from the 1.5% that was in effect until July 14, when the FHA adopted a "risk-based" pricing system that created a range of charges depending on borrowers' credit scores and the amount of the down payment or equity they owned in the homes. In late July, Congress approved a housing bill that included a provision requiring the FHA to revert to a standard premium at least until Oct. 1, 2009.

On a $300,000 loan, the new upfront premium works out to $5,250, up from $4,500. The annual premiums paid by borrowers would remain at 0.50% to 0.55% of the loan balance.

http://online.wsj.com/article/SB121978888706674303.html?mod=hps_us_whats_news

Foreclosures skyrocketing.  Inventory growing.  Prices crashing.  Down Payment Assistance financing ending.  Up front fees rising.  And Cramer is calling a bottom in housing......is this his tenth bottom call?

2 Comments – Post Your Own

#1) On August 27, 2008 at 8:19 AM, alstry (35.03) wrote:

DEPARTMENT STORE CHAINS SHUTTING DOWN!!!!!!

The following is a summary of Dillard's store closings:

During the second quarter, Dillard's closed the following store locations:

Center City Square Feet Turfland Mall Lexington, KY 214,000 Greeley Mall Greeley, CO 124,000 McFarland Mall Tuscaloosa, AL 180,000 Pine Ridge Mall Pocatello, ID 120,000

Dillard's closed its Rivercenter location in San Antonio, Texas during the month of August (120,000 square feet).

Dillard's has announced the following near-term 2008 store closures:

Center City Square Feet Chesterfield Town Center Richmond, VA 110,000 Towne Mall Franklin, OH 113,000 Knoxville Center Knoxville, TN 115,000 Hickory Hollow Nashville, TN 200,000 Eastland Clearance Center Charlotte, NC 162,000 Valley View Mall Dallas, TX 300,000 Crossroads Mall Omaha, NE 200,000 Boulevard Mall Las Vegas, NV 200,000

It apprears the average size if an anchor is about 150K square feet. The above store closing represent about 2 million square feet. If we factor all the retail store closings, we are contemplating hundreds of millions of square feet going vacant....how will this be absorbed and what effect will it have on the centers they are located in???

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#2) On August 27, 2008 at 8:29 AM, alstry (35.03) wrote:

From other side of the Atlantic........

Housebuilder Taylor Wimpey has reported a huge loss for the past six months after having to sharply reduce the value of its assets including land.

The firm slumped to a loss of £1.54bn in the six months to 30 June, saying it faced "very challenging" conditions.

It was hit by the lower value of its land in the UK, US and Spain, and the cost of downsizing its UK business.

http://news.bbc.co.uk/2/hi/business/7583557.stm

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