The Pulte Homes Blog

Pulte Cutting Employees Again, Sign of A Failing Company

noreply@blogger.com (Greg Bowden) — Fri, 20 May 2011 01:08:00 +0000

BY ROBBIE WHELAN AND DAWN WOTAPKA

PulteGroup Inc., the country's second-largest home builder by annual sales, is terminating as many as 10 executives at the divisional president level or higher as part of a management-consolidation plan.

The total number of layoffs has yet to be determined. At the end of last year, the builder had 4,363 employees, about one-quarter the number it had during the real-estate boom, in 27 divisions.

The move comes as the country's home builders struggle to generate profits amid weak demand and a particularly disappointing spring selling season.

Bloomfield

The Ingredients of A Strong Brand

noreply@blogger.com (Greg Bowden) — Thu, 24 Mar 2011 16:43:00 +0000

Branding! Branding! Branding! Everyone uses the word, but they rarely tell you what makes up a good brand and what 'branding' covers. Silly really, when you can't design one or know if you have a good one without knowing what they consist of. So let's do that, shall we? Let's see what kind of list we can put together.

A strong brand has...

A Logo

But not just any logo. A strong brand has a logo that's memorable, noticeable, and says something about the company and what's important to it. This appears on the website and anything else it fits on. Like the coat of arms or wax seal of royalty, the logo becomes a seal of approval and ownership.

A Tagline

That catchy, memorable bit of text that says what your company stands for. It's almost like the summary of a strong brand and the text version of a logo. In fact, when it's incorporated into a company in just the right way, customers can recall it just as easily, if not more easily than the logo itself.

A Design

A company can go through several stationary or website designs. Even brick and mortar stores can have several design changes, but regardless of what type of design it is or where it's found, the feeling, traits, and images it provokes are the brand.

A Font

Users assess it subconsciously, business owners often brush it off.

How to draw you're customers in:

It doesn't matter what you're selling, the fact is that when you run a business, you're in the business of selling first and providing a product or service second. This makes it important for every business owner out there to think of a way to draw customers in and to make them interested in your products. This means marketing and advertising; while small businesses may not have the resources to what some of the larger companies out there do, what they do have is the examples that have been set for them by the most successful giants in their industry.

Buying a New Home Means Paying More; Here's Why

noreply@blogger.com (Greg Bowden) — Wed, 23 Mar 2011 23:03:00 +0000

Buyers of new homes plunged in February to the fewest on records dating back nearly half a century, and new home prices are now 30 percent higher than of those being resold _ twice the markup in healthy housing markets.

Click Here For Video

Did Pulte Buy Centex Too Soon?

noreply@blogger.com (Greg Bowden) — Tue, 01 Mar 2011 03:54:00 +0000

Everyone has heard the arguments: Pulte bought Centex too soon. It paid too much money. The deal added too much debt to Pulte’s balance sheet. And why add market share when there’s no market in which to sell?

But the litmus test could be whether Pulte can pull off its branding strategy in an industry sector that mostly has resisted name-brand marketing.

Pulte is assigning a brand to every piece of dirt it owns or controls: Centex for entry level lots, Pulte for first move-up, Del Webb for active adult, and “TBD” (apparently a brand still in formation) for luxury products. Pulte now controls the marketing, sales, construction, and design of its products corporately, leaving its areas and divisions to focus on land acquisition and customer service.

Since the merger, Pulte Group has paid down nearly $2 billion in debt and made optimistic projections about synergistic operational savings.

Pulte's Merger With Centex Homes Not A Good Decision

noreply@blogger.com (Greg Bowden) — Tue, 22 Feb 2011 01:15:00 +0000

Pulte has yet to return to consistent profitability after the $1.3 billion merger, and acquisition of Centex Homes, which created the largest home builder by home closings. Since then Pulte has turned a profit in just one of six quarters, and has taken nearly $1 billion in write-downs. And Pulte’s profit margins and stock performance have trailed the other builders.

Pulte Homes Loses Almost $1 Billion in Third Quarter

noreply@blogger.com (Greg Bowden) — Tue, 22 Feb 2011 01:01:00 +0000

Want to know how the new homes construction market is doing?

Forget about the statistics. Pay no attention to weekly rising or decreasing sales numbers. Ignore prognostications from the trades groups.

Just study the newest third-quarter performance data from one of the largest homebuilders in the U.S. - PulteGroup Inc. of Bloomfield Hills, MI.

The Michigan-based builder lost nearly a billion dollars. Pulte booked $986 million in charges and orders declined, underscoring the home-building sector's continued problems.

With the housing market expected to weaken further next year, Pulte said it will slash costs by about $100 million by consolidating divisions and reducing staff, The Wall Street Journal reported.

Richard Dugas Jr.
"We're frustrated...to be bumping around at the break-even level--a little bit above, a little bit below at any given quarter--on our core business, and that's not acceptable," Pulte CEO Richard Dugas said in a conference call with analysts.

"We want to be solidly profitable, so that's why we're taking the actions."

Pulte's cost cutting comes as home builders are battling a multiyear downturn. Earlier this year builders thought their fortunes were improving.

But that confidence came from the federal government's tax credit of up to $8,000 for first-time home buyers. Since the credit ended April 30, home purchases and home-construction orders have dropped.

Several builders in recent weeks have reported double-digit earnings declines. Pulte said third-quarter orders dropped 12% from a year earlier and 15% from the second quarter.

The company reported a third-quarter loss of $995.1 million, or $2.63 a share, compared with a loss of $361.4 million, or $1.15 a share, a year earlier.

Revenue fell 3.1% to $1.06 billion.

Gross margin on home sales fell to 7% from 12.6%. Closings dropped 7.2% to 3,865 units.

The company's home-building operations generated a pretax loss of $1 billion.

Goodwill impairment, construction and insurance reserves, and land-related charges totaled $986 million. Pulte reported a pretax loss of $292 million a year earlier, the WSJ reported.

Betting that the housing sector had hit bottom, Pulte last year acquired competitor Centex Corp. for $1.3 billion.

Pulte took a $655 million third-quarter charge, driven primarily by expectations for lower demand. Pulte has now written down $1.15 billion, or 83%, of the original $1.395 billion goodwill recorded, according to Credit Suisse.

"The charges were everywhere," wrote Stephen East, a building analyst with New York City-based Ticonderoga Securities.

"No one should be surprised by the goodwill write-off," says East. "Our only surprise was that all of it was not written off. However, we still think that could happen."

Pulte says the purchase was a good one. Even so, Pulte reduced its operating areas to four from six and consolidated divisions in Arizona, Florida and in the New York and New Jersey area. It also cut corporate staffing.

"These actions will result in a fourth-quarter charge," Dugas said. "But with many forecasting demand in 2011 will show only modest gains, we are acting proactively now to make sure we maximize the savings opportunity."

Pulte Scamming Customers of Their Deposits

noreply@blogger.com (Greg Bowden) — Fri, 11 Feb 2011 22:43:00 +0000

The New York Times
Melissa Calderone says Pulte Homes preapproved a mortgage but later backtracked on it.

http://www.nytimes.com/2011/02/06/business/06gret.html

By GRETCHEN MORGENSON
Published: February 5, 2011

MELISSA CALDERONE was ready for a fresh start when she made plans last year to move to Florida from New Jersey. Recently remarried, she signed a contract in mid-March on a house to be built in Windermere, Fla., by Pulte Homes, the nation’s largest homebuilder. The neighborhood had good schools for her three children and two stepchildren. It was also close to where Ms. Calderone’s parents lived.

Her local bank approved her for a mortgage. But then a Pulte Homes saleswoman told her that she would get a $4,000 credit toward closing costs if she took out a loan with the homebuilder’s banking unit instead. Ms. Calderone, 38, agreed. She deposited $20,000 in earnest money and set aside $80,000 more for a down payment on the $347,000 house. Her closing date, documents show, was scheduled for late summer, about six months later.

Then her troubles began. Although she had been “preapproved” by Pulte, the company ultimately denied her the loan. Then, contending that Ms. Calderone had defaulted on the purchase agreement by failing to close on time, Pulte kept her $20,000 deposit. The house went back on the market.

“They have my money and the house, which they are selling to somebody else,” Ms. Calderone said. “I have no house and no deposit.”

Asked about Ms. Calderone’s complaint, a spokeswoman for the PulteGroup declined to comment, citing concerns over customer privacy.

But the spokeswoman provided a general statement: “Preapproval does not guarantee the final approval or closing on the transaction, since a buyer’s financial situation can change during the homebuilding process or the buyer may be unable to verify certain aspects of his or her credit profile. If the buyer fails to close on his or her financing for any of these reasons, the purchase agreement allows the seller to retain the earnest money to offset any financial damages.”

But Ms. Calderone is not the only Pulte customer with this kind of complaint. Last year, the attorney general of Arizona filed a lawsuit against Pulte, contending that the company’s mortgage sales practices deceived consumers. That suit cited borrowers who thought, as Ms. Calderone did, that they had been approved for a mortgage when, in fact, they had not been. Those people lost their deposits as well.

“In the earlier contracts there was a 60-day period for refunds,” said Nancy M. Bonnell, the assistant attorney general for Arizona who litigated the matter against Pulte. “It seemed like the disapproval of the loans came after the 60-day period. Then consumers would find out they did not qualify for the loan or rate.”

Ms. Bonnell said that Pulte customers in her case forfeited deposits ranging from $2,500 to $25,000 each.

Even when a customer notified Pulte within the specified refund period, the company did not return deposits, according to the Arizona complaint. Some customers were told they had “prequalified” for a loan at one interest rate only to be charged a much higher rate when the loan came through, the complaint said. One customer was promised a 7 percent mortgage but received one carrying a rate of almost 14 percent, it said. Knowing she could not afford the loan, that customer canceled her purchase; Pulte refused to refund her deposit, the complaint said.

Pulte settled with the Arizona attorney general last August, without admitting or denying wrongdoing, Pulte agreed to pay $1.18 million, including restitution.

Under the terms of her contract with Pulte, Ms. Calderone had 45 days to cancel her purchase and get her deposit back. But as occurred in Arizona, her problems with Pulte Mortgage — indeed her first contact with the loan-processing unit — did not come until well after that period had ended.

E-mail correspondence between Ms. Calderone and Pulte shows that the lending company did not contact her until May 25, 2010 — some 67 days after she signed her contract. At that point, she began supplying documents, like the terms of her child-support agreement with her ex-husband, which was her only source of income.

Over the next three months, she continued to respond to questions and requests from Pulte, even when it asked for materials she had already submitted. Pulte also asked about small transactions in her bank account. Where did a $500 cash deposit come from, Pulte wondered? A wedding gift, Ms. Calderone replied.

AS the summer passed, Ms. Calderone kept supplying documents. But she was growing worried that she would be unable to move into the Windermere house by the Sept. 9 closing date. She was living with her parents, and a delay would mean her children could not attend the Windermere schools, where she had registered them.

During this back and forth, nothing changed in Ms. Calderone’s financial situation. At one point, the Pulte loan processor told Ms. Calderone that questions were arising because of new rules imposed by Fannie Mae and Freddie Mac, the mortgage finance giants. “Then she comes back to me saying ‘You haven’t been divorced for a year yet, so we can’t verify how much income you are getting every month,’ ” Ms. Calderone recalled.

It seemed to her like one big runaround. “I had the income; I had the credit score,” she said. “They preapproved me, and I had a closing date. To me, is seemed like they were looking for a reason not to complete the deal.”

The closing date came and went with no contact from Pulte, Ms. Calderone said. The extension she had received from the local school district, meanwhile, was set to expire on Sept. 23.

On Sept. 13, she received an e-mail from a Pulte representative saying the company was submitting her loan application to its regional underwriting manager for review. “I should know today,” the e-mail concluded.

But Ms. Calderone did not hear about her loan that day. About a week later, she received a phone call saying the loan had been denied. Unsure if her children would be able to stay in the local school, she canceled her contract and asked for her money back. She was told that because she had failed to live up to her end of the deal, Pulte would keep her $20,000.

In early December, after she wrote a letter complaining to Pulte’s chief executive, the company offered her a $10,000 credit on the purchase of another Pulte home. She declined. She and her family are now renting a home in south Florida.

A version of this article appeared in print on February 6, 2011, on page BU1 of the New York edition.

Home Prices To Decline In 2011

noreply@blogger.com (Greg Bowden) — Tue, 28 Dec 2010 23:31:00 +0000

http://www.visualtube.com/media/1950/Home_Prices_To_Decline_In_2011/

Home Prices Expected To Take Big Hit Next Year

noreply@blogger.com (Greg Bowden) — Tue, 28 Sep 2010 21:28:00 +0000

Click Here or Click On Title

Pulte Homes Illegal Alien Carpenters

noreply@blogger.com (Greg Bowden) — Tue, 10 Aug 2010 23:10:00 +0000

Click Here To View The Video

Once again great jobs Americans would kill for, in the hands of illegal aliens. This time working for a subcontractor of Pulte Homes, the nation's largest home builder. No social security, No workers' comp. And you be the judge about whether the managers know all about it, and either actively arrange it, or merely look the other way.

Help stop this madness by helping Stand With Arizona push for the enactment of mandatory E-Verify Plus with strong penalties for both workers and companies for social security fraud.

Let's help get Americans back to work!

Click Here To Donate to Stand With Arizona Today

Click Here To Stand With Arizona

Centex Homes-Pulte Homes Collapse In Texas

noreply@blogger.com (Greg Bowden) — Thu, 28 Jan 2010 03:14:00 +0000

Illegal Acts by Pulte @ Sun City Texas

noreply@blogger.com (Greg Bowden) — Thu, 28 Jan 2010 03:07:00 +0000

The residents of Sun City Texas need to demand the resignation of all of the Pulte appointed board of Directors, and especially Brent Baker, for violating the "Interested Director Rule" that is found in Texas Non-Profit law. This statute prohibits interested directors (those that have financial interests/stake - employees of Pulte - with issues before the board) from voting on issues before the board in which they have a financial stake/interest. This law is intended by the State to protect the interests of homeowners like us from having double agents on our board of directors.

This law requires that Interested Directors ABSTAIN from any votes before the board in which they have a financial interest. In the case of Pulte employees, this includes all three of them. They have not carried out their duty of loyalty to the CA when voting on issues that are financially deterimental to Pulte. They have not abstained from voting as is required by law. The CA attorney is also complicit in allowing this violation of state law to continue without taking action against the Interested Directors on the board.

All three of the Pulte directors should be required to resign their positions on the board for failing to abstain on votes concerning their employer - Pulte. The CA attorney also needs to resign or be terminated for failing to protect the interests of the CA and its members.

In the future any decision that the CA board of directors needs to consider that involves Pulte should be referred to an impartial committee (not made up of Pulte baised members) for an impartial recommendation. Any Pulte appointed board of directors on the board need to be required to abstain from voting on such issues.

Pulte and its three appointed board of directors, headed by Brent Baker, have been violating the law and basically - DOUBLE DEALING - when it comes to voting on CA issues that involve Pulte. Really, we have had an employee of Pulte negotiating with Pulte on behalf of the CA???? How unfair and unjust is that??

Please raise your voices in demanding the resignation of all three current Pulte employees that are now on the Board of Directors of the CA as well as the resignation of the CA attorney.

Ventnor Residents against the abuse of Eminent Domain, Pulte Pulls Out

noreply@blogger.com (Greg Bowden) — Tue, 26 Jan 2010 19:05:00 +0000

You ! Yes You ! Have helped us save our homes for the present. A very big thank you. Pulte Homes has pulled out of the deal and city officials are scurrying around like cock roaches. People can beat the unjust practice of taking peoples homes and giving it to developers to make millions.

http://cleaning-products.net/ventnor.htm

Abuses from Centex Homes - Pulte Homes

noreply@blogger.com (Greg Bowden) — Sun, 03 Jan 2010 00:55:00 +0000

Don't Buy a House Yet

noreply@blogger.com (Greg Bowden) — Sat, 05 Dec 2009 14:06:00 +0000

By Steven Goldberg, Contributing Columnist, Kiplinger.com
Dec 3rd, 2009

When housing prices hit bottom, they will languish near those low levels for years to come. So don’t be in a rush to buy.
Mortgage interest rates are at a 50-year low. Last month, Congress extended a tax credit for home buyers through April. The economy is beginning to crawl out of what by some measures is the deepest recession since the 1930s. One survey already shows house prices beginning to rise.

So isn't it time to buy a home? Kiplinger's certainly thinks so. But if I were in the market for a new home, I would wait. Housing prices typically don't rebound quickly after a bust; instead, they level out and stay near that low base line for years.

I don't see why this time should be different. True, prices seem as though they can't drop further, and in some areas they even show signs of an upturn. But if prices won't be taking off and might well resume their decline, you lose nothing but a little time by waiting to buy.

Of course, if you're buying out of necessity — because you're moving to a new area and need to sell your old house and buy a new one, for example -- there's no need to wait. But if you're planning to buy your first house, if you want to move to a larger home, or especially if you're buying a house for investment purposes, take your time.

The housing picture is complex — and frightening. House prices have plunged 30%, on average, from their 2006 peak. But from 2000 to 2006, average prices nearly doubled. That means average house prices are still almost 40% higher than they were a decade ago. Forty percent is a healthy increase — even in a robust economy.

And the economy, of course, is anything but robust. A fragile recovery seems to have begun last summer, but unemployment stands at 10.2% and is likely to rise even higher. It may not begin to fall substantially until late next year. Companies were quick to lay off workers, but they are being slow to hire.

As bad as the overall economy is, residential real estate is in much worse shape. About seven million households — or 12.5% of all homeowners — either are behind on their mortgages by 30 days or more or are in foreclosure. It's hard to make the house payment if you're unemployed. Millions of houses already stand empty — victims of the subprime loans that sparked the Great Recession. Almost a quarter of homeowners owe more on their mortgages than their houses are worth.

The history of busts.
Nationally, housing prices haven't declined from one calendar year to the next since accurate record keeping began in 1968. But in 2005, the Federal Deposit Insurance Corp. identified 21 regional housing busts since 1968. (The FDIC defined a bust as a decline of 15% over five years.)

Busts occurred in Texas when oil prices sank in the mid 1980s, in Southern California in the early 1990s amid defense-industry cutbacks, and in much of the Northeast corridor in the late 1980s and early 1990s. The 21 busts happened for varying reasons, and each unfolded differently. But they all shared one common trait: A nasty regional recession triggered each one.

Many (but not all) busts followed booms — just as our national housing crash followed an unprecedented boom.

Most (but not all) of the regional busts tended to be painfully protracted affairs. Why? Because unless you're forced out, most of us would rather stay in a house, pay the mortgage and hope for an eventual upturn rather than sell and realize our losses quickly. That means home prices don't go down all at once; they tend to slide agonizingly slowly on infrequent sales.

True, the tax credits and low mortgage rates make buying a house tempting today. But if you buy into a slumping housing market, those incentives won't add up to much. So while the worst of the real estate decline is surely behind us, the odds are strong that you'll be able to buy later at the same price — or a lower one.

Steven T. Goldberg is an investment adviser.

Hagens Berman Sobol Shapiro Investigating Pulte Homes in Arizona and Nevada

noreply@blogger.com (Greg Bowden) — Thu, 29 Oct 2009 02:27:00 +0000

PHOENIX--(BUSINESS WIRE)--Hagens Berman Sobol Shapiro announced today it is investigating Pulte Homes (NYSE: PHM) in Arizona and Nevada based on reports that claim the company may be engaged in a fraudulent scheme to artificially inflate home sale prices and drive sales by controlling the home sale process.

The firm filed a lawsuit against Pulte Homes in California last week, citing similar claims and believes the practice is widespread throughout Pulte neighborhoods in Arizona and Nevada.

The lawsuit in California claims Pulte placed unqualified homeowners in loans that they could not afford in an effort to sell more homes and at higher prices. Since Pulte controls the entire home buying process, its settlement and appraisal arms can take whatever steps necessary to close a sale at prices demanded by Pulte.

“We believe Pulte Homes spent a lot of time and effort to develop a sophisticated scheme in California, and decided they didn’t want to stop there,” said Rob Carey, a partner in the HBSS Phoenix office. “We believe that Pulte targeted homeowners in states with high foreclosure rates, including Arizona and Nevada, and we’re interested in learning more about the company’s sales process in these states on behalf of homeowners.”

HBSS is interested in hearing from anyone who purchased a home from Pulte in the past several years in Arizona or Nevada. Homeowners can contact the firm at pulte@hbsslaw.com, visit the Web site at www.hbsslaw.com/pulte or call (206) 623-7292.

Hagens Berman Sobol Shapiro will treat all information as confidential.

About Hagens Berman Sobol Shapiro

Hagens Berman Sobol Shapiro is a nationally recognized class-action and complex-litigation law firm based in Seattle with offices in San Francisco, Chicago, Boston, Los Angeles and Phoenix. Among recent successes, HBSS negotiated a $300 million settlement in the DRAM memory antitrust litigation, the largest antitrust settlement in U.S. history, recovered $340 million on behalf of Enron employees, and was part of the leadership team in the $3 billion Visa/MasterCard settlement. In pharmaceutical litigation, the firm’s recent successes include a $350 million settlement with McKesson, more than $200 million with other parties in drug-pricing litigation, and a $150 million settlement regarding Lupron. HBSS represented Washington and 12 other states against the tobacco industry that resulted in the largest settlement in history. For a complete listing of HBSS cases, visit www.hbsslaw.com.

Contacts:
Hagens Berman Sobol Shapiro
Rob Carey, 602-840-5900
Rob@hbsslaw.com
or
Firmani + Associates, Inc.
Mark Firmani, 206-443-9357
Mark@firmani.com

Pulte Homes Lawsuit

noreply@blogger.com (Greg Bowden) — Tue, 27 Oct 2009 18:14:00 +0000

A law firm filed a class-action lawsuit against Pulte Homes in California claiming the company artificially propped up home sale prices and pushed homeowners into dangerous loans for additional profits.

The suit claims that Pulte’s practices created ‘toxic subdivisions’ resulting in foreclosures, a steep decline in home values, a loss of buyer’s down payments, loss of mortgage payments and ruined credit.

The suit represents anyone who purchased a home in a Pulte neighborhood between Jan. 1, 2005 and March 1, 2007. If you fall into this category, please visit http://www.hbsslaw.com/pultehomes. You can share your story with attorneys and learn more about the lawsuit.

Pulte Downgraded To Junk

noreply@blogger.com (Greg Bowden) — Thu, 27 Aug 2009 20:37:00 +0000

DOW JONES NEWSWIRES

Moody's Investors Service lowered its credit ratings on Pulte Homes Inc. (PHM) one notch further into junk territory following the company's $1.4 billion purchase of Centex Inc.
The ratings agency expects the combined homebuilder's "currently robust cash flow will decline substantially this year and next" as the benefits of inventory liquidation play out.
Once that happens, Moody's said Pulte will need to generate increasing portions of its cash flow from operations. That will pose a "considerable challenge," citing the company's large land position, below-industry-average margins and somewhat-low revenue per employee compared with peers.
The downgrade closes Moody's review of the company's begun in April, after the deal was announced. At the time, Moody's said it was examining whether the new company's larger land portfolio would increase risks to debt holders.
The combined company has nearly 190,000 housing lots in 29 states, one of the largest land supplies in the industry and will be a major builder of homes for first-time home buyers and retirees. By units it will be the nation's largest builder.
Pulte was lowered by Moody's to B1, or four steps into junk territory. The ratings outlook is stable, with Moody's noting that increased risks from its large combined land position are offset by potential cost-savings benefits.
Standard & Poor's Ratings Service and Fitch Ratings last week affirmed their ratings on Pulte but have negative outlooks.
Shares were down 4.1% at $12.78 in recent trading.

Housing Outlook

noreply@blogger.com (Greg Bowden) — Fri, 10 Jul 2009 16:08:00 +0000

Foreclosure sales, short sales and first-time homebuyers taking advantage of tax credits is purely illusionary and hides the underlying problems of lending and inventory," says Anthony Sanders, a finance professor at George Mason University's Hall School of Management. "Plus, the jumbo and non-first-time market has to show volume."

The spring sales bump many had hoped for didn't materialize. According to the National Association of Realtors, pending sales activity only climbed 0.1% from April to May--not exactly a market rally.

There are too many sales in markets that are affordable to first-time buyers, driven by foreclosures and short sales, and too few sales in expensive parts of town thanks to a lack of financing and the impression that prices are coming down.

In neighborhoods rich and poor alike, it's going to be a long summer--with no sign of recovery on the horizon. "

and is right on with market trends and the abandonments found all over the country.

Now Comes The Real Crash

noreply@blogger.com (Greg Bowden) — Fri, 05 Jun 2009 14:31:00 +0000

June 5, 2009

Here's the good news: The worst of the subprime mortgage carnage is behind us.

Here's the bad news: That was just the tip of the iceberg. There's probably much worse ahead.

Fool retirement guru Robert Brokamp recently sat down with noted value investor Whitney Tilson to talk about his thoughts on the continuing mortgage crisis.

I thought this was a subprime problem!
It was, at first.

Many subprime mortgages started out with a low "teaser" interest rate that then increased to a market-level subprime rate after a set period of time. When that happened, the payments would go up -- often by a lot -- and the hapless overleveraged borrower would go, "Oh fiddlesticks, I can't afford to pay the mortgage anymore."

(Except that most of them probably didn't say "fiddlesticks." But I digress.)

Tilson notes that the number of loans facing payment shock started climbing in early 2006, reached a very high level in early 2007, and stayed high until about the end of last year, at which point they started falling off sharply. Likewise, the massive wave of defaults and foreclosures triggered by these higher payments is abating. That wave is behind us.

But subprime mortgages weren't the only ones with teaser rates.

Now, it's mostly not a "subprime" problem
The emerging problem is with prime mortgages, those issued to people with good credit. The crash in housing prices has left many of those folks "underwater" -- owing more than their house is now worth. And the crash in the global economy has left many of those folks unemployed -- and many who are still employed are making less money now than they were a year or two ago.

Tilson cites figures that about a quarter of all prime U.S. mortgages are underwater at the moment, and that number is likely to grow if housing prices continue to fall. Despite some beliefs that home prices are bottoming, unemployment is still a big problem -- Deere (NYSE: DE), among others, just announced new rounds of layoffs. And now mortgage interest rates are suddenly rising -- the average 30-year mortgage is up to 5.32% this week, up from 4.91% just last week, according to the most recent Freddie Mac (NYSE: FRE) survey.

Nobody knows quite how all these factors will play out, but clearly the potential for a huge wave of defaults in the near future is growing.

What, you thought things were stabilizing?
Tilson recently argued that the appearance of stabilization in the housing market is a "head fake," caused by the usual spring surge in homebuying and a temporary reduction in the inventory of foreclosed homes sitting on the market. The crisis, Tilson says, is actually getting worse.

As Tilson sees it, although the worst of the losses suffered by speculators and subprime borrowers are over, problems with prime loans are just now starting to pick up steam. Many conforming prime loans are owned by Fannie Mae (NYSE: FNM) and Freddie Mac. But other mortgages will likely also prove problematic, including home equity lines and prime "jumbo" mortgages, as well as the scarier Alt-A and Option ARM loans.

Eeeek?
Why scarier? According to Tilson, nearly half of Alt-As and over 70% of Option ARMs are underwater. Alt-A resets are just starting to take off -- they won't peak until 2012 or 2013. And Option ARMs don't just reset, they recast -- borrowers go from making just interest payments, in many cases, to making full proper 30-year-amortized mortgage payments. Some could see their monthly payments increase by 60% or more.

Results From Lowes Not Good For Homebuilders

noreply@blogger.com (Greg Bowden) — Thu, 21 May 2009 00:32:00 +0000

Lowes is doing very well because their customers are buying up Foreclosures and they need to fix up those homes with much needed items from Lowes. People are not buying new homes because the value is in Foreclosures. Homebuilders will struggle to keep their heads above water for a very long time to come.

Pulte Homes Is A Dead Business

noreply@blogger.com (Greg Bowden) — Mon, 18 May 2009 01:40:00 +0000

With unemployment up, deficit up, interest rate up, cost of basic needs like electricity & water up, even though 1st time buyers are supposed to get $8000 credit, nobody mentioned that you need to make less than $75,000/yr to get it; I find it hard to imagine that these homebuilders will survive this environment. No wonder they even knocked down some unfinished projects.

"U.S. unemployment rate in April hit 8.9%, its highest in a quarter century. The labor force lost 539,000 non-farm jobs in April, down from March's 699,000 decline. A 72,000 rise in government jobs, mainly new workers for the 2010 Census, helped narrow the gulf."
But if you dig in those numbers carefully, you need to add Birth Death Assumption and seasonal adjustment, Census one-timers (because those are one-timers, temporary workers), plus revisions, bringing the REAL Adjusted Non-Farm Payroll job losses to 847,000 not 539,000.
And this was supposed to be WORSE THAN EXPECTED.

It is very obvious that they are manipulating their data, accounting rules, people to pump up this market, all that with the goal of restoring confidence so that the general unaware investors would put money back in the market;
in the mean time, the companies can then take advantage of the hype to raise capital at a higher price. No wonder everybody wants to raise capital.
Even MSFT who has tons of cash already, comes out raising capital to take advantage of the stock price, not that they need the cash! This proves that stock prices are inflated, companies know this, the smart people know this, but the average investors don't. Because of greed, they don't want to miss the boat by not investing.
Once they are all in, the market will become overbought and it's the little guys who will end up holding the bag.

Homebuilders are losing money building homes

noreply@blogger.com (Greg Bowden) — Tue, 12 May 2009 22:02:00 +0000

Homebuilders are losing money building homes. Some even knock down unfinished projects.
Wait until interest rates go up more (already moved up the last 2 weeks), when government has no more money "because of their other projects", also housing prices will go down another 15%, then it will be a complete disaster for homebuilders. Papering up losses and bad news can only last a while before the real truth comes out.

New Home Prices Have to Go Up 10 to 15 % Before Builders Can Start Making Profits

noreply@blogger.com (Greg Bowden) — Thu, 07 May 2009 16:23:00 +0000

New Home Prices Have To Go Up 10 To 15% Before Builders Can Make A Profit. I don't foresee That Until 2 More Years. There Is Just To Much Builder Inventory & Foreclosures On The Market To Deal With Before You Can Start Increasing New Home Prices 10-15%. It May Take More Than 2 Years To Start Seeing A Decrease In Those Inventories & Foreclosures. My Question Is-How Much Longer Can These New Home Builders Survive? Even When They Start Making A Profit, It Will Be A Long Time Before They Can Start To Keep Their Heads Above Water, Literally. The Market Will Never Be The Same As It Was, Which In My opinion, Is A Good Thing For The Consumer.

Pulte Homes reported a net loss of $514.8 million for the 1st quarter of 2009

noreply@blogger.com (Greg Bowden) — Wed, 06 May 2009 15:54:00 +0000

BLOOMFIELD HILLS, Mich.--(BUSINESS WIRE)--May. 5, 2009-- Pulte Homes (NYSE: PHM) announced today financial results for its first quarter ended March 31, 2009. For the quarter, the Company reported a net loss of $514.8 million, or $2.02 per share, compared with a $696.1 million net loss for the prior year first quarter, or $2.75 per share. The first quarter 2009 net loss included $410.2 million of pre-tax charges related to inventory impairments and other land-related charges. Impairments and land-related charges for the prior year quarter were $663.6 million. Consolidated revenues for the quarter were $587.4 million, a decline of 59% from prior year quarter revenues of $1.4 billion.