I got a laugh at the "Deal of the Century." Here in the land of the Silent Bubble (Maryland - it's really different here...), they weren't selling anything for anything less than about $400K, and I think those were for condos?! I also saw plenty of $600K to even $800K "luxury starter castles" for sale. The only remotely affordable and not grossly oversized or misdesigned houses were in retirement communities!
I wonder just how many of their supposed "sales" actually get financing. It's harder to get an overpriced house without toxic loans!
It's hard not to come to the conclusion that there are a lot of foolish people around who still believe real estate is a no-brainer. In six months, prices will be lower and so will interest rates.
The Fed released the 2nd quarter flow of funds data today. The home mortgage debt trends look more encouraging. I have supplied charts on my homepage for any who might be interested.
I'd be very skeptical about this PR piece from HOV. A sale isn't a sale until closing, hence "the Company reported more than 2,100 gross sales including more than 1,700 contracts and more than 400 sales deposits" is laughble. How can you have a sale without a contract? And if they only collected 400 deposits, then that is probably near the actual number of sales that they will eventually close.
It does reek of desperation, although it may work in the short term as their stock price is up today.
considering cancellation rates are 30% + during "normal" sales, what do suppose the cancellation rate will for this "once in a lifetime" opportunity sales event?
What Id like to know is how many deposits they usually take in a weekend. And how much of a change this is from business as usual once the smoke and PR clears.
At this rate, it actually almost works out to a sucker born a minute.
Heard something along the lines of: If a home builder drops the price they must retroactively fix the price for some time period previously. Anybody know if that's a California law or any specifics?
Wow, oil is just get blasted with easy leverage today. It's nice to see speculators really going for the jugular of the US economy now - sometimes they don't get the credit they deserve.
Hopefully Ben will go all out and give us a 50 bps cut tomorrow along with $120 oil.
That'll make the auto industry think twice about begging for rate cuts in the future!
ac, So right, it's the hot money bubble blowing speculators. The money has to go somewhere that generates HUGE short term returns. What other asset has the prospect of rocketing after a rate cut? The Yen, which should strengthen, is too well managed by the PPT to get enough traction. It's been Jed Clampet's Black Gold for the past couple of weeks.
Local condo development with an ultra-desirable location and moderate prices (for this area) had a grand opening weekend a couple of months ago and got deposits on every unit -- there's money around here.
And yet only a small fraction of those units have actually sold so far.
The Yen, which should strengthen, is too well managed by the PPT to get enough traction.
Also Japan doesn't want the Yen to rally too much. They're a true export economy and could really be hurt by a rising currency, where as we're primarily an import economy - since we don't have much production capacity (relatively) a weak currency just doesn't help us very much.
A contract is a firmer commitment than a deposit. Assuming they were telling the tuth 2100 put money upfront witth the intention of purchsing a specific house. No doubt a huge portion of those contracts were frontloaded by all the would-be buyers of the last few weeks who held off for the telegraphed sales prices. Another large segment will fall out from either financing or contingencies (sale of previous home). Still 2100 is a lot. I'll wait for the subsequent revisions. By that I mean; 1 how many close, 2 what happens when J6P walks in on Thursday asking for last weekends' price, 3 mark downs to the remaining inventory.
I can't say it any better so I'll quote. From Dan Fitzpatrick on RealMoney:
The Real Realities of Realty
Dan Fitzpatrick
9/14/07 11:49 AM EDT
"Interesting dialogue on CNBC just now about the Hovnanian "Deal of the Century" that ends Monday, where home prices are discounted by 20%. Diana Oleck said that this was a weekend sale where home prices would re-set back to their original asking price after the weekend.
That's wrong.
The realities of the homebuying process are that recent sales set the market price -- kinda like the financial markets. Assuming someone buys next Tuesday at the original (non-discounted price), how are they going to get financing? No lender is going to loan money on a home with comps that are 20% less than the sale price. (In fact, isn't that part of the problem now?) The required appraisal on any loan will reflect the 20% discount. Results-oriented appraisals are a thing of the past -- until the next boom.
No way these cuts are anything other than permanent. And even if the asking price is bumped back up next week, what do you think is going to happen when a real buyer steps up to the plate? That purchase price will be slashed by 20% quicker than you can say, "Granite or marble on that countertop?""
So I now ask, success?...or be careful what you wish for???
Point of reflection: Dont these folks have a total of 35,000 houses built, completed, ready to move into?
CFC should try to trump this and have a "Forecolusre Auction Retention Tribute". They could set up FART Tents throughout the land and pay homage to home buyers everywhere.
"No lender is going to loan money on a home with comps that are 20% less than the sale price. (In fact, isn't that part of the problem now?) The required appraisal on any loan will reflect the 20% discount. "
Excellent point. So -- this sale of the century stuff was just a face-saving form of capitulation -- with colorful banners and free hot dogs?
Such a nice round number, 400.
Real money, they say.
Too busy though, to actually report it as "396", say...but not that busy to report it more casually as "a few hundred".
I'm with central_scrut (no "althoughs" about it): It does reek of desperation
and hopeinsd: Sales for the rest of 2007- 0, unless, of course, the DEAL OF THE CENTURY occurs again next week
So what happens to all the previous contract holders who hadn't gone to close yet? Your appraisal just dropped by 20%. What lender is going to go through with a loan previous to this past weekends price?
So I lay $100 bucks as deposit on a $100k pirce break home offered at now $379k...
I chew on that for about 60 days, and see how the market play's out thru early fall.
Then, on Nov 1, I back away, forfeit $100, and re-bid @ $349k
I am hoping CR will put up a chart so we can track how the annual real estate "deals of the century" correlate with the annual 20+ sigma events in the financial markets.
Hey, Maybe on the next "Deal of the Century" weekend, they will set up a drive through window were you can get a vanilla shake and fries with your order, and they can just keep the change and call it a deposit........
Yes actual transactions are what is important. Assuming contracts with earnest money: Most will have contingencies on sale of previous residence at some price reflecting non discounted price. They cannot get the price they want, because, duh, new houses are discounted.
So between that and the ability to get financing (rate increases, insufficient down payment, qualification) they will be a lot of contracts that do not result in sales.
We just will have to wait and see. The next quarterly report will have the real info in it.
Presuming that they did not fudge the numbers, would the $100k discount at the numbers reported be big enough to affect the new home sales price statistics reported for September?
I would be very surprised if more than 500 of these 2100 reported "sales" actually close...less than that would not surprise me,and I am curious about how big the "deposits" were.paying $50 for what amounts to an option to buy might make sense to some people.I looked at the locations of these developments,and it does not to me.I might go $75k for one of the roseville townhomes.maybe.
With all due respect, it seems like there is a reluctance on this board to give Hovnavian their due.
The sale itself was a competent enough bit of hucksterism. Will some weekend buyers wise up and cancel? Of course, but then hucksters aren't after the smart ones...
The real meaning of the sale is that the hb's now see it in their interest to steal share; steal it big and steal it soon. Add the new-found urge among the likes of Countrywide to liquify REO's, and you have the two necessary ingredients for un-sticky house prices.
So cheer a bit for Ara Hovnavian. He'll need the encouragement for later, when the rest of his competitors put up their "deal of the century" banners.
Sales for the rest of 2007- 0, unless, of course, the DEAL OF THE CENTURY occurs again next week.
I got a laugh at the "Deal of the Century." Here in the land of the Silent Bubble (Maryland - it's really different here...), they weren't selling anything for anything less than about $400K, and I think those were for condos?! I also saw plenty of $600K to even $800K "luxury starter castles" for sale. The only remotely affordable and not grossly oversized or misdesigned houses were in retirement communities!
I wonder just how many of their supposed "sales" actually get financing. It's harder to get an overpriced house without toxic loans!
Homeowners' equity falls for 1st time in 13 years
Net worth rises at 8% annual rate to $57.9 trillion
Does this net worth figure include paper wealth or the real wealth actually behind the paper?
I'm not betting on the latter.
It's hard not to come to the conclusion that there are a lot of foolish people around who still believe real estate is a no-brainer. In six months, prices will be lower and so will interest rates.
OT:
The Fed released the 2nd quarter flow of funds data today. The home mortgage debt trends look more encouraging. I have supplied charts on my homepage for any who might be interested.
I'd be very skeptical about this PR piece from HOV. A sale isn't a sale until closing, hence "the Company reported more than 2,100 gross sales including more than 1,700 contracts and more than 400 sales deposits" is laughble. How can you have a sale without a contract? And if they only collected 400 deposits, then that is probably near the actual number of sales that they will eventually close.
It does reek of desperation, although it may work in the short term as their stock price is up today.
considering cancellation rates are 30% + during "normal" sales, what do suppose the cancellation rate will for this "once in a lifetime" opportunity sales event?
People with already signed contracts cancelling and resigning at lower contract price? I wonder what the net increase (decrease) in backlog is?
If you can sell 2000 homes buy cutting prices up to $100,000, just think how many you could sell if you cut by $300,000!!!
Get a 100k discount, then spend a 100k replacing all the contractor spec crap they installed in the house to get it off their books asap.
I never really understood the attraction of new builds. 40 years ago builders hadn't ethought of all the innovative ways people can cut corners today.
Sales for the rest of 2007- 0, unless, of course, the DEAL OF THE CENTURY occurs again next week.
5th annual going out of business sale?
I think they are full of it.
400 deposits is the key here. That means only 400 people slightly committed.
Also, what were the deposit percentages of home value and were they hard (no money back?).
I bought a new home in 2003 and the contract meant nothing until you gave a deposit. That's why I think it's alot of smoke.
NY Fed at it again this morning with 16.750b in repo accepted.
What Id like to know is how many deposits they usually take in a weekend. And how much of a change this is from business as usual once the smoke and PR clears.
At this rate, it actually almost works out to a sucker born a minute.
Heard something along the lines of: If a home builder drops the price they must retroactively fix the price for some time period previously. Anybody know if that's a California law or any specifics?
Wow, oil is just get blasted with easy leverage today. It's nice to see speculators really going for the jugular of the US economy now - sometimes they don't get the credit they deserve.
Hopefully Ben will go all out and give us a 50 bps cut tomorrow along with $120 oil.
That'll make the auto industry think twice about begging for rate cuts in the future!
ac, So right, it's the hot money bubble blowing speculators. The money has to go somewhere that generates HUGE short term returns. What other asset has the prospect of rocketing after a rate cut? The Yen, which should strengthen, is too well managed by the PPT to get enough traction. It's been Jed Clampet's Black Gold for the past couple of weeks.
Yep, it's the deposits that count.
Local condo development with an ultra-desirable location and moderate prices (for this area) had a grand opening weekend a couple of months ago and got deposits on every unit -- there's money around here.
And yet only a small fraction of those units have actually sold so far.
Bull shit, I say.
Take them at their word: they borrowed their future sales for at least the rest of the year... and the sales of every other homebuilder, too.
The Yen, which should strengthen, is too well managed by the PPT to get enough traction.
Also Japan doesn't want the Yen to rally too much. They're a true export economy and could really be hurt by a rising currency, where as we're primarily an import economy - since we don't have much production capacity (relatively) a weak currency just doesn't help us very much.
Right Ben?
A contract is a firmer commitment than a deposit. Assuming they were telling the tuth 2100 put money upfront witth the intention of purchsing a specific house. No doubt a huge portion of those contracts were frontloaded by all the would-be buyers of the last few weeks who held off for the telegraphed sales prices. Another large segment will fall out from either financing or contingencies (sale of previous home). Still 2100 is a lot. I'll wait for the subsequent revisions. By that I mean; 1 how many close, 2 what happens when J6P walks in on Thursday asking for last weekends' price, 3 mark downs to the remaining inventory.
Last year HBs were giving out free upgrades but not cutting prices. Does the latest 'sale' include both free upgrades and cut prices?
I can't say it any better so I'll quote. From Dan Fitzpatrick on RealMoney:
The Real Realities of Realty
Dan Fitzpatrick
9/14/07 11:49 AM EDT
"Interesting dialogue on CNBC just now about the Hovnanian "Deal of the Century" that ends Monday, where home prices are discounted by 20%. Diana Oleck said that this was a weekend sale where home prices would re-set back to their original asking price after the weekend.
That's wrong.
The realities of the homebuying process are that recent sales set the market price -- kinda like the financial markets. Assuming someone buys next Tuesday at the original (non-discounted price), how are they going to get financing? No lender is going to loan money on a home with comps that are 20% less than the sale price. (In fact, isn't that part of the problem now?) The required appraisal on any loan will reflect the 20% discount. Results-oriented appraisals are a thing of the past -- until the next boom.
No way these cuts are anything other than permanent. And even if the asking price is bumped back up next week, what do you think is going to happen when a real buyer steps up to the plate? That purchase price will be slashed by 20% quicker than you can say, "Granite or marble on that countertop?""
So I now ask, success?...or be careful what you wish for???
Ah, but the century is young.
Cannibalizing future sales from themselves & other builders. This accelerates the race to BK.
Point of reflection: Dont these folks have a total of 35,000 houses built, completed, ready to move into?
CFC should try to trump this and have a "Forecolusre Auction Retention Tribute". They could set up FART Tents throughout the land and pay homage to home buyers everywhere.
This large Chicago condo project NOT successful -
South Loop condo collapse | Crain's Chicago Business
I think what they might mean is they got 1700 contracts with deposits, and 400 deposits with no contract.
It seems too good to be true to me but it appears they did sell a whole bunch of homes.
"No lender is going to loan money on a home with comps that are 20% less than the sale price. (In fact, isn't that part of the problem now?) The required appraisal on any loan will reflect the 20% discount. "
Excellent point. So -- this sale of the century stuff was just a face-saving form of capitulation -- with colorful banners and free hot dogs?
Such a nice round number, 400.
Real money, they say.
Too busy though, to actually report it as "396", say...but not that busy to report it more casually as "a few hundred".
I'm with central_scrut (no "althoughs" about it):
It does reek of desperation
and hopeinsd:
Sales for the rest of 2007- 0, unless, of course, the DEAL OF THE CENTURY occurs again next week
So what happens to all the previous contract holders who hadn't gone to close yet? Your appraisal just dropped by 20%. What lender is going to go through with a loan previous to this past weekends price?
Anyone want odds on the 'Deal of the Century' happening as frequently as some of those '23 sigma events' did in August?
So I lay $100 bucks as deposit on a $100k pirce break home offered at now $379k...
I chew on that for about 60 days, and see how the market play's out thru early fall.
Then, on Nov 1, I back away, forfeit $100, and re-bid @ $349k
How Lowwwwwww will they Gooooooooooo
it's a fun game
I am hoping CR will put up a chart so we can track how the annual real estate "deals of the century" correlate with the annual 20+ sigma events in the financial markets.
Hey, Maybe on the next "Deal of the Century" weekend, they will set up a drive through window were you can get a vanilla shake and fries with your order, and they can just keep the change and call it a deposit........
If they meant contract w/ deposit they should have said that, as well as the deposits' percentage to sale amount.
Also, a deposit is not a requirement.
As to the "400" deposits? What kind of person is dumb enough to leave a check w/ a new home sales rep. and say "stay in touch y'all!"
They act like people were "just desperate!" to get a home in one of their brand new dust bowl under construction communities.
Something stinks here.
Robert Coté
Yes actual transactions are what is important. Assuming contracts with earnest money: Most will have contingencies on sale of previous residence at some price reflecting non discounted price. They cannot get the price they want, because, duh, new houses are discounted.
So between that and the ability to get financing (rate increases, insufficient down payment, qualification) they will be a lot of contracts that do not result in sales.
We just will have to wait and see. The next quarterly report will have the real info in it.
All else is speculation.
Presuming that they did not fudge the numbers, would the $100k discount at the numbers reported be big enough to affect the new home sales price statistics reported for September?
I would be very surprised if more than 500 of these 2100 reported "sales" actually close...less than that would not surprise me,and I am curious about how big the "deposits" were.paying $50 for what amounts to an option to buy might make sense to some people.I looked at the locations of these developments,and it does not to me.I might go $75k for one of the roseville townhomes.maybe.
With all due respect, it seems like there is a reluctance on this board to give Hovnavian their due.
The sale itself was a competent enough bit of hucksterism. Will some weekend buyers wise up and cancel? Of course, but then hucksters aren't after the smart ones...
The real meaning of the sale is that the hb's now see it in their interest to steal share; steal it big and steal it soon. Add the new-found urge among the likes of Countrywide to liquify REO's, and you have the two necessary ingredients for un-sticky house prices.
So cheer a bit for Ara Hovnavian. He'll need the encouragement for later, when the rest of his competitors put up their "deal of the century" banners.
It appears that there is at least one other blogger who sees Ara
Hovnanian's future in stand up comedy:
Reggie Middleton's Boom, Bust & Bling Blog - HAS MOVED TO REGGIEMIDDLETON.BOOMBUSTBLOG.COM!!!: Hovnanian Announces Successful Preliminary "Deal of the Century", OR Hey, Our Marketing/PR Team Pulled it Off, and We Finally Got Some Positive Pr
Well said David Pearson!!!
Profit is not necessary for survival in the short run, but cash is.
Ara may lose a bit of profit in the near term, but is a smart move methinks to stay afloat and keep his crew intact.
David's right, these guys just sprayed oil on the slippery slope. Cheers!
Ahhh. They wanted to sell 2100 and they sold 400. I get it. They call this a success?