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alstry (36.40)

S&P vs. The Facts

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April 15, 2008 – Comments (3)

The Facts:

The median price paid for a Southland home was $385,000 last month, the lowest since $380,000 in April 2004. Last month's median was down 5.6 percent from February's $408,000, and down a record 23.8 percent from $505,000 in February 2007. That peak median of $505,000 was reached several times last spring and summer.

http://www.dqnews.com/News/California/Southern-CA/RRSCA080415.aspx

 

S&P's assumptions for SPF:

"Assuming stable pricing in its major markets, we foresee the company's gross margin at 8.8% in 2008, compared to a negative 7% in 2007."

 

How can S&P assume stable prices in its analysis when prices are falling at a record pace just since the beginning of the year?

 

Why is S&P INTENTIONALLY trying to mislead investors???????

 

3 Comments – Post Your Own

#1) On April 15, 2008 at 4:53 PM, cabuilderboy (88.03) wrote:

Not to stick up for SPF, but you are applying resale pricing numbers to a new home builder balance sheet. I can assure you, SPF and every other builder is much farther ahead of the price drop curve than the resale market. Almost every CA builder has reduced prices over 30%, while the median shows a drop of 23.8% as you have reported. You can do the math, but S&P is simply suggesting a builder balance sheet is already reflecting expected lower prices compared to the resale market.

I respect your use of stats, but make sure you apply a more equitable analysis of new vs. resale.

 

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#2) On April 15, 2008 at 5:00 PM, VTEngineer2001 (< 20) wrote:

Predicting the percent fall in the next month or quarter would make their numbers even more shaky than they are in the article. I think this is more along the lines of the S&P trying to add (some) credibility to their numbers rather than intentionally misleading investors (even though it is misleading - just not intentionally). Still, it would be nice if they said something like "current market conditions and prices would produce an 8.8% gross margin for the company in 2008, however given continued month-over-month price declines in home sales, we do not foresee this as sustainable".

I HAVE to beleive in the common good of society, otherwise what have we become?

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#3) On April 15, 2008 at 5:30 PM, alstry (36.40) wrote:

You can read S&P's report for yourselves.  The language is very clear.

In making its assumptions for positive margins, it makes the assumption that prices will be stable.  Clearly they are referencing selling prices.

Yes, new home builders are ahead of the cureve in lowering prices.   But, especially in CA and other bubble markets, new home builders have been LOWERING prices since the beginning of the year.  The above assumption was made in March when S&P knew prices were falling in SPF's key markets.  And incorrect assumption based on a known fact is a LIE!!!!!!

This is a much more inportant issue than S&P simply lying about one homebuilder.  It is much broader and much more serious.  S&P rated mortgage pools AAA that it knew that the borrowers had little chance of remaining compliant with the terms.  At this point, the integrity of our entire country's financial system is at stake.

Who knows what the assets in our banks are really worth?  Are our banks in fact solvent.  Conditioins are so bad right now that almost every industry in Americal is laying off workers.

Casinos are laying off.  Airlines are laying off.  Wall Street is laying off.  Major Law firms are cutting back.  Construction firms are laying off.  Retailers are shutting down by the thousands around America.

I am not sure how bad it will have to get before the country finally realizes that a little piece is shutting down every day.  Each time a business shuts down, each time a worker gets fired, each time a municipality cuts a program.....and so on and so on.

What we are facing we have never faced before as a nation.  Our income is crashing but our expenses for things we buy daily is going through the roof.  This can't last without very very serious consequences.

Homebuilder earnings come out in a few weeks.  Just watch how close they are to current estimates.  Let's count how many more people get fired between now and then.  Today MGM and UBS announced major cutbacks.....how many more do you think occured that we don't know about.

 

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