Newport Beach-based homebuilder William Lyon Homes reported today that its average California home price was $503,600 in the quarter ending June 30, a 5.5% reduction from the same quarter in 2007. The average price fell 11% to $417,700 for sales in all three states (California, Nevada and Arizona) where the company builds homes.
The drop is due to falling home prices and to a shift to sales of more lower-priced homes, the company said in its second quarter earnings report.
Lyon Homes reported net losses of $38.9 million for the three-month period, compared to losses of $76.9 million in the second quarter of 2007.
The profit margins on homebuilding dropped to 4.5%, down from 14.4% in the same period a year ago.
New home orders fell 15% to 418 during the quarter, and the number of homes closed fell 42% to 319, the company said.
Previous posts:
Summer selling season almost over.
MORE GOOD NEWS RIGHT MULLIGAN HEAD.
I WONDER HOW MANY PEOPLE THAT BOUGHT LAST YEAR FEEL GOOD ABOUT THEIR PURCHASE OF THE NEW HOME THE LIVE IN NOW……
OR SHOULD I SAY THAT THEY ARE MOVING OUT OF NOW………….
Sales boosted by lower priced homes. Meaning smaller, less amenities if prices only dropped 11%
At 4.5% profit, that is not enough to sustain a business. No Hwood, it is not good news. If they fold up shop, more people will be looking for work. Is that what you want? Higher unemployment?
There is an inevitable recapitalization occurring in the residential real estate market. The recap. is necessary because assets such as homes and land are not worth anywhere as much as the owners thought. As with any recapitalization there will be temendous loss of wealth, loss of jobs and overall despair. Like other disastrous financial bubbles, there is plenty of blame to go around, but there is no way to stop the ongoing price correction.
It was one heck of a party that the real estate industry had, and now it is payback time.
Nicely said nano- I’ll get the beer cans in the yard! Anyone have that hang over cure yet???????????
A 5.5% YOY drop with part of that from the sales mix is no reason to celebrate bear-o’s. Save it for another story.
How do you know they are Lyon? Their lips move.
Mulliganville Says:
August 1st, 2008 at 5:46 pm
“At 4.5% profit, that is not enough to sustain a business. No Hwood, it is not good news. If they fold up shop, more people will be looking for work. Is that what you want? Higher unemployment?”
That’s part of free markets and supposedly a mainstay of the Republican platform - the most efficient businesses survive. The good news is that the economy will re-invent itself (away from RE), and the unemployed will have a chance to find work with new companies. The other option is to raise taxes to subsidize inefficient businesses. Oh wait, that’s what’s happening with the latest bailout.
# stashingmycash Says:
“Nicely said nano- I’ll get the beer cans in the yard! Anyone have that hang over cure yet???????????”
—
You are close to the cure Stash.
Pick up those cans from the yard, return the empties, take the money and buy more beer.
# Mulliganville Says:
At 4.5% profit, that is not enough to sustain a business. No Hwood, it is not good news. If they fold up shop, more people will be looking for work. Is that what you want? Higher unemployment?”
__
The General bought back control a couple years ago. Not the best of timing it might seem, but if you’ve ever seen his estate, he’ll be fine.
FROM THE REPORT:
“Effective on January 1, 2007, the Company made an election in accordance with federal and state
regulations to be taxed as an “S” corporation rather than a “C” corporation. Under this election,
the Company’s taxable income flows through to and is reported on the personal tax returns of its
shareholders. The shareholders are responsible for paying the appropriate taxes based on this
election. The Company does not pay any federal taxes under this election and is only required to
pay certain state taxes, based on a rate of approximately 1.5% of taxable income. As a result of
this election, the Company’s provision for income taxes for the six months ended June 30, 2007
included a reduction of deferred tax assets of $31,887,000 due to the elimination of any future tax
benefit by the Company from such assets. In addition, unused recognized built-in losses in the
amount of $19,414,000 were no longer available to the Company.
RealtorDaveE Says:
“If you’ve always wanted to buy a new home, your time may be here…..”
—-
Just ask the man who owns one…(with apologies to Packard)……
OR better yet, take the advice of a guy who would love to sell you one.
DAVE, You are shameless. Heck of a self-promoter, but shameless.
Those poor folks who bought that line last year or the year before that, or the year before that ……………………….
Just a question Dave. What would you say to THEM ….now.
PDU,
Quando podeces te regi eorum fecerunt?
Dave, you have NOTHING to apologize for. Builders will not be putting up new homes here, because they are not profitable. This IS the last chance for new home bargains. ‘Nuff said.
f you want to get an idea of where the bottom is watch the prices of land. What’s happening is land is being re-cycled through the system and coming through the supply pipeline at prices much less than 2006 prices. In high cost areas like Orange County, land often comprises 50% or more of the cost of housing.
Land prices have fallen anywhere from 30-80% from their 2006 levels. Meanwhile building costs have come down about 15% from 2006.
Builders in 2008 can buy land, build houses and offer them to consumers at prices 30-40% less than 2006 and still make a profit.
So if you isolate the two major components of housing costs, the cost of land and the costs of the structure, and then add them back together, this can provide some insights on home prices in the next 6-18 months. There is a great tool found at the link below, where you can select the housing quality from one of four levels, Basic, Track, Custom or McMansion and get the estimated building costs per square foot for different geographical areas. Add this to the what land is selling for and there’s your price support.
http://www.UsHousingMeltdown.org/home-value-replacement-cost.asp
Yes, income multiples will detach from their historical multiples because mav thinks so. It’s all so clear now. A renter’s income times 3.
“historical norms”
historic norms of 4-5X is a median in the $300Ks……..
……. sit back…….. relax……… and enjoy…….. it’s going to be there for years….. and years……..
No, you are going to be here for years….and years. Try getting a J O B. Everyone knows you don’t have one, or you have one that requires nothing of you. Day in, day out, here you sit…typing away. Never called to a meeting, never having to travel. From the crack of dawn you type. We all know it takes time to follow these discussions. How is it that you have THAT much free time if you are gainfully employed? Same for a select group of others here.
I wonder if this were a medical blog would the doctors be chastised to the length RE agents are here…
# Mulliganville Says: “I wonder if this were a medical blog would the doctors be chastised to the length RE agents are here…”
Huge difference, doctors produce something of value to society. RE agents just take a commission and provide no service to the buyer. The buyer’s RE agent has such as much interest to get the buyer to pay more for the property as the listing agent. What kind of business is that? You hire someone to help you find a place and he or she has all incentive to get you pay as much as possible for that place.
Doctors on the other hand, have to go to college, study hard, and they actually save people’s lives.
Mulli, only (a realtor) would even try to compare realtors with doctors.
Sorry Bubbs…but every buyers agent I have dealt with fights tooth and nail for their client. They want incentives, closing costs paid, etc. If you know of collaboration between two agents on opposite sides of the fence, you should report it to CAR.
Just what kind of agents do you know that would act in the manner you suggested? I have always been a seller’s agent. In 10 years plus of this business, not one time, not one transaction occurred in the manner you suggested.
BTW, most agents I know are degreed professionals who began their careers in other fields and chose to enter RE. Matter of fact, many have MBA’s!
And if you do not think doctors are in sales…well, we are all in sales Bubbs…right?
Mechanic’s blog: the mechanic must know nothing
Everyone is an expert when it comes to housing…since we all live in one of some sort or another. This mindset is literally like food. We all shop for it…cook it…eat it…etc. Not many truly know that much about it. But we all think we know more than the other guy.
Quick question: if agents are not worth it, and the wealthy are that way for a reason, they generally do not waste money, why do they not sell their homes themselves? Better yet, why do they not use Redfin since they save you so much money and all? Why do they use the same agents over and over again? What, you think McMonigle has pulled the wool over everyone’s eyes?
Just commission chasers huh? No problem…put me on salary. I am fine with that. But to be on call 7 days per week, miss every family gathering known to man, perform more “odd jobs” than I care to list, work with clients for 6 months to a year or more before they decide “this is the right home,” etc.–if you want to equate a salary to that, I am in. But your number will be far too low to retain good talent.
for someone who “works” in real estate you sure do have a lot of time to blog
Mav,
I think you’re repeating yourself.
Mav,
I really do think you’re repeating yourself.
Mav,
Looks like you repeated yourself a third time on Jon’s next post, an excellent brief synopsis on the fed from 5 experts.
Hope I’m not getting under your skin!
Anyway, I’m not going to repeat my response, but it’s already up on that fed post, along with something thrown in for your buddy Bill.
Because I hate repeating myself.
Like I said, I hate. . . . .
My wife and I looked at the new Verandas Lyon homes at Columbus Square at early this year and the prices were starting at about 700k - now just five or six months later they are in the low 600’s - so we went to look at them again. Factoring in the sales incentives, you can get a house for the high 500’s - I hate to be one of the home owners who bought at 700k.
On a side note - I think SOME RE agents are getting a bum rap, which I agree a lot of them do deserve, but not ALL of them. My experience has been some of the older generation Realtors who are professional career RE agents (the ones that did not jump on the “hey let’s suddenly become a RE agent” bandwagen over the last 5 years or so) are not to blame.
Of course there are exceptions on both sides, some experienced agents are crooks and some green agents are honest and professional, but that has been my experience in general.
I have dealt with several agents that say “buy now or be priced out forever.”
A good agent says buy when it is a good time for YOU.
Saying now is a good time to buy a new home sounds like the typical pushy inexperienced Realtor that wants to influence buyers with stupid scare tactics.
New or old, buy a house when it is a good time for YOU - any RE agent that tells you otherwise or makes general statements is a greedy shill.
RealtorDave,
Good thing you don’t repeat yourself.
From your 3/24/08 piece on your site:
“……………we also think March will reflect an additional increase in sales and possibly at least some firming of prices, maybe increases.”
—
I still get a sense of wonder in reading that.
Want to know what I wonder?
Amazing to me that one in a position to influence others would be trying to convince anyone, yes even those who’ve “always wanted to buy a new home,” that NOW is a good time to buy.
……..and at the same time try to save face by saying the price bottom could still be a year and a half away.
Dave, you know, and I know there will be new homes for sale next year and the year after that……and yes, I understand your statement, “I’m just trying to call ‘em as I see ‘em. . ..” but I’m baffled why? — Attention? Self-promotion?
You cover so many bases with cover-your-butt qualifications that what you have to say loses any meaningful insight.
pdu: By your logic, the Cadillac sales rep should not sell Escalades today as gas may increase in price. Are you really listening to yourself? What would you like pdu, all Realtors to take a stand and announce to the public that RE sales will be put on hold until a clear bottom has been established? RE is a commodity. It goes up and it goes down.
Those of you who are not ready to buy a home…don’t. Those of you who are not sure if you are ready to buy or not, you aren’t ready. Wait until you are comfortable. If you are ready to buy, they do it. This is not rocket science.
Buyers today are more informed than ever. They are receiving information from all sides. They know the game, are big boys and girls, and will make their own financial decisions.
It really is that simple.
“then do it.”
Mulli,
You say:
“RE is a commodity.”
—
That, my friend, is one of the most foolish statements you have EVER posted.
Just expecting that a real estate salesperson might have more integrity than to suggest that if one always wanted to buy a new home that they had better do it before the end of the year.
Geeeezzz, even I might fit in that category - one who always wanted to buy a new home……. but even I also know that now might not be the best time — might not even be a good time.
pdu: it is always subjective. And it is up the buyer…whenever they are ready, that is fine. If they are not, they should wait…like you. I’m cool with that. But, and listen closely hwood: the Cadillac reference was not from the buying point of view…it was from the selling point of view. Do you think the GSM at the dealership cares that gas is $4 per gallon or does he want the vehicles moved? See, the salesman is charged with moving the inventory. And what do you know, the manufacturer has provided incentives (aka price reductions in housing) for him to do so. The Escalade salesman is responsible for selling vehicles for the company that has hired him. Just like the listing agent or buyer’s agent is responsible for finding or selling property for the party that has hired them.
pdu: Dave also came right out and said he does not deal with new construction as they are his competition. If he thinks the end of this year is a good gauge, that is his opinion and I suppose he is entitled to it. The difference I see is Dave does not go on attack mode, but rather the defense…on a regular basis…and all because he has listings he is responsible for selling as a real estate professional.
I think you all are a bit too close to this little economy. Your dark glasses are on and, again, what do you propose…a mandated cease and desist order from the Governator demanding a halt to RE transactions until the market has officially bottomed? Your expectations and demands of an agent are a bit unrealistic. They have families to feed, clothe, and house. They have a duty to be honest with their clients, not to review their last two tax returns to ensure they are making the proper financial decision. Where is the freaking accountability you so desperately demand from agents for the buyer OR seller? You all just seem worried about the buyers today…what exactly are they all doing to cause you grief?
Mulliganville Says:
“You all just seem worried about the buyers today…what exactly are they all doing to cause you grief?”
—-
No problem at all with the buyers, just a bit concerned with a realtor who thinks real estate is a commodity.
You let my challenge on that one slide Mulli.
You may as well attempt to justify that statement because it will come back to haunt you.
It’s far too telling a statement from one holding himself out as a person with experience and perspective on the real estate market.
Real estae a commodity, Mulliganville?
Come on man, that makes you sound like a fool. Additionally the way you have sidestepped it is far too reminiscent of ROC/Pebbles/BoredThoughtful/IhateLansner&theRegister/Shockg/tr/Provider and all those other pretenders.
Makes you so much like them you might as well be them.
Man up or weasel out.
Mulli, While I’m on the rant, help me here too. You are starting to sound like one not worth listening to.
You said, above:
“If he thinks the end of this year is a good gauge……, ”
Gauge? GAUGE? What in the world are you talking about?
If I missed something here, I apologize, but to me it sounds like gibberish.
Mulliganville says:
“Your expectations and demands of an agent are a bit unrealistic. They have families to feed, clothe, and house. They have a duty to be honest with their clients,”
—
Whoa. You flat nailed it right there. Unfortunately human nature is such that self preservation comes first.
Remember back in the 80’s when gold hit $850?
Knew many who were in the business, Monex, etc. They were making a ton and doing the right thing for their clients.
When the market turned and went down limit day after day and they couldn’t get their clients out many clients lost tons.
Many brokers/salespeople left the business because it broke them.. Not financially, but spiritually. They could no longer sell an “investment” that had the potential to destroy the client. They couldn’t tout what they didn’t believe in.
I know a few realtors on the sidelines today. Got to respect a person like that.
Some out there wouldn’t work for the Cadillac dealer if the job required pleasing a sales manager rather than honoring their own self-integrity.
Don’t get me wrong, an Escalade might be right for some and a home might fit another’s desires right now, but ……oh, hell, Mulli, you KNOW what I’m talking about.
Not slithering away pdu…just crashed for the night. Here is why I think of RE as a commodity. From a Malibu agent…
—Most properties today are marketed as if real estate were a product. In marketing a product, the seller sets the price and a buyer either buys it or doesn’t. For consumer products, the price is a function of the cost of production plus advertising costs etc. The “product” approach breaks down when it comes to real estate, because real estate is actually a commodity. For commodities (like gold or stocks), the buyer determines the value. The difference bears repeating:
For a product (like a hamburger), the seller sets the price.
For a commodity (like gold, stocks, or houses), the buyer determines the value.
More than any other commodity, real estate is emotional. Seeing real estate as a commodity instead of a product represents a “paradigm shift” (i.e. looking at the market in a totally different way than we used to). Most importantly, this paradigm shift requires new approaches to selling a home, approaches that are aimed at impacting the buyer’s perception of value.—
You know pdu, it is ok for us to disagree on this. Is your home a product or is it a commodity? Is the seller setting the price or is the buyer? If it is the buyer, and it is, it has to be a commodity. Wouldn’t you agree we had a good bit of “product buying” during the boom as buyers basically ignored historical value trends and got caught up in the boom hoping to flip as a seller shortly thereafter?
Let’s talk about that Escalade situation. Would you agree that every buyer out there today understands where gas prices are? So GM is offering 60 months at 0% for Escalades. That could be enticing for one who seeks a luxury vehicle that is not the size of a mousetrap. Having been in 2 serious accidents myself, I appreciate the larger vehicle for a bit of protection. The sales reps responsibility is to listen to the customer and match them to the appropriate vehicle produced by their company…but they also have a responsibility to promote excess inventory. Maybe at 0%, vs. 6% for another vehicle, the savings on the note of the Escalade replaces, say, the CTS in this example. Maybe this actually saves the buyer some cash in the long run.
You mentioned you know a few Realtors on the sidelines and you have to respect a person like that. That is a good indicator to me that perhaps they do not believe in the product, or they think there is not enough business to warrant their participation. My own office did over $40,000,000 for the month of July. Not bad…could be better. But, it could always be worse. There is a stark difference between pushing one’s own listing when it is not to the betterment of the buyer (you wold be a dual agent here…rare, but it happens), and assisting a buyer in today’s market. Like I have said, no buyer is going to be caught off-guard in Orange County today. They know the game. We have to start giving them credit and stop thinking the agents and lenders should be policeman for the buyer. That is not their role.
Finally, regarding Dave: it is his opinion that new construction inventory might be best this year coupled with incentives from builders. He has GAUGED or judged, that this year might be a very good year for one to purchase new construction. Sorry that was not clear…I thought it was.
Sales is not complicated. The reason I interchange products or different businesses with RE is simple: sales is the solving of a problem. Solution based selling is a practice. Am I a RE sales professional? No…I am a sales professional. You have a problem, here are my solutions. Once educated on the product, a good sales professional can succeed in a variety of industries.
Mulli you make good points and I agree with what your saying about sales. I had been in the sales trenches for years. Sales is not complicated but it takes a certain personality to be succesful but Dave is an RE agent and he posts:
“Agents are supposed to be “ficuciaries,” putting their clients’ interests above their own. Had more agents and lenders done that over the past five years, we wouldn’t be in this mess.”
Personally I never asked RE to dig into financials of clients but in certain cases couldn’t you try and steer a cleint in a direction that best fits thier needs if in your opinion is they cannot afford the house? When your in sales you build repour with your clients and they inevitably tell you things about how they live and what their situation is and a whole lot about thier lives. My borrowers always told me everything and I built a relationship with them. I sometimes spent an hour talking to them about what they are doing in their lives. It builds trust but that trust should be respected not taken for granite.
It only hurts the industry you are in if they default. You sound like you understand sales so it should be real easy to speak with them and suggest they look at a cheaper property without insulting them or loosing a sale. I did it all the time with option arms. I never funded one becuase after I explained the loan people thought other loans were a better fit. I talked about there situation and the loan and they made the decision on their own. During the boom I could have sold them left and right if I were dishonest but I decided that my volume didn’t change and my clients were more satified. I lost some commish becuase the back end on option arms were substantially more but I made some of it back in refferals, I just had to work harder.
Do they build normal homes in the OC any more that regular people can afford? Median home price over $800k. All I see is a cracker box crammed next to more cracker boxes. It’s a joke!
I can only speak for myself Stash…I do try to find out as much as possible during discovery. As mentioned, some people are more forthcoming than others. I want repeat customers so I find out what is important to them and try to solve their problem keeping that in mind.
Mulligan,
You are still trying to defend your statement that real estate is a commodity. Unbelievable.
Come on, you really aren’t that clueless. Even I know that:)
It has NOTHING to do with who sets the price.
–
commodity - definition of commodity - A physical substance, such as food, grains, and metals, which is interchangeable with another product of the same type …
–
Even two identical floorplans next door to each other don’t become a commodity…….you should know that, but apparently you don’t.
pdu: at least put the entire definition out there:
com·mod·i·ty Audio Help /kəˈmɒdɪti/ Pronunciation Key - Show Spelled Pronunciation[kuh-mod-i-tee] Pronunciation Key - Show IPA Pronunciation
–noun, plural -ties.
1. an article of trade or commerce, esp. a product as distinguished from a service.
2. something of use, advantage, or value.
3. Stock Exchange. any unprocessed or partially processed good, as grain, fruits, and vegetables, or precious metals.
4. Obsolete. a quantity of goods.
Your stock exchange example is correct….as is item #2 listed above. Would you say a home is something of use, advantage, or value? Like I said earlier, you can not think of RE as a commodity. We can disagree…it is OK :) I think it is. Hence the “paradigm shift” mentioned previously. It requires one to think of it in different terms. I am OK with you not being compliant here…perhaps you could do the same?
Mulliganville says,
“Like I said earlier, you can not think of RE as a commodity. We can disagree…it is OK :) I think it is. Hence the “paradigm shift” mentioned previously. It requires one to think of it in different terms. I am OK with you not being compliant here…perhaps you could do the same?”
—–
Never.
You are wrong.
Don’t try to patronize me here, you are wrong.
For anything to be a commodity it needs to be interchangeable with any other supply of the same commodity.
Jewels can be a commodity. Custom made jewelery is not.
Lumber is a commodity. Cement is a commodity. bricks are a commodity. Pipes are a commodity. Copper wire is a commodity.
You can buy any volume of any of the above that you want. If it meets specs you don’t need to see it.
Put all of the above together and you can build a house. That house will NEVER be a commodity, unless you preassembled them exactly alike and agreed to deliver identical product to anyone wanting to place it on a location that would then cause that house to be one-of-a-kind, no longer a commodity.
You can’t STILL be unable to understand the difference.
Look again at the definition — the key word should be obvious, “INTERCHANGEABLE”.