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Ivy Zelman, chief executive officer of Zelman & Associates, a housing-research firm, said home builders
have plenty of land already, but it is mostly in the wrong places, “beyond the ‘burbs,” far from where most
people work. In prime areas, though, builders have dwindling supplies of lots and so feel the need to buy
more. Demand for lots in top-tier locations appears to be increasing, particularly in Phoenix, near
Washington, D.C., and in parts of California, she said.
Meritage Homes Corp. recently paid about $2.9 million to California Bank & Trust, a unit of Zions
Bancorp, for a loan backed by 81 finished lots in the Quail Springs subdivision of Chandler, Ariz., a
suburb of Phoenix, said Steve Davis, chief operating officer of the home builder. Meritage then foreclosed
on that loan to gain control of the lots and expects to begin offering homes there within a few months, Mr.
Davis said.
The price for the lots works out to roughly the costs of the improvements, including roads and sewers,
already in place, Mr. Davis said. In effect, Meritage is getting the land for free and paying only for the
improvements, he said. A spokeswoman for California Bank & Trust confirmed the transaction.
The lots Meritage is buying in Chandler would have cost about three times as much in 2005, said Howard
Weinstein, a land broker at Land Advisors Organization in Phoenix. The average cost of a lot of 6,000 to
7,000 square feet in the Phoenix suburbs of Gilbert and Chandler soared from about $36,000 in 2001 to a
peak of $120,000 in 2005. Since then, the cost has sunk to $35,000, Mr. Weinstein said.
Chandler is attractive because it is home to major semiconductor plants, providing high-wage jobs, and is
more affordable than nearby Scottsdale, Mr. Davis said. Meritage expects to build homes priced at
$180,000 to $200,000 on the Quail Springs lots, he said."
So far so good, right? Well it was for me, you know a revival of animal spirits, faith in the future and all of
that. Then I stumble across the Arizona Republic article.
Now before I get there indulge me for a moment. This paper is like so many community or regional news
outlets. They know who butters their bread and in Phoenix no one spreads the advertising butter thicker
than the real estate industry. The last few months the paper has pretty much been on the “green shoots”
meme when it comes to real estate. That’s what made this article so astounding.
"Thomas Kelly explains the foreclosure process to those outside the banking industry by likening it to a
tube.
“You get put in the tube when you’re 90 days late, and you might come out the other end of the tube six
months later,” said Kelly, spokesman for JPMorgan Chase & Co.
What Kelly’s analogy doesn’t explain is how, for the past three years, thousands more Phoenix-area
property owners have been entering the tube each month than coming out of it.
At present, the system is backed up with more than 45,000 “pending” foreclosures, up from about 2,300
in June 2006, according to a historical analysis by the Information Market, a Phoenix research firm.
Most experts expect pending foreclosures to increase even more before leveling off sometime within the
next 12 months."
For a little perspective on that 45,000 number, consider that in the last three years in Phoenix about
73,000 homes have been taken back by the lender. Take it a step further and ponder the fact that there
should be about 5,000 foreclosures completed this month which will be second only to the 5,240
foreclosures recorded in February. Want another statistic? As of Friday 5,700 pre-foreclosure notices
have been served.
I’ll paint an even bleaker picture for you. Here is an historical view:
Month Pending Foreclosures
June 2009 45,709
Dec 2008 30,812
June 2008 23,870
Dec 2007 12,888
June 2007 6,538
Dec 2006 4,140
June 2006 2,311
I’ll let you read the entire story and I recommend that you do so. Pay particular attention to the end in
which the author talks about the impending commercial real estate bust.
So, if you look at these numbers you’re inclined to ask whether the builders are living in some sort of
parallel universe. Do they know something we don’t or have they been so battered they’ve lost the ability
to reason. I don’t know the answer but the numbers don’t add up.
I want to believe that the homebuilders are seeing rays of sunshine where I can only pick out storm
clouds. The problem is that there seems to be no end yet to the foreclosure tsunami (hows that for mixing
metaphors). I’ll think about this a bit more and probably do a follow-up tomorrow. In the meantime I’m open
to your analysis.
Original Article
have plenty of land already, but it is mostly in the wrong places, “beyond the ‘burbs,” far from where most
people work. In prime areas, though, builders have dwindling supplies of lots and so feel the need to buy
more. Demand for lots in top-tier locations appears to be increasing, particularly in Phoenix, near
Washington, D.C., and in parts of California, she said.
Meritage Homes Corp. recently paid about $2.9 million to California Bank & Trust, a unit of Zions
Bancorp, for a loan backed by 81 finished lots in the Quail Springs subdivision of Chandler, Ariz., a
suburb of Phoenix, said Steve Davis, chief operating officer of the home builder. Meritage then foreclosed
on that loan to gain control of the lots and expects to begin offering homes there within a few months, Mr.
Davis said.
The price for the lots works out to roughly the costs of the improvements, including roads and sewers,
already in place, Mr. Davis said. In effect, Meritage is getting the land for free and paying only for the
improvements, he said. A spokeswoman for California Bank & Trust confirmed the transaction.
The lots Meritage is buying in Chandler would have cost about three times as much in 2005, said Howard
Weinstein, a land broker at Land Advisors Organization in Phoenix. The average cost of a lot of 6,000 to
7,000 square feet in the Phoenix suburbs of Gilbert and Chandler soared from about $36,000 in 2001 to a
peak of $120,000 in 2005. Since then, the cost has sunk to $35,000, Mr. Weinstein said.
Chandler is attractive because it is home to major semiconductor plants, providing high-wage jobs, and is
more affordable than nearby Scottsdale, Mr. Davis said. Meritage expects to build homes priced at
$180,000 to $200,000 on the Quail Springs lots, he said."
So far so good, right? Well it was for me, you know a revival of animal spirits, faith in the future and all of
that. Then I stumble across the Arizona Republic article.
Now before I get there indulge me for a moment. This paper is like so many community or regional news
outlets. They know who butters their bread and in Phoenix no one spreads the advertising butter thicker
than the real estate industry. The last few months the paper has pretty much been on the “green shoots”
meme when it comes to real estate. That’s what made this article so astounding.
"Thomas Kelly explains the foreclosure process to those outside the banking industry by likening it to a
tube.
“You get put in the tube when you’re 90 days late, and you might come out the other end of the tube six
months later,” said Kelly, spokesman for JPMorgan Chase & Co.
What Kelly’s analogy doesn’t explain is how, for the past three years, thousands more Phoenix-area
property owners have been entering the tube each month than coming out of it.
At present, the system is backed up with more than 45,000 “pending” foreclosures, up from about 2,300
in June 2006, according to a historical analysis by the Information Market, a Phoenix research firm.
Most experts expect pending foreclosures to increase even more before leveling off sometime within the
next 12 months."
For a little perspective on that 45,000 number, consider that in the last three years in Phoenix about
73,000 homes have been taken back by the lender. Take it a step further and ponder the fact that there
should be about 5,000 foreclosures completed this month which will be second only to the 5,240
foreclosures recorded in February. Want another statistic? As of Friday 5,700 pre-foreclosure notices
have been served.
I’ll paint an even bleaker picture for you. Here is an historical view:
Month Pending Foreclosures
June 2009 45,709
Dec 2008 30,812
June 2008 23,870
Dec 2007 12,888
June 2007 6,538
Dec 2006 4,140
June 2006 2,311
I’ll let you read the entire story and I recommend that you do so. Pay particular attention to the end in
which the author talks about the impending commercial real estate bust.
So, if you look at these numbers you’re inclined to ask whether the builders are living in some sort of
parallel universe. Do they know something we don’t or have they been so battered they’ve lost the ability
to reason. I don’t know the answer but the numbers don’t add up.
I want to believe that the homebuilders are seeing rays of sunshine where I can only pick out storm
clouds. The problem is that there seems to be no end yet to the foreclosure tsunami (hows that for mixing
metaphors). I’ll think about this a bit more and probably do a follow-up tomorrow. In the meantime I’m open
to your analysis.
Original Article
| The Housing Storm May Not Be Over by Tom Lindmark, June 24, 2009 |
I was all set to write an upbeat post about how a story in the WSJ was another
indication that the housing market was slowly getting better when an article in the
Arizona Republic stopped me dead in my tracks. Let me explain.
First, the WSJ article reports that some homebuilders are starting to acquire land
again. It isn’t massive amounts, rather they’re buying or trying to buy land that
banks have taken back in foreclosure proceedings. Here’s what’s going on:
"U.S. home builders, long burdened with excess holdings of land, now are
shopping for more of it.
Though it will take years for builders to make use of all the land they bought at
inflated prices during the housing boom, some are starting to see irresistible
values for finished lots — land ready for building, with streets, sewers and other
improvements in place — in prime locations. Many of these lots are owned by
banks that acquired the property through foreclosures.
indication that the housing market was slowly getting better when an article in the
Arizona Republic stopped me dead in my tracks. Let me explain.
First, the WSJ article reports that some homebuilders are starting to acquire land
again. It isn’t massive amounts, rather they’re buying or trying to buy land that
banks have taken back in foreclosure proceedings. Here’s what’s going on:
"U.S. home builders, long burdened with excess holdings of land, now are
shopping for more of it.
Though it will take years for builders to make use of all the land they bought at
inflated prices during the housing boom, some are starting to see irresistible
values for finished lots — land ready for building, with streets, sewers and other
improvements in place — in prime locations. Many of these lots are owned by
banks that acquired the property through foreclosures.
| ButThenWhat.com is an attempt to connect dots and figure out what is going on in business and politics, stripping away personal interest. Lindmark's Bio Visit the blog at ButThenWhat,com. |
|
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