Monday, September 17, 2007

Hovnanian Declares Victory

The Financial Entertainment Network, CNBC has given the Hovnanian PR head a free commercial spot:
Homebuilder Hovnanian Enterprises said its weekend sales blitz on some of its hottest real estate properties was a clear success but exact figures are yet to be determined.

"It has been phenomenally successful," said Doug Fenichel, head of public relations for Hovnanian's Northeast region.

"The number of people visiting our centers was in the thousands, and that was just in New Jersey," he said. "We knew people were ready to buy and many people found deals they liked and are buying homes."

Okay. Now that the headline is out the bad news can trickle in over the next few weeks. Where is the media in this? The PR head says "clear success but has no figures to share? Bull. This jerk was up all night pouring over every update from every sales office all over the country. He knows how many lollipops were given out and what color. We need reporters who will call these liars on this crap.


ghd111 said...

Selling at a loss just like GM did.
Shoddy houses built by illegals. For future sales now the comps will be on record at the lower levels.

Guess whomever paid more is overjoyed.

Sweet Cashback said...

Back from vacation and FIRST to remind everybody to not trust Sushi with Avocado even with a bit of lipstick and a Koi farm!

Sac RE Agent said...

Not sure if Sactown's Hovanian homes participated in this "Mother of all Home Sales". But I'll chat with a few people I know over there and see if I can find out.

On a sidenote, Dawg, check out John L's blog again. I'm thinking one of his latest post is directed at you.

Sweet Cashback said...

After 10 days not checking in with anything I noticed right away that a house we have our eyes on, dropped another $40K since we left.

Owners bought it $599K 8/2006 and where asking $629K in 3/07. Visited it and found it way overpriced. Where told that if it doesn't sell the owners would rent it (HAHAHA) out but never lower their asking price. I love hearing those kind of comments in this market.

6 weeks back they lowered it to $599K, now to $559K. The owners must be bleeding money (it's sitting empty since March).

Still much more then it's worth and requires a jumbo loan for many buyers in an area that has plenty of houses >300K available (Orange County, NY).

Peripheral Visionary said...

Actually, even Hovnanian doesn't really know how many it sold, as it doesn't know how many leads will produce an actual application, and how many applications won't be rejected due to problems with financing.

But in my neighborhood (D.C. metro), the "for sale" signs are blooming like late flowers. This area has always had a lot of activity, but I've detected a distinct increase over the summer--existing "for sale" signs are still up, but new signs go up every day. One change that is happening, however, is that some of the larger complexes under construction are hastily being converted to apartments--just flip over that big "new condos for sale" sign and paint "new apts for rent" on the back.

There is one business that's booming, however--the sign printing business. Anybody who can print "for sale" or "for rent" on a piece of cardboard is making big money these days.

Bill said...

All I could think of was the homeowner in Virginia who bought his Hovnanian home for $200,000 more in 2005 and was...not pleased.

It's America, land of the class-action lawsuit (forget the merits)

Rob Dawg said...

Sac RE;
I assume you mean this

"Western Civilization is on the verge of collapse. The sky is falling. The four horsemen of the apocalypse are upon us. We’re on the verge of a bloodbath. Of course, if you’re a Realtor®, any time’s a good time to buy a house."

Yeah, that's John's m.o. He's been using false quotes to slanderously lash out at people who dare disagree with him even when what he publishes is a violation of California securities laws. Notice also that comments have been removed. Again. This happens whenever the truth is undeniable. It is censored. I am truly sorry that a profession that generally values truth and honesty can be so tarnished by the likes of John. Unfortunately that fact that people like John are allowed to contibue their irresponsible behaviors also speaks ill of the ability of the profession to regulate itself. There might come a time when regulation for all might come from without to the detriment of all involved.

Rob Dawg said...

I disagree. Hovnanian knows how many people signed in, how many talked to a saleperson, how many....

Of coursethey didn't "sell" any. It takes at least 2 weeks unless they've been frontloading the last few weeks of buyers to plump their event numbers. [Of course they did. What idiot didn't know about the weekend sales event in the last two weeks and decided to close before that.] That's not my complaint. My complaint is that they know how many had offers, how many had conditional offers and how many made appointments to sign offers. In a week they will know how many go under contract and 3 weeks how many have or are going to close and how many are pending conditions unrelated to financing. They are not going to be honest with those numbers especially after tomorrows "phenomenal success" numbers.

Funny Circus Bears said...

Hovnanian knows exactly how many sales k's were signed this weekend, contingent or not, and how many deposits were placed.

Funny Circus Bears said...

With housing it’s all about inventory, the slow moving nature of the market, and how prices react to both of those realities.

As inventory started rising sharply, prices began a slow, lagging deceleration, and that deceleration eventually became a real decline. That process of “turning the ship around” takes a couple of years.

The multi-year process of turning the ship around yet again to price increases will not even begin until well after inventory reverses and begins to decline. Yet inventory is still increasing, and to make matters even worse a massive number of foreclosures are being included in that rising inventory. Prices, now in a downward trend, will not react by flattening out until long after (lagging up just as they lagged down) the inventory trend changes. And the inventory trend shows no signs of changing any time soon, with the likelihood that it will even get much worse.

The downward price trend has just begun.

tk said...

As a California renter, it makes me happy to see home prices finally starting to come down in Sacramento, Merced, Livermore, Ventura, San Diego, etc. Unfortunately, I live in the SF Bay area (Menlo Park) and on my block four homes have sold in the past three months. One is across the street for $940K which sold after two weeks. The guy's house on the end of the street sold before he could put a post in the ground - he just put a "Sold" sign in the front window.

Some friends tell me houses are starting to go down in SF and Daly City but as far as Palo Alto/Menlo Park/Mountain View go, I'm not seeing a crash at all - it still looks like a seller's marker.

Rob Dawg said...

As you observe; smaller and specialized markets are full of anecdote. Trends are notorious to glean from few datums. Also understand that it is normal for mature high-end neighborhoods to change direction later than the general market. Oh and Apple is going gang busters which is special circumstance unique to some of those named places.

tk said...


No, I get it - I shouldn't extrapolate a trend from a few house sales around here. But we take a lot of walks around these neighborhoods (new baby) and see a lot of houses and $800K-$1.5M stuff (in my tiny little world) are still selling quickly.

Also, I think Google has a lot to do with the run-up in Mountain View.

Anyway, I'm thinking we're just lagging San Diego and next year it will hit hard here. I'm still happy renting for now.

Sac RE Agent said...

with all of the venture capitalist firms, hi tech firms and Stanford University, located around the Menlo Park/Palo Alto area, it would not surprise me if there was very little bursting of prices. that area is a highly desirable area to live and work in.

hell, even east palo alto is seeing a huge upswing in positive activity regarding real estate.

Rob Dawg said...

Yes and GOOG and the rest. Sorry if you thought I was lecturing. You can extrapolate. It is extreme but the post industrialists of the late 1920s and their Philadelphia to Boston excesses of period are one example.

Funny Circus Bears said...

GS is moving downward towards a potential long zone position prior to their earnings announcement on Thursday.

Lost Cause said...

It is amazing that nobody connects these housing flops with high gas prices. Everywhere you look, it is the outer ring that is fizzling.

Peripheral Visionary said...

Curious as to if you're still long CFC going into Tues/Wed/Thu. GS isn't as much of a risk as the other investment banks; the news on the investment banks should be out by the time GS reports, so there isn't as much potential for a surprise.

Peripheral Visionary said...

And for what it's worth (this and $1 will get you a sundae at McD's), my handicap of rate moves:

-50 bps: 5%. The markets would love a 50 bps or greater move, but Bernanke knows perfectly well that it would hammer the dollar, and would seriously damage the Fed's credibility, so not likely to happen.

-25 bps: 50%. Bernanke is a slow mover and would probably favor only changing the wording, but he's under a LOT of pressure, and if he doesn't drop and the markets tank, he'll be blamed for it.

0 bps with change in wording: 40%. As mentioned, probably Bernanke's favored approach, but not sure he's got the guts to do it.

0 bps with no change in wording: 5%. If Greenspan's chattering has been getting to Bernanke, there's an outside chance he may flex the Fed's muscles and show the markets who's in charge, but it's a slim chance.

Rob Dawg said...

Lost Cause,
You are wrong. Sorry to be so blunt but that's the way it is. Gas isn't all that high inflation adjusted and certainly not dollar adjusted for the import component. It sometimes looks like the edges are suffering because the edges are on average newer and more expensive and in greater demand. Those are factors not urban form.

Funny Circus Bears said...

PV, yes my current position with CFC is long, initiated a week ago @ 16.52 and still open.

Rob Dawg said...

Yeah, I have previously typed $16.80 (but insist I meant $16.50) so I agree but question the upside from tonights $19.50. BofA wants either $18 or high interest. They can exercise and dump faster than your screen can refresh. That's a drag on anything above 20(?) or so.

Funny Circus Bears said...

Robert, I have steadily increased the stop up to $19.00, and I expect to exit this position (either by selling or getting stopped out) very soon.

For me, so far, 20+ has been a short entry / long exit and 16 has been a long entry / short exit.

Rob Dawg said...

Stop @ 19 good to know. In the money, sure to execute = sleep at night.

It is truly amazing the money "we" have seen lying on the table. "We" being you and Legion, me as the kibitzer.

I know CFC is a long term zero. That doesn't mean it will ever go to zero. Long before that the zero will be papered over with any number of covers. Sad. Sad because it perpetuates the fantasy of a market with market prices.

Legion said...

@rob and FCB

Yeah I am cuurently out with cfc for now. Who knows what will happen with the fed "cuts", I don't know how the market will I have made over 50K in 2 months, I am sitting on it. If I hadn't covered my short at 16.2 I would be out about 24K right one freakin day!!!!

Keep on truckin FCB.

Oh and Rob, you are dead on correct about BoA dumping shares sonner or later.....

Peripheral Visionary said...

FCB and Rob, I wouldn't forget about execution risk . . . that 45 minute (200 point) glitch in the DJIA way back earlier in the year should have been fair warning. In addition to a technical fault, there's also the risk of a trading stoppage (and an AMAZING amount of money can disappear between when a stock stops trading and when it opens back up.) Under normal circumstances a stop-loss is 99.999% reliable, but we're not operating under normal circumstances these days.

On the far suburbs, I think gas is a factor, but the much bigger factors are time and lifestyle. My question for Loudoun County VA or Inland Empire or the Phoenix outskirts is: why? Why would anyone live all the way out there, just to commute hours every day, and have no night life, hit-and-miss shopping, and live in featureless suburbs--just to save a few bucks on the mortgage? Makes no sense, and a lot of people are coming to the same conclusion. Some far suburbs make sense: Long Island NY, Greenwich CT, Orange County CA--all overpriced, but still desirable places to live. Others just don't make any sense at all.

Rob Dawg said...

that 45 minute (200 point) glitch in the DJIA way back earlier in the year should have been fair warning.

Holy crap. That was -ages- ago. Don't we forget?!? I don't forget. Good to see others don't either.

Okay, tinfoil hats in place? Let us proceed. Absolutely. Market makers in rapid markets have three choices; do their job, do what's ethical or save their kids and house and job. Duh.

Oh, look guys. A 200 (or TWO THOUSAND) point execution window. Whatever shall we do?

Look, I'm not a wierdo, I'm not buying gunpowder or even gold. I'm sitting on some cash waiting for a long term entry. There is nothing above 10,800 justified by any long term valuation. Sure there are some good stocks and the DJIA is not all but you get the idea. I don't even fume over the fact that the markets are not fair. Cripes, fair? Why even bother? Fair costs so much unfair looks like a bargain.

There's a bitchslapping two years overdue. I'm not gonna break just because I've been wrong. My strategy is to buy some f the manufacturing sectors that go down the least. Why? Inflation. THe US is the #1 manufacturer with a bullet. iPod profits repatriated at a 30% discount versus USD look fine. The future of intellectual property protection looks better every day. Well not protectioin so much as ROI. But I ramble.

Transprtation costs are a wierd recent anomaly. Even if gas doubles it still makes POV travel the best alternative and because POV is so dominante even should it get more expensive than transit it would still persist for decades.

simi.uber.alles said...

It baffles me that people keep bringing up gas prices. Gas was $2/gal when I moved to Simi Valley in 1998. It's now about $3/gal, a 50% increase over nearly a decade. This isn't much over inflation, which is pretty surprising considering that the price of oil has quadrupled in the past 10 years.

At 20 MPG & 2000 miles/month (which is a pretty high estimate), you get 100 gal/month, which conveniently works out to $1/gal = $100/month. People just aren't going to get incensed over that, not when the mortgage payment is going up by $1000/month.

When gas hits $10, maybe then people will start to care more about the cost of commuting. Right now, the wasted time in the car is far more valuable to most people than the cost of fuel.

Funny Circus Bears said...

Obviously ETFC will be gaping down at the open tomorrow, as will BAC to a much lesser extent.

I'll initiate a limited short position on ETFC.

I'll look to take some BAC long at some near a bottom, anticipating emotional overselling.

Lost Cause said...

I refer to the documentary film "Making Sense of Place." Notice that old Cleveland was 60 sq miles and new extended Cleveland is now 900 sq miles, with no net population change. Also note the cost of maintaining that roads and infrastucture. This kind of thing is unsustainable. You don't see this as part of what is going on?

Akubi said...

The economy is a sign, but I sense a bigger sign from Burma.

Akubi said...

For those who don't give a rat's ass about Burma, Orwellian govt, doubled fuel costs, generalized BS, etc. - as usual - and
400 monks
. Porn later.

Son of Brock Landers said...

@ PV - Going back to your probability layout for the Fed tomorrow. I'm in the no change to rate with a change in wording bias. I think he'll leave it open to an intra-meeting cut if need be. Whatever the phuck that means.

Curious said...

Damn, all of a sudden I feel like I understand you guys less than I understand Akubi.

But I'm way more concerned when your knowledge/acumen takes such flight.

How the eff did y'all get so freakin' smart and/or enlightened?

What can I do to become more informed? I think your blog & comments are too far beyond my abilities. Do you have any suggestions about where I might learn some basics?

Yes, I understand that y'all think you're talking basics but I feel like a overly intelligent kindergartner who's talking to overly intelligent PhD's!

Help me find my natural place of learning so I can stop annoying you all with my simplistic questions!

-C, the BA chump.

Pleather Murse said...

BTW, where can I buy one of those Cow-Pies (tm)? They look scrum-diddly-icious. I bet they're high in fiber.

The_Scum said...

Hurray for K Hov and his giant success! It should help prop up homebuilder and mortgage bank stops for the rate cut (which I think PV or whoever it was vastly underestimated). Since I closed my shorts Friday I hope to make some more risk money re-entering. Maybe by Friday reality will have set back in so the slides can resume.

aaron said...

foreclosures up HUGE.

just the beginning.

H Simpson said...

Just caught this on

To many, a large boat is a vacation home, as it has the same tax advantages and similiar financing. Looks like the same trouble we are seeing in real estate.

The credit crunch is starting to hit. I was at a large boat show in Newport RI last weekend. Nobody was talking to brokers about buying new or used boats. This will hit by next Jan-Mar.


Real estate owners aren't the only ones affected by the current loan crisis. Boat owners are having their problems too! Companies that repossess recreational boats say their business is way up from a year ago, and with boat owners in the northeast facing the end of the boating season, the crisis could get a lot worse. However, it is important to note that lenders want their money and not their loan collateral returned to them. Whether it is your house or your boat, if you are behind with your payments, you are advised to contact your lender. Sometimes a lender will make arrangements to reduce your payments or allow you to sell the boat for less than the amount owed, but be warned that whatever arrangements you make, you had better honor them. Your word has to mean something.

Dan said...

Uh, wasn't that "glitch" proven to be not a glitch at all, and nobody could take advantage of the market/future spread because there was no advantage to take?

Peripheral Visionary said...

I would be *extremely* surprised if no one took advantage of that "glitch". Of course the market regulators said that it was just a glitch and that everyone was equally affected, but what did you think they were going to say?

In short, the computers got backed up on the DJIA calculation. Of course, Dow Jones (or NYSE, not sure who actually handles the computers that do the official calculation) said that since it wasn't being computed correctly, everyone was equally affected.

But everyone wasn't equally affected. The big traders run their own calculations, using the same algorithms that Dow Jones uses (probably for just such a contingency.) They would have seen the discrepancy in their own internal numbers and in what was being officially reported. So there's no question in my mind that the big traders, with accurate numbers, saw very real arbitrage opportunities open up during that window in time. Once again, they would have had the favorable position with respect to the outside, small investor--another indication that in the day trading market it is not an even playing field.

Dan said...

Right, but the problem was the DJIA is just a calculation, it isn't marketable. There are two prices, the calculated price, and the real price. the problem was the calculated price was delayed. Now I completely agree that the big traders run their own math(They just compute the DJIA the same way on their own systems). And they surely noticed the discrepancy, but what are they going to trade? the futures, etf's, etc were all trading normally and priced normally.

Rob Dawg said...

Investor: "I'd like to purchase a DJIA basket at the current price of 11,000."

Trader: [Knowing the price is 200 points lower] "Done and I got you a good price, 10,990."

Investor: "Gee, thanks."

Lou Minatti said...

Why would anyone live all the way out there, just to commute hours every day, and have no night life, hit-and-miss shopping, and live in featureless suburbs--just to save a few bucks on the mortgage?

Kids. If I was single or if my wife and I were DINKs I wouldn't mind a townhouse or loft in a trendy area. As a parent I want a quiet neighborhood with good schools and an actual back yard with trees. That is what it boils down to.

$3 gas won't kill the exurbs. $4 or $5 gas won't do it either. Just buy a more fuel-efficient car. Problem solved. Gas remains a small part of the budget. The mortgage, taxes, insurance, medical care and day care for the kids are the killers. I pay $1200/mo for child care. That's not unusual. $20 extra per week for gas is just not a factor.

Peripheral Visionary said...

I suspect that most people here have picked up their knowledge (let's stay away from "acumen" or "enlightenment") from a variety of sources. A few classes in economics and statistics can actually be very helpful in laying the groundwork for an understanding of the economy, but after that, it's up to a lot of reading books, reading the news, and even surfing blogs (huzzah!)

If you don't have any coursework in economics or statistics, that's a good place to start, or get a few good books that cover the basics. They're not quite primers, but I would definitely recommend the timeless works How to Lie With Statistics and Freakonomics; they're both very accessible, and very good at instilling a proper sense of skepticism toward reporting on the economy.

And of course, there's Wikipedia, which has good overviews of the Economy and Interest Rates and what we've been talking about, Monetary Policy.

For general economic commentary, I like The Prudent Bear, which has excellent (if pessimistic) commentary, varying in detail and complexity; you'll find some article series (Guest Commentary and "Random Walk") to be more accessible, while others ("Credit Bubble Bulletin" and "The Bear's Lair") to be more challenging. Of course, there's always the Calculated Risk blog; Rob's a regular there, and the discussion varies from accessible to somewhat complex. I also have to recommend Tanta's excellent The Compleat UberNerd, which goes into the mortgage industry in excruciating detail; it's very challenging, but should be at least partially readable and very enlightening.

H Simpson said...



you are spot on.
Once you have kids

1. you don't have time to go out clubbing.
2. You don't have time to go to the musicals.
3. High end joints loath you bringing your children.
4. You think more about the neighborhood. You can protect yourself, but what about your 3 year old?
5. Cities have traffic that can run over your kid. The burbs don't
6. been hearing a lot of gun shots in the area. The city is not safe anymore.

So you had the DINKS who decide to have kiddies. They sold the condo near town thinking they can commute hoping one can work from home. they look at developments with new houses, soccer fields, and schools with no metal detectors but who will come down hard on any student found with a peanut butter sandwich. Oh how wonderful is safety.

When they bought in 2005, the rates were low and they took a ARM so they could get the extra large house on the postage stamp lot even though they did not need all those rooms. They took out a 2nd loan 6 months to add the spa (that commute is stressful) and down payment for mom's new leased Lexus suv to go to soccer practice. The leftover coin was used for a vacation and to pay 6 months of property taxes.

Now it is 24 months later. Momma is knocked up again and now it does not make sense for her to work as daycare is too expensive.

The Lexus has had it's milage run up and the lease company has told them they are going to have to buy it at the list price. Cannot even turn it in.

2 years of insurance increase have cranked up the house bill by 800 bucks.

The credit cards are maxed out with all the yuppie baby crap, but at least it will get a second use.

Hubbie has been told most the organization is being send to Bangalore, but he is safe for now. But no raises for 18 months as the economy is cooling.

Then the ARM resets from 2% to 7% and the couple's American dream has turned into a nightmare.

Not everyone was a con man like Casey. But some folks did not think out worst case and they are going to get whacked in a perfect storm..

serinitis said...

Misc notes

1. Lou - A friend of mine found it was cheaper to have an au-pair from Europe to handle child care. The cost was $600/month + room and board.

2. The friend who is buying the Countrywide house is still buying it. He got the price down to $491K. PERS is handling the first 80% loan. Countrywide is doing the second 20% for a no money down purchase. Technically it is not a no money down becuase he is putting a small down payment, but the down is coming from cashback in the loan. I believe he is paying 8.4% for the second.

3. I am pretty certain my options on Countrywide are toast. They were a high risk high potential return, so I did not expect them to be in the money.

Dan said...

Rob that could happen at any time for any security if you have an uninformed investor.

FlyingMonkeyWarrior said...

We need reporters who will call these liars on this crap.
@ Rob Dawg,
You just did.

Peripheral Visionary said...

Well, now they've gone and done it. That whistling noise you hear in the background is the Fed's credibility and the U.S. dollar falling in tandem.

Funny Circus Bears said...

Hopefully you bond and cd guys got yourselves positioned for this.