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Here is your open thread for the mid-week on May 23rd, 2012. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
Here’s some good news:
The U.S. homebuilder Toll Brothers said home deliveries and signed contracts on new homes rose in its latest quarter. Its shares rose more than 2 percent.
I’m kind of a booster of spot lot new construction, and some of the smaller developments that are going in. It seems to me housing has gotten to be more routine in construction practices, and the price to build has been pretty reasonable.
In other words there seems to be more economic viability to new construction now, from some builders than in the past decade.
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Regulators probe whether Morgan Stanley selectively informed clients ahead of Facebook IPO
Regulators are examining whether Morgan Stanley, the investment bank that shepherded Facebook through its highly publicized stock offering last week, selectively informed clients of an analyst’s negative report about the company before the stock started trading.
The top securities regulator for Massachusetts, William Galvin, said he had subpoenaed Morgan Stanley. Galvin said his office is investigating whether Morgan Stanley divulged to only some clients that one of its analysts had cut his revenue estimates for Facebook before the stock hit the market on Friday.
http://finance.yahoo.com/news/regulators-probe-banks-role-facebook-040858749.html
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RE: David Losh @ 1 – A lot of that it probably due to having picked up lots extremely cheap–something that is not sustainable.
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RE: Pegasus @ 2 – Just out of curiosity, is there any decision someone could make in your world that isn’t someone else’s fault? I mean seriously, it’s not like the idea of FB stock price dropping was entirely inconceivable. Buying the stock, IMHO, was moronic, but that’s mainly because I’m not a fan of the website.
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RE: Kary L. Krismer @ 4 – Your idea as a salesman that caveat emptor must rule the day is alarming. Your constant defenses of the kleptocracy continue unabated. The sellers and promoters have no responsibilities and the laws and rules don’t apply to them? I am surprised you are not running some time of ponzi scheme out of your basement. After all if people are stupid enough to believe the hype and lies they get what they deserve? The rubes are there for the slaughter?
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I would think that a major IPO not shooting through the stratosphere would be viewed as a good thing. Seems like evidence that the market isn’t so frothy that people are behaving in a bubble-like fashion.
But if you only look for the negative all the time, I guess that is what you find.
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By Pegasus @ 5:
That is not my position. In contrast your position is clearly that when something bad happens, it’s someone else’s fault. And that any allegation made is true.
We’ll see how this FB thing comes out, but the whole thing is laughable. I can only imagine what’s going though some little tiny brains right now.
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By deejayoh @ 6:
Beyond that, 3 days of trading is only 3 days of trading. The thing could still take off. After all, it’s not about what the company’s situation really is, it’s what a lot of people think the company’s situation really is. That’s what will drive the market.
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RE: Kary L. Krismer @ 7 – You should read the article. It deals with the underwriter dealing in violation of security laws. Something that affects the price of a security. It isn’t about whether FB was a good investment or not or that people can lose money on an investment. It is about security fraud. It relates back to my comments made a few days ago about the mass corruption in the IPO market which you tried to blame on “market conditions” as an excuse. Tell us oh Great Oracle of All Things how “market conditions” caused the 20 percent collapse of FB in the first two days. Hehehe.
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By Pegasus @ 9:
No it doesn’t. It deals with allegations of such violations, and given the timing of the allegations, those are very likely allegations which are based on very little information.
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RE: Kary L. Krismer @ 3 –
Well, from my perspective spot lots are selling for fair market value, and that is sustainable.
You continue to say that prices for are a dual item of distressed, and normal. Only time will tell, but so far I see good deals, and bad deals in the market place. Some people are buying well, and others are paying way too much.
Builders, I think, have been pretty savvy for the most part. Some went over the edge with the rest of the herd, but most, especially spot lot developers have been pretty right on. That I think will continue to be sustainable.
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RE: Kary L. Krismer @ 10 – Yes allegations at this point and investigations by regulators and a lawsuit already being filed. Just because it is likely that the perps will get away with this it doesn’t mean that it did not happen. It’s how our kleptocracy functions. It isn’t “market conditions” as the Great Oracle had previously determined as blame.
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Facebook I.P.O. Raises Regulatory Concerns
The steps a company takes to go public are highly choreographed and regulated by securities law. A company cannot comment or disclose new information about its business or prospects unless it does so publicly by amending its prospectus. Otherwise, it risks running afoul of regulators. The company could also be vulnerable to securities lawsuits, as investors would have to prove only that it made “material misstatements†ahead of an offering, rather than a high threshold of securities fraud.
One investor, after being briefed on Facebook’s revised forecast, unloaded all of its holdings in the first hour of trading, according to Scott Sweet, founder of the IPO Boutique, who advises mutual funds, hedge funds and individuals. The investor sold hundreds of thousands of shares at about $42.
Now as controversy swirls around Facebook and its bankers, the uncertainty could cloud the stock, as well as the broader I.P.O. market.
http://dealbook.nytimes.com/2012/05/22/facebook-i-p-o-raises-regulatory-concerns/
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By David Losh @ 11:
If a lot is being sold for less than the cost of the engineering and installed utilities, that’s not sustainable. You can’t buy raw dirt for less than zero dollars.
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By David Losh @ 11:
I’m talking about the actual sales. You can find equity properties which are good deals and REOs which are bad deals. But more typically it’s the other way around.
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RE: Kary L. Krismer @ 15 –
But in the world of development it’s all the same, that’s how national builders came in, they average out the price of lots. No lots sell for zero, they all have a value, it is dirt. So the engineering also has a value or cost.
What I’m saying is that many of the local builders have lots they paid for years before the run up, others they bought at auction, well, actually at a swap with the bank, and it all evens out.
I would have been able to buy a property for $100K in city to rehab, or build, maybe even $150K, at any time. There was a period between 2006 to 2008 where that wasn’t an option, but the market for dirt is pretty stable.
Right now though it looks to me like building is a much better margin, and will pay a better return.
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By David Losh @ 16:
Exactly. And a lot of the lots that have been built on recently were bought by builders for less than the cost of the engineering and utilities. They were bought at firesale prices from either builders in distress or banks. That is not sustainable because eventually those lots will be used up.
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RE: Kary L. Krismer @ 17 –
You really are making my head hurt.
Are we back to the argument of how stupid the banks are?
There is a point where you have to say that the market is the market, and the complexion of the market makes no difference. Once the Real Estate market place hit 25% short sale or bank owned, that became the market place for years to come.
Real Estate agents continually complain about how it isn’t fair that short sales take too long, or that prices are dropping because of those darn short sales, or that bank onwed is selling for a sever discount.
Building is a pipe line, lot’s come, and go, good prices, and bad. Just because a builder gets a steal of a deal on some lots doesn’t mean they will sell the finished product for a discount. The finished product sells for what the market will bear.
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By David Losh @ 18:
No. There were just way too many lots that started in some stage of development. If anything it was how stupid the developers were, but it wasn’t really in individual stupidity, instead a collective stupidity.
The thing that caused it was property taking so long to develop (e.g. zoning, planning, etc.) That there were way too many lots meant that neither banks nor developers could get out of the property what was put into it.
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RE: Kary L. Krismer @ 3 –
The end product sells for what the market will bear. The price of the lot isn’t determining the price of the product. What is determining the price of lots, today, is what the market will bear.
So if builders got these really cheap lots, and are now selling properties for really cheap, that will continue. If sellers continue to sell lots at above what a builder can expect as a return, then the lots won’t sell. Builders have other options.
Today’s options may be in rental, multi family, but smaller developments, and spot lots keep coming along.
The market has changed, and will continue to change.
Sellers should get hip to that, and if they intend to sell now would be the time.
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Blame it on my A.D.D.
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Interesting way to try to advertise an apartment, but I have my questions about whether it would violate fair housing laws.
http://blog.seattlepi.com/thebigblog/2012/05/23/will-this-apartment-get-you-a-girlfriend/
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By David Losh @ 20:
You’re missing something. Just pulling some numbers out of my butt, let’s say a builder in 2007 bought for $7,000,000 land on which they could put 100 lots, or a cost of $70,000 a lot. They then put an additional $3,000,000 into permits, engineering, installing water and sewer lines, raising their total cost to $100,000 a lot. The market heads south and the builder can no longer build houses on the lots, in part because they cannot finance the building of the houses. But they are not alone in wanting to sell these lots. And there are very few buyers in 2009-2010 for such lots, so they can only get $2,000,000 for all 100 lots.
That’s a great deal for the new buyer of the lots once the market turns around. But they are not going to be able to get additional lots in the future for $20,000 when it costs $30,000 to do permits, engineering and utilities. Owners of existing unimproved acreage are not going to pay them $10,000 a building lot to take their property. Owners are going to want maybe $30,000 and it is still going to cost $30,000 to develop the property, so the effective lot cost will be $60,000, not $20,000 like with the lots described in the prior paragraph.
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RE: Kary L. Krismer @ 23 –
It’s dirt, and fixed costs for development. The loss maybe the prices paid for the dirt, but builders are different than the emotions of residential home owners.
What you saw was a building stall where the prices once again evened out. That’s how national builders came in here, they bought the lots, averaged the cost from across the country, and built a product to be sold.
Where builders lost a lot of money was the inabilty to build, and sell the end product. If they financed, the monthly payments were killing them. Some builders owned, and held for cash, and they just waited.
You’ll also notice a big difference in the style of building from 2007 to today. The units are more modern, and green. The cost to build has been reduced, labor is more plentiful, and materials a little more reasonable.
It all works out.
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I actually wanted to add this link that talks about the Obama spending http://www.marketwatch.com/story/obama-spending-binge-never-happened-2012-05-22?source=Patrick.net&link=MW_story_popular
He says Obama has spent less than most Presidents. True, or False?
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By David Losh @ 24:
The change I would expect it to slightly larger, more upgraded units, rather than the cheap little pieces of crap they were building before. I suspect there are probably some plats where the plat isn’t even useful because the lots are too small.
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RE: David Losh @ 25 – He’s not saying that he spent less. He’s saying that the rate of increase is less. When you start with a higher number it’s hard to have the same rate of increase.
Also, that’s a bit deceiving because he had most of 2009 attributed to Bush. While it’s true that spending was approved under Bush, a lot of what happened at the end of 2008 was done in consultation with Obama. Obama basically approved of all of the actions that were taken to deal with the economy on an emergency basis. So it’s really unfair to place most of that large increase in Bush’s category.
Finally, I suspect that doesn’t include a lot of things, like for example TARP. The cost of some of those things, however, might not be known even at this time.
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NAR fighting attempts to publicize agent performance:
http://www.techdirt.com/articles/20120521/12223019004/real-estate-listing-services-use-questionable-copyright-claims-attempt-to-block-criticism-agents.shtml
referenced in the comments here:
http://www.bubbleinfo.com/2012/05/23/disclose-agent-statisticsfeedback/
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RE: David Losh @ 1 –
Inc Magazine, June 2012, page 34
Supports your allegation on residential construction. they list Wash St as a booming area.
I had trouble deciphering the journalism though, the term single family starts for Y Generation can mean mean mostly just more new apartments too? They didn’t clarify.
The growth potential is way out there though….2017. They allege a 63% increase then from this year’s sales. That’s where I just smiled, anyone can forcast [wild guess] five years from now on anything and by the time they’re proven right or wrong, hades, we forgot their 5 year old prediction anyway.
Good read anyway, they pointed out in this month’s Inc [see page 76]; what’s compassion and synergy got to do with leadership? They put the ruthless leaders on the top of the stack on their magazine cover…so do I.
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RE: Kary L. Krismer @ 15 –
The Empty Huge Bull-dozed Building Construction Sites in Covington/Auburn the Last 3-4 Years Still There
And all the lots plotted out with non-indiginous witch hazel weed bushes growing in them now.
Looks like a glut of lots in SE King county unused still, supports deflated prices as you alleged.
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Tim Is It Just My Computer’s Server or Is Your Website Currently Turtle Slow?
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RE: ChrisM @ 28 – I’m not sure copyright infringement is the right cause of action, but I seriously doubt it’s the only cause of action.
A MLS or anyone has the ability to control the data they collect, and to limit its use. Why do you think I so often write: “Data from NWMLS sources, but not compiled or guaranteed by the NWMLS”????
Also, I’ve looked at their method of rating agents, and it’s rather amateurish, reminding me a bit of the people on Trulia who ask: “Who is the top agent in ______.” I suspect you’ll find that REO agents probably come out on top in their ratings because they have a lot of listings and most of them sell. That doesn’t mean they are good agents.
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RE: softwarengineer @ 30 – If you looked at the ownership records, it wouldn’t surprise me that a lot of those have changed hands since 2008. Someone bought them up and is waiting.
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http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/24/BURB1OM28O.DTL
This article is interesting for two reasons.
One is shows the extent to which banks are assigning out second mortgages for collection after short sales.
Two, apparently California doesn’t care about mortgage fraud. You can’t allege fraud as a cause of action unless the loan is over $150,000 (or some such thing–I haven’t reviewed the statute).
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RE: Kary L. Krismer @ 34 – I meant to say foreclosures in the paragraph starting with the word “One.” It’s probably true of short sales too thought.
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RE: Kary L. Krismer @ 26 –
It’s dirt with lumber on it. It all evens out. There is no distress in dirt; it’s just profit, loss, and the ability to hold.
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RE: David Losh @ 36 – If you have $10M into dirt, and are forced to sell for $2M, I’d call that distress.
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RE: Kary L. Krismer @ 37 –
Dirt is different. In most cases you have to own the dirt out right, free, and clear, to get a loan on it. It’s like a down payment.
The builder may sell the lots to finish other projects, or trade the lots off to the bank, or other builders. It’s a little world within a world.
But I will broaden this to say there is no distinction between distressed, and normal property sales. Once a bank controls the property there is no distress, just numbers. Banks have multiple streams of income, and those properties are just a part of a portfolio that is being cleared out.
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RE: Kary L. Krismer @ 32 – Regardless of the legal standing, this is a completely dumb move on the part of NorthstarMLS/MRIS. Now, thousands of people will now see that yes, a bunch of real estate agents do indeed suck. These people would have never known if it were not for the lawsuit.
For further information:
http://en.wikipedia.org/wiki/Streisand_effect
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RE: wreckingbull @ 39 – That could be. And that website is probably judgment proof, so no benefit there either!
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Some investors are avoiding German bonds which pay almost no interest. Imaging that! /sarc
“But with yields on short-term debt near zero, many traditional long-term investors are shunning German government bonds, casting doubt on the durability of the rally.”
http://online.wsj.com/article/SB10001424052702304707604577423741726323450.html
Yet more Wall Street Journal stupidity.
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RE: Kary L. Krismer @ 41 – Agreed about WSJ stupidity, but I don’t think you have the full context for this particular complaint:
http://online.wsj.com/article/SB10001424052702303610504577420050541008824.html
This is about being able to park funds somewhere (that would otherwise be allocated to Euros) in Europe that is assumed to be safe.
In other words, the euro is going down. I’m willing to place money that Greece bails by 1/1/2013. I expect Italy, Austria (because of bad loans to Hungary), Ireland (as they face the music), Spain and even France to be forced to capitulate.
Iceland looks better & better…
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More facebook fun:
http://www.nanex.net/aqck/3122.html
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