Toll Brothers CFO Optimistic on Housing, Eventually

Joel Rassman, CFO of Toll Brothers, makes the case that the current slump in the housing market is different from previous downturns because it is due to an oversupply of housing rather than job losses, higher interest rates or a slowing economy. In November, he said that improving conditions in the Washington, D.C. market could indicate that the duration of the current downturn will come in close to the year-and-a-half that is typical of the industry’s cyclical slowdowns. Occurring about the same time as Hurricane Katrina, Washington was the first market to show slowness, mostly in Northern Virginia, and things could now be in the process of turning positive there. “You’ll see incentives slowly but surely disappear,” he said. “And when that happens, you’ll see some consumers coming back into the market thinking that maybe they missed the bottom and that they’d better get in before it’s too late. And it builds from there. There is even the potential for a significant shortage of housing, because in many markets it takes anywhere from two to five years to get approvals for development.” (www.bloggingstocks.com; www.cfo.com)
Bloggingstocks (3/5/07); Victoria Erhart; CFO Magazine (11/1/06); Ronald Fink

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Housing Market to Heat Up? Sellers, Agents Hope Spring Sales Will Be Spectacular

After more than a year of falling sales and sinking prices, the residential real estate market in Massachusetts is poised to enter its most crucial test in years. A strong spring market could put an end to the real estate downturn that has cast a long shadow across the state, from downtown Boston to the Berkshires, and some are seeing grounds for optimism. The number of homes and condos on the market as the spring season starts is up over last year, according to MLS Property Information Network. Condos for sale are up by about 500, to 13,787 and the number of houses for sale has risen by about 1,000 to more than 25,000. That’s a reflection of more optimistic home sellers trying the market, sometimes after having pulled those properties during the downturn. Also, the latest batch of market reports for the state showed the number of home and condo sales rising, although prices have continued to fall. Real estate brokers say they already see signs that the pace of deals is picking up. “We have had five or six bidding wars in the last few weeks,” said Michael Carucci, president of ERA Boston Real Estate Group. “I see buyers that have been on the sidelines getting very active lately. That is the clearest sign of a recovery.” (www.bostonherald.com)
Boston Herald (3/4/07); Scott Van Voorhis

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Sudden Overload: When the Mortgage Adjusts Upward, Here’s How to Cope

By some estimates, $1 trillion worth of adjustable-rate mortgages will reset this year, creating “payment shock” for consumers who didn’t see it coming or expected to be in better financial shape by the time their payments increased. But before they do anything, there are a number of steps that consumers who are facing an increase should take, according to Jack Guttentag, professor of finance emeritus at the Wharton School at the University of Pennsylvania who created www.mtgprofessor.com, a Web site to educate consumers about mortgages. For starters, he advises home owners to dig out their loan documents and figure out when the adjustment will occur. Look for the name of the published index to which the rate adjusts, identify the margin listed in the loan documents and add the most current value of the index to the margin to get a ballpark estimate of the future rate. “By the time the lender sends a notice of the new rate, you should not be surprised if you’ve been tracking it,” Guttentag said. “You want to make your decisions based on what you know, and this is something you can know.” Then it’s time for a reality check. Take a look at how much you make and how much you spend, and adjust your budget accordingly. Freddie Mac suggests that borrowers trim their expenses, everything from gas to groceries, if the new rate stretches their budget, and they should consider refinancing the loan if it is possible, but only if they can land better terms, keeping in mind that it costs money to refinance. (www.washingtonpost.com)
Washington Post (3/4/07); Dina ElBoghdady

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Seeking Curbed-Cost Appeal, Builders Cut Homes’ Price and Size

Now that overheated markets such as Miami are cooling fast, Miami-based Related Group, the nation’s largest condo developer, has trotted out a rebranded “affordable housing division” to build condos for buyers priced out of the market. “You make less money, but the demand for this type of housing is so great that the volume you can do justifies the concession on the returns,” said Oscar Rodriguez, senior vice president of the division. “It used to be the bigger the better. That has changed,” said Morningstar housing analyst Eric Landry. Building smaller and cheaper “is on the table for all of (the builders),” he said. One example comes from KB Home, which lost $49.6 million in the past quarter as orders fell 38% from a year ago. Chief Executive Jeffrey Mezger told analysts in a Feb. 13 conference call that KB is “quickly retooling product on our new openings to go to smaller product.” That’s an about-face from recent years, when KB upped some home sizes 300 to 400 square feet to get more profit on same-sized lots. KB and other builders now get subcontractor price concessions too. “Over the last 24 months you were almost a heretic to talk about affordable housing,” said Bryan Finnie, managing director of North Miami developer Redevco. “Now the conversation is, ‘Oh, market opportunity.’” (www.investors.com)
Investors’ Business Daily (3/2/07); Marilyn Alva

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Gulf Shores Give Up on Beach Mouse Housing Permits

After trying since 2004 to gain the ability to issue special permits for single-family home construction within the habitat of the endangered Alabama beach mouse, Gulf Shore officials have abandoned their efforts. The officials sought to cover the species’ entire range with an “incidental take permit” that would absolve landowners from legal liability should they accidentally harm the mouse or its habitat. It had been the intention of the city and the U.S. Fish and Wildlife Service to place one permit over the mouse’s entire range — dune and scrub habitat encompassed entirely by Gulf Shores’ planning jurisdiction — to expedite the permit process for the owners of about 500 undeveloped lots on the Fort Morgan peninsula. On an individual basis, the process can take two years. The city sent its application to the Service in January 2006 and when it was finally reviewed by federal regulators earlier this year, it was returned with a request for newer information and maps. Bill Pearson, the local field supervisor for the Service, said that his staff has been primarily occupied with suits from environmental groups alleging that the government wasn’t doing enough to protect the mouse. At the moment, Pearson said, five property owners have outstanding permit applications before Fish and Wildlife. Since the first of the lawsuits was filed in 2003, the Service has, in three batches, issued incidental take permits to about 100 landowners who want to build houses, he said. The most recent group of permits was issued earlier this year. (www.al.com)
Mobile Press-Register (3/4/07); Ryan Dezember

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FEMA Closes Louisiana Mobile Home Park Housing Katrina Victims Over Health and Safety Concerns

The Federal Emergency Management Agency said that it has requested work permits to dismantle a trailer park in the Hammond, La. area that was providing shelter to dozens of families left homeless by Hurricane Katrina but was plagued by sewage leaks and power outages. FEMA abruptly closed down the mobile home park because of ongoing problems with raw sewage that pours onto the grass. FEMA said that electricity was cut off last week for the third time since Oct. 12. Manuel Broussard, an agency spokesman, said that the landowners hadn’t paid bills on time; while a co-owner of the site said FEMA hadn’t paid on time. The site, on the edge of town in loblolly pine country about 45 miles northwest of New Orleans, was one of the dozens of compounds the government rushed to establish for the tens of thousands of displaced hurricane victims. Its residents said they questioned the genuineness of the sudden concern for their health because the stink of the sewage has been a nuisance for about a year. (www.sunherald.com)
Sun Herald (3/5/07); Associated Press

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