D.R. Horton 2nd-Quarter Net Sales Orders Decline
D.R. Horton, the nation’s largest home builder, reported that its sales orders in the most recent quarter fell 37%, led by even steeper declines in California and the Southwest. Horton’s founder and chairman, Donald R. Horton, said that conditions for selling homes “continue to be challenging in most of our markets,” as the supply of unsold new and existing homes remains high. “We continue to sell more homes than any other builder,” he said, “even though the spring selling season has not gotten off to its usual strong start.” The Fort Worth-based company said that net sales orders for the first quarter of 2007 totaled 9,983 homes, down from 15,771 a year ago. Orders plunged 59% in California to 1,107 from 2,697 a year earlier; they fell 39% in the Southwest and 21% in the Northeast, the smallest regional decline. “It appeared demand had stabilized, but this throws that into question,” said NAHB economist Bernard Markstein. As a result of problems in the subprime mortgage market, NAHB recently trimmed its 2007 construction forecast to 1.45 million starts. That forecast hinges on the belief that the housing market will show signs of improvement this summer and that problems in the subprime market won’t spread. Markstein said that there is often a tendency to become overly pessimistic after seeing a series of negative reports. He said the current weakness and rich incentives from builders create an opportunity for buyers that might last only three to six months. “We’re always saying this is the best time to buy,” he said. “Well, this really is the best time.” (www.ap.org)
Associated Press Newswires (4/10/07); David Koenig
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Housing Slowdown Hits Close to Home
The housing slump in the Kansas City area is reverberating from building sites to corporate offices, with layoffs announced by subprime lender NovaStar Financial, but the statistics so far have not been alarming. The Federal Reserve Bank of Kansas City estimates that there are 51,800 construction jobs in the area, virtually unchanged from January 2006. About half involve residential work. “A year ago, it was up 10%, so it’s no longer contributing to the metropolitan area as a whole” in terms of driving additional growth, said Chad Wilkerson, a regional economist for the Fed. Moody’s Economy.com also anticipates that growth in housing-related employment in the area will slow down significantly this year, from 6% to 1%. Those numbers include construction workers, building suppliers, landscapers, architects, engineers, bankers and real estate agents. “It is important to keep in mind that the Kansas City housing market did not see the kind of expansion that we witnessed in some areas of the coasts,” said Moody analyst Magi Kirilova. “Therefore, the corresponding slowdown will not be as pronounced, either. While strictly construction payrolls will be impacted the most, the housing-related sector as a whole will see an aggregate slowdown in growth.” Kirilova added that a subtler impact of the slowdown may be seen in other parts of the local economy that benefited from the recent housing boom, when people were buying and furnishing new homes, or refinancing and using the extra cash to make other purchases. NAHB estimates that buyers of new homes on average spend $8,500 on furnishings. (www.kansascity.com)
Kansas City Star (4/10/07); Kevin Collison
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Prices Out of Reach for Thousands
Even though housing affordability has fared better in the Coachella Valley and the Palm Springs area of California than in the state as a whole, only about one-quarter of the households living there have the income to qualify for a median-priced home, down from 48% in 1993, as the result of steadily rising housing prices. “Five years ago, I was buying land around here at $40,000 to $50,000 an acre,” said Rudy Herrera, a partner in Palm Desert-based home builder Family Development, which has several valley subdivisions. “Today, that same land is more like $200,000 to $250,000 an acre.” With individuals having little direct control over home prices, the valley business community is seeking ways to make houses more affordable by raising worker wages, and trying to attract higher-paying industries. Diana Berchem, a former nurse recruiter at Eisenhower Medical Center, said that the 253-bed hospital, which employs about 2,000 people, would be interested in forming a consortium to address affordable housing issues for all types of workers. She said that there had been situations in which candidates rejected job offers because of the high price of homes. She also shared stories of newly hired employees from other parts of the country who couldn’t sell their homes, strapping them with a double mortgage — or mortgage plus their current rent. To stay afloat, she said, some employees were working full-time at one hospital and also working on a per-diem basis at another. (www.thedesertsun.com)
Desert Sun (4/15/07); Lou Hirsh
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Mortgage Mod Squad: Lenders Get Flexible to Help Prevent Foreclosures
With large numbers of home owners falling behind on mortgage payments, lenders across the country are seeking ways to keep delinquent customers out of foreclosure. Texas-based EMC Mortgage, which services about 500,000 loans nationwide with $78 billion in outstanding balances, has a roving 50-person team of Mod Squad problem solvers who are expert in making changes to loan requirements that will permit the borrowers to remain in their houses, pay down their loans and avoid foreclosure. Rather than waiting for home owners to contact them when they are in a jam, the team is reaching out to borrowers, working with local consumer and credit-counseling organizations, and holding loan-modification educational meetings for borrowers in cities where delinquencies are rising. Loan modification is one approach that mortgage servicers can use to reduce foreclosures. Other techniques include: repayment plans in which unpaid balances are reduced over time through small, regular add-ons to borrowers’ monthly payments; and forbearance agreements under which principal and interest payments are reduced or even suspended for a period of time. Once the borrowers have their finances under control, the regular payments resume, along with gradual reimbursements of balances in arrears. (www.washingtonpost.com)
Washington Post (4/14/07); Kenneth R. Harney
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Relocations Get Harder
Gone are the days when companies could move employees and new hires around like puppets on strings. Now, the sluggish housing market is creating hassles for employers and employees who are struggling to move and to sell homes in what has quickly turned into a buyer’s market. Forty-six percent of companies say recruiting new employees is becoming more difficult as the housing market turns tepid, according to a 2006 survey by Prudential Relocation. Three in 10 of those who turned down a relocation did so because of housing and mortgage concerns, according to a 2006 survey by Atlas World Group. That decision can come at a price: more than half of the companies surveyed had an employee decline a relocation, and 35% of the employers said that turning down a move hinders an employee’s career. At Nissan North America, getting employees to move has also brought some hurdles. The auto giant recently moved its headquarters to Nashville and tried to get about 1,300 employees to transfer from the Los Angeles area. Nissan had hoped that about half of the current staffers would move, and succeeded in getting 43%. The company offered a number of incentives, including identifying lenders that would help ease the process. (www.app.com)
Asbury Park Press (4/16/07): Stephanie Armour, Gannett News Service
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Bay Area Housing Prices Tick Up
The median sale price of a home in the San Francisco Bay Area was $639,000 in March, up 3.1% from February’s $620,000 median and 2.1% higher than a year earlier, according to DataQuick Information Systems. A total of 8,317 new and resale houses and condominiums were sold in March, a 31.9% increase from the 6,305 homes sold in February, but down 19.6% from the 10,343 homes sold in March of 2006. An increase in sales from February to March is normal because more people think about buying a home once springtime rolls around, according to DataQuick. “We are seeing a lot more interest among buyers (starting in February) for homes compared to last year,” said Karen Manuel, a Realtor® with Alameda-based Kane & Associates. “There are fewer sales, but the sales prices are higher because there is less inventory. My sense is that last year buyers wanted to see what happened. A year later, the bubble did not burst and prices are still holding steady or going up a bit.” Linnette Edwards, associate broker with the Orinda-based office of Prudential California Realty, said houses in communities such as the Oakland and Berkeley hills are selling well in part because they have access to public transportation and are close to San Francisco. (www.origin.insidebayarea.com)
Inside Bay Area (4/13/07); Eve Mitchell
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