June 03, 2008
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RELATED TICKERS: TOL
... should be told to pound sand. These guys simply want their bubble back.
Full Size here.
Here's a RE commentator I like to read, John Burns Real Estate Consulting. A snippet from this week's email.
We have reviewed more than 500 cash flow reports and appraisals this year, and we are stunned by what we are finding. It is very common to find:
"Updated cash flows" with home price assumptions that are much higher than we can negotiate in 5 minutes with the sales agent and significantly higher than the most recent closings in the neighborhood.
"Supposedly conservative" assumptions of flat home pricing and rising sales rates in a market with foreclosures down the street and job losses in the metro area.
Completely untrue statements that appear as caveats, such as "We have assumed that the property is fully entitled."
A high pro forma IRR on paper that is really a very, very low IRR when the proper assumptions are used.
Sound like a RE market near you?
Not new news though in the industry. Just these make news when people start looking around for people to sue...like appraisers. The truth is the bankers and mortgage brokers need to have some code of conduct to extinguish the control they maintain on these consultants. Its the same in the Commercial RE sector as well. Its not totally unanalygous to the credit agencies relationship to bond issuers. Yikes, did I say that- just kidding.