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alstry (35.02)

More HOV nonsense and stupid hombuilder analysis

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September 03, 2008 – Comments (4)

Let's get one point clear......home prices are falling around America.  Home prices are falling for a variety of reasons including skyrocketing foreclosures, rising unemployment, falling wages, increasing non housing related costs, tightening credit standards all resulting in too much supply and too little demand.

The price declines are accellerating and inventory is growing.  As prices continue to crash, homes start selling below construction cost even if you are given the lot for free.  Right now such pricing can be seen in CA, FL, NV, GA and AZ.  It is getting much closer in CO, TX and the Carolinas.  These are the key areas where new homebuilders build.

No matter how you want to cloud the issue, when homes are selling below construction cost, every home sold is a loss and drains cash from the balance sheet. 

Over the past few years, there has never been more BS representationis or Wall Street analysis than that provided by and for the publicly traded HBs.  How many "one time" impairments are not going to be included in losses as builders impair only a few of their owned lots each quarter?

This one by HOV tonight is a perfect example of builder BS:

"Homebuilding gross margin, before interest expense included in cost of sales, was 8.5% in the third quarter of 2008..."

How stupid does Hovnanian think its shareholders are?......obviously very stupid to make such a statement.  HOV has $2.6 Billion dollars in debt.....and a material portion at over 11%.  At a blended rate of 8%, HOV is paying over $200 million dollars a year in interest alone.

Could you imagine someone saying to the bankruptcy judge.... but for the debt accumulated, I would be able to pay my bills, live comfortably, and not declare bankruptcy?????? 

Hello...anyone home SEC watching out for fair disclosure???

Don't be fooled.  These homebuilders are losing hundreds of millions every quarter.  In HOV's case, losses for eight quarters in a row.  As these builders continue to build, execs take home huge salaries, and home prices continue to fall, the losses will only continue to accumulate until the money runs out.

Until prices stop crashing, there is no bottom.....plain and simple.  If prices keep falling, most HBs will go BK......just like what happens to the airlines selling seats below cost.  Any idiot can analyze a homebuilder, it is one of the easiest businesses to analyze.....it is obvious by the way the data is presented and clouded, the builders and Wall Street analysts all think we are idiots.

 

 

 

4 Comments – Post Your Own

#1) On September 04, 2008 at 12:14 AM, alstry (35.02) wrote:

Not Another Affair Rumor!!!!!

(ST. PAUL, MINN.) – John McCain’s campaign threatened legal action against the National Enquirer today for running a story about McCain’s running mate, Sarah Palin, allegedly having an affair with her husband’s business partner.

http://www.cbsnews.com/blogs/2008/09/03/politics/fromtheroad/entry4413030.shtml

Don't we know by now that all politicians screw around.  Let em be.  McCain did it, Edwards did it, Clinton did it, go for it.  Who gives a damm anyway....we all know that family values BJ is only to get votes anyway.

America should be more like Europe, if the mistress is decent looking, put her on page 3 and brag about it.

Enough about the private behavior.  We know Barak hasn't really done much.  What the hell has McCain done other than manage to get captured by the enemy and brag about it for his entire politcal career?

Yes we have the right to vote...just not the right to choose.  The way the media controls the elections is not much different than the way Wall Street analysts control the spin on the market.

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#2) On September 04, 2008 at 12:23 AM, alstry (35.02) wrote:

More BS:

July 2008:

But things may be looking up domestically for ResCap. GMAC said its U.S. operations are beginning to stabilize after it slashed its balance sheet to reduce risk.

“While prime conforming loan production decreased modestly year-over-year with $12.2 billion in the second quarter of 2008 versus $12.7 billion in the year-ago period, production of higher-margin government loans increased to $3.8 billion this quarter compared to $800 million in the second quarter of 2007.”

 

http://mortgage.freedomblogging.com/2008/07/31/ditech-parent-sees-its-us-mortgage-biz-stabilizing/

 

Today:

Residential Capital LLC, the parent of Costa Mesa-based Ditech.com, is cutting 5,000 jobs, a 60 percent staff reduction, as the mortgage meltdown continues.

“While these actions are extremely difficult, they are necessary to position ResCap to withstand this challenging environment. Conditions in the mortgage and credit markets have not abated and, therefore, we need to respond aggressively by further reducing both operating costs and business risk.”

http://mortgage.freedomblogging.com/2008/09/03/ditech-parent-to-cut-5000-jobs/

It's only a friggen month later!!!!!!!!!!!!!!!!

And some want us to believe with the current unprecedented economic crisis, voting for a Republican or Democrat will somehow make a difference and not be more of the same nonsense???

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#3) On September 04, 2008 at 7:54 AM, DemonDoug (80.18) wrote:

And some want us to believe with the current unprecedented economic crisis, voting for a Republican or Democrat will somehow make a difference and not be more of the same nonsense???

Thank you al.  that last statement just made my day.  We didn't vote Ron Paul, so no, there won't be any change.

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#4) On September 04, 2008 at 8:32 AM, alstry (35.02) wrote:

Demon,

Just so you have a clear understanding of my perspective....

right now much of what we see hear and read are deceptions, half truths, and blatent misrepresentions.  For those even with basic training it is obvious.  The fact that it has become so pervasive tells me that regulators are trying to deal with a problem far bigger then any of us are aware.

When a system reaches this level of stress, castastrophe is likely to ensue.  I have little doubt of that now. 

We are now seeing ads running on CNN that effectively are conditioning America that we have to bomb Iran.

We are seeing CEO's make statements like this:

“Once the supply of foreclosed inventory is exhausted, we believe that favorable demographics will kick in,” Bob Toll said.

Yet, a few weeks earlier Toll sold 1.5 million shares...if he really believed what he just represented to shareholders, he wouldn't be selling shares.

In the past, this kind of behavior was never tolerated by regulators, now if happens everyday.

I know we have a fun disagreement whether it will be inflation or deflation......buy in the end the are the opposite sides of the same book.  If there is a collapse, which is getting more and more likely everyday......then either result is the same, few are working and even fewer can sustain themselves.

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