U r b a n T r e k k e r

Regional Community News Roundup

* Md. To Add Toll to Ease BRAC Traffic [Examiner Baltimore]
"The influx of more than 10,000 households with the Base Realignment and Closure at Aberdeen Proving Ground by 2012 had some bearing on the expansion of Interstate 95 near White Marsh, according to one Maryland Transportation Authority official."

* Mass Transit Ridership up in Northern Virginia [WTOP]
"Fare increases, parking problems and crowded trains maybe forcing more Northern Virginians away from Metro."

* City Working on New On-Street Parking Plans Around the Ballpark, in Southwest, and on Capitol Hill [JD Land]
"here has been much discussion by residents and city officials over the impending "apocalypse" of traffic and parking congestion with the opening in April of the new ballpark. Residents not only in Near Southeast (all 400 of you) but in Southwest and on Capitol Hill have been waiting for the city to announce exactly how on-street parking will be handled during games, as there is great concern as to whether residents will still be able to park on their streets and won't have to deal with hundreds or thousands of cars circling the neighborhoods looking for free parking."

* Homes with a Bit of Homeland [Washington Post]
"Chuck Langpaul Jr. has been in the custom home business for more than a decade, so he thought he knew a thing or two about groundbreaking ceremonies: Hoist a shovel, snap a picture and it's done."

* FBI Probes Virginia Mortgage Scam [Washington Post]
"The sidewalks are still scrubbed and most lawns are neatly trimmed, but now the subdivision of townhouses off Route 1 in Woodbridge is pocked with empty windows and foreclosures. Federal investigators are poking around."

* Developer Pulls Back from Loudoun County Project [Washington BizJournal]
"A Loudoun County developer has withdrawn a proposal that would have brought nearly 1,000 homes to a property just south of Leesburg Executive Airport."

* Housing Boomerang [City Paper]
"By the end of September, Wilson Reynolds had finally run out of patience. For months, the Adams Morgan advisory neighborhood commissioner had pressured a landlord to make building improvements on two properties with broken locks, homeless squatters, and gang graffiti in the hallways."

'Name Your Price' Condo Sales

Builders definitely have gone wild with incentives! It's the end of the year. For some of them, their financial situations have forced them to take the high road. The consequences of not having consistent cash flow is dire.

Debt-to-backlog. Having debt that is a higher multiple of backlog (the dollar amount of outstanding orders for homes) is troublesome. Consider that the amount of cash for paying down debt is going to be a fraction of the backlog. 

Debt-to-market cap. A measure of the amount of financial leverage. 

via Seeking Alpha

Problems with builders financial conditions is opportunity for buyers, especially those year-end close-out deals. They are usually "the best deals" in town.

Hovnanian's has the most aggressive pricing that I know of. They're willing to go that far, because desperately need the cash to survive! In comparison to other builders, HOV is in the top two builders with high debt leverage [chart above]. Here is the community where they have 'Name Your Price' condo $ales. A 1 BR condo previously for $374,290 can be had for you for - how much?.. Whatever you think it's worth.

Cameron Station

Click on image to enlarge it

OTHER CLOSE-OUT DEALS in the PIPELINE

KSI aka Kettler (Alexandria, Reston, Shirlington, Lorton, Bethesda, and Largo)

Floridian

Centex Homes

I will post more year-end close-out deals as new information coming along.

As a word of precaution, make sure before you go out there and be blinded with all kinds of 'incentives,' come prepare with your market analysis. So, you know pricing on the market. It counts. And builders know it, too. They just don't want you to know about it.

 

Disclosure: No cash exchange hands for posting this on my blog. The only time I earn my broker's fee is when buyer/s decided to use my expertise to represent them in a sales transaction. A builder sales representative don't represent 'your interest.' She/he represents the seller [builder]. If you want to hire a Realtor, here is the Virginia Agency form to help you differentiate between seller and buyer representation.

Technorati Tags: centex homes,big builders,nahb,pottery barn,ksi,kettler,urban company,agency representation,hovnanian,cameron station,seeking alpha

$2 Trillion of Mortgage Slashed?

Every single day you turn around, another bank writes off some multi billion dollar from their subprime assets because of the value of their complicated asset-backed securities [SIVs] plummeted. At first, it is estimated that banks would write-downs $400 billion from their assets.

Then this one: The possibility of banks cutting back $2 trillion of mortgage.

The impact of the U.S. mortgage market crisis on the underlying economy could be "dramatic" as leveraged investors may need to scale back lending by up to $2 trillion, according to investment bank Goldman Sachs (GS.N: Quote, Profile, Research).

via Reuters

"Honey, I shrink the buyers."

The impact would be what? Dramatic. That's an 'understatement.'   The impact will be huge! For the most part -- banks, the Fannie-Freddie of the world plus other quasi government organizations -- are the major source of funding.

Even with historically low interest rates, the market is not moving at the speed of light. There is that. Then $400 billion write-offs. And then, you take $2 T off from loaning it to the market. The outlook?

It would bring housing.. to its knees.

On the other hand, if I were a buyer today, I would run and get a loan approval. Start shopping and buy a home before the source of money dries up.

 

Image: Jumbo mortgages comps in pricey CA, via Market Watch

 

Builders Profit

NV Homes, Cameron Station

Wondering how builders make their money? Via Market Watch.

Question: Can you provide any idea of what the average home-builder gross profit is on a square-foot basis right now here in the Northeast? I was getting ready to start negotiating the purchase of a townhouse here and I know the builder has a mortgage on the home for $286,000. I am trying to buy the home for around $340,000, which I think equates to a $12 per square foot profit. Just wondering if that seems reasonable.

Answer: I cannot give you a precise number, but I can extrapolate one from data provided by the National Association of Home Builders.

The average net profit before taxes of a typical home-building company was 9% in 2006, the latest year for which figures are available. The average price is now $300,000, give or take a few pesos, and the average size is roughly 2,500 square feet.

Now, 9% of $300K is $27,000. Divide that by 2,500, and you come up with a profit of $10.80 per square foot.

These days, builders are fighting for their own survival! Some of the big builders are in deep trouble financially. Their profit margin may be less than 9%, especially if they offer concessions either to buyers and/or agent bonuses. Incentives, price reductions, and overhead expenses could easily eat up their bottom line.

Somehow, a few of them would do it as 'a matter of survival.'

 

The Builders In Trouble

Last week, the big banks had to write down huge losses because of subprime. Now it's the builders turn. S&P cuts the bond ratings of 6 of the nation's biggest builders: Lennar, Centex Group, Pulte Homes, Ryland Group, Standard Pacific Corp. and D.R. Horton.

With the exception of Standard Pacific, five of the six sell new homes in Washington DC, Maryland and Virginia market. Interesting how the builders try to blame it on the media instead of looking at both external and internal factors. The market indicators -- overbuilding, high inventories, slow sales, tighter home loans underwriting -- clearly contributed to the financial losses. Especially, the big builders that are publicly-owned companies. Who knows what happen to usually privately-owned small home builders. 

Start with Toll Brothers. Their business is on the pricey luxury new homes. Toll Bros. got hit on three front: cancellations, drops in average sales prices, and drops in signed contracts. It reported a 36% drop in year-to-year revenue to $1.17 billion. They had 417 cancellations for the quarter with only 250 new orders. Its cancellations actually lower than the fourth quarter of 2006 with 585 cancellations. Nevertheless, their cash-on-hand is higher than their peers.

Hovnanian's cancellation rate stands at 40%. Since they sold more than half of its homes in the 3-day fire sale, sales have gone down since then. Cancellation on the three day sale is below average, however expect rate that to grow. Since they do it the first time buyers are accustomed to discounts and incentives. They want more of it. All the co. care right now is to cash flow rather than profitability.' That means, their cash on hand is really low. To survive they needed to raise cash quick. That translates to: Opportunity for buyers. Got that?

How so? Because raising cash is a priority, Hovnanian will do whatever it takes to get them there -- reduce prices, give incentives and discounts -- to MOVE their inventories! That's how they'd do it. Starting with this sale [below].

WCI got hit pretty bad. They have a big liquidity issue. Their market is in the higher up range. Like Foster's Run in McLean, where priced of homes are in the above $3 million range. In this market, if you're on higher up market, it is tougher. Buyers would rather walk away from their deposits than got stuck with $$$ loans for 15 or 30 years? Revenues from their bread-and-butter product, single family homes, down by 25.9% from last year. To save cost, 575 employees are to get pink slips by end of the year. What's more - BBOL reports that the company is in violation of their loan covenants. Not good. With the violation, if no agreement is reached with their lenders, technically the "..lenders can foreclose on their collateral and demand payment in full." Like domino effect, the action could trigger other lenders to demand full payments. With little cash to survive if the lenders pull the plugs on them, they might face bankruptcy.

Searching for deals? Go straight to new homes constructions. There are plenty of supply out there. Outside the beltway area, Prince William county is 'the place' to find expansive supply of new homes. Fairfax, Loudoun has plenty, too. But not as expansive as in PW. These guys are in 'the business.' They only make money when they sell homes. They need to unload their inventories quick (sale) to stay in business. That's why, it's easier for them to offer you whatever you can think of -- discounts, incentives -- than the regular Joe homeowner. A homeowner doesn't have to move unless the lender foreclose the home.

And the last few remaining new homes or condos usually have better deals than auction.

 

Technorati Tags:  wci ,  d.r.horton ,  ryland ground ,  wci communities ,  foster's run ,  mclean ,  bbol ,  centex ,  lennar ,  pulte homes ,  m/i ,  custom homes ,  custom builders ,  luxury homes

Home Construction Starts at Lowest Level in 14 Years

Ouch! Not a good news coming from the home building industry for now.

However, the good news is this: If you look at the long-term outlook, less number of homes build would eventually create a healthy housing market. It would balance out the number of new homes. Supply vs. demand. And only home builders with strong balance sheet will come out strong out of this market.

U.S. home construction starts fell in September to their lowest level in more than 14 years, while consumer prices rose at the sharpest rate in four months, separate reports showed on Wednesday.      

......

U.S. home construction starts fell 10.2 percent in September, while building permit activity, a sign of future construction plans, also dropped to the lowest level since mid-1993, a government report on Wednesday showed.

The Commerce Department said housing starts set an annual pace of 1.191 million units in September, lower than the 1.285 million units expected by economists. It was the lowest pace for housing starts since the March 1993 rate of 1.083 million units.

via Reuters

 

 

Arlington Building and Zoning Permit Hikes Approved

According to Arlington Insider, the Arlington County Board approves building and zoning permit increase, effective October 1, 2007 - which is just next week.

The Arlington County Board today approved fee increases for building and zoning permits expected to bring in nearly $7.5 million in new revenue for Fiscal Year 2008. The new fees go into effect October 1, 2007.

The 'fee increase' details.

• Building permit fees for new single-family homes and townhouses  would increase from $0.17 cents a square foot to $0.50 cents. For residential additions, permit fees would increase from $0.18 cents per square foot to $0.50 cents. Permits for residential alterations, such as homeowners making home improvements, would not change.The building permit fee increase for a 3,000 square-foot single-family home will be about $1,200.                         

• Permits for new commercial buildings and additions would increase from $0.19 cents a square foot to $0.70 cents and permits for commercial alterations would increase from $0.14 cents a square foot to $0.50 cents. Increases for electrical, mechanical and plumbing permit fees vary. The building permit increase for a new, 2,000 square-foot condominium unit will be about $1,275. A new 200,000 square-foot office building with an estimated construction cost of $28 million dollars will pay an additional fee of $127,000.

via Arlington Insider

AOL HQ to Move to NY

Dulles Tech corridor soon will miss the presence of its big employer: AOL. The big brass at AOL decided that it's to the best of the company to move its headquarters from Dulles in Washington DC to New York. Because Madison Avenue in NYC,  is the mecca for advertising business, and advertising dollars is heavily concentrated there. That's what they think.

AOL's decision to move its corporate headquarters to New York from Dulles, Va., is the most visible step by the online company to transform itself from an Internet-subscription business into a digital ad-sales firm.

From its base in Dulles, AOL became one of the first Internet giants, selling consumer access to the Web. But with that business dominated by phone companies and cable operators, AOL is focusing on selling targeted digital ads on a network of its own Web sites as well as other digital venues, including rival Web sites, online video and mobile devices.

via Wall Street Journal

Housing and jobs are inter related. The move will affect Loudoun county and Dulles tech local economy, including commercial and residential real estate. AOL has a big campus here, what will happen to its campus if they leave?

Not sure what will happen to the 4,000 employees.  More houses going to be on the market soon, if some of the employees relocated with the company, then?

We will see.

Region Community News Roundup

Artist rendering show proposed development in Westport, Baltimore. [from story on Baltimore Sun]

* Thumbs Up on New City Center [FCNP]
"The board of directors of the Greater Falls Church Chamber of Commerce wasted no time in giving its unanimous approval to Atlantic Realty’s new plans for the launch of a major Falls Church City Center redevelopment last Tuesday. Having heard a recommendation of its task force assigned to evaluate the project based on a set of criteria developed by the Chamber, the board overrode its chair’s suggestion of a slower approval process and went to a vote, which was unanimous, on Tuesday."

* Glen Construction Shuts Down After 48 Years [Washington BizJournal]
"Glen Construction Co. Inc., one of the oldest family-run builders in the Washington region, has run out of money needed to finish its projects and expects to close its doors by year-end, company officials said."

* Virginia Officials Lay Out Cost Cuts to Save Federal Funds for Dulles Rail [Washington BizJournal]
" Virginia state officials have identified $306 million in cuts to the expansion plan for Metrorail to Dulles International Airport in hopes of safeguarding some much-needed federal support for the project."

* CNN Looking at Three Southeast Sites [JDLand]
"Today's print edition of the Washington Business Journal (online for subscribers only) reports that CNN, wanting 80,000-100,000 sq ft of space to upgrade its studios, is looking at three in-development office buildings in Near Southeast..."

* Loudoun Lag Others in Housing Market [Washington Post]
"The median sales price of an existing Loudoun home dropped 8.6 percent in August compared with the same month a year ago, making the county's housing market one of the worst-performing in the Washington region, according to data released this week."

* Second Dulles Report Confirms High Price Tag [Fairfax Times]
"A second report examining the Dulles rail project's engineering and cost has come out and corroborates the initial, higher-than-announced price for the project. The new report says the project's real cost is closer to $2.79 billion, still significantly higher than the project partners' own estimates of $2.64 billion."

* Vienna Council Nixes Condo Proposal [Sun Gazette]
"Vienna's Murmuring Pines neighborhood will not be getting condominiums anytime soon.
The Vienna Town Council on Sept. 10 unanimously rejected AyrHill Homes' proposal to build 22 condominiums on combined lots at 117 East St., S.E., and 116 Berry St., S.E."

* Opinion: A Hardware Store at the Hub of Healthy Neighborhood [DC Examiner]
"Say you work in downtown D.C. in or around the Golden Triangle, and your wife calls to say your windows are in dire need of screens, or your husband calls to say he lost his house key, or your kid says she needs a flashlight for her science project."

* Alexandria Prepares for National Harbor Tourists' Trolley [DC Examiner]
"Alexandria City Council's approval of $141,000 to run trolleys on King Street is the first in a series of expenditures to ready the city for the opening of National Harbor."

* Marylanders Endure Commutes Longer than All Except N.Y. [Baltimore Examiner]
"Marylanders face the country’s second-longest commute to work, and it’s getting longer, according to new Census Bureau estimates."

* Dulles Greenway Toll Increases [WTOP]
"The owners of the private Dulles Greenway have been granted permission to gradually increase tolls on the highway between now and 2012."

* Two Middle Branch Projects Advance in City Process [Baltimore Sun]
"Two projects to transform large swaths on both sides of Baltimore's Middle Branch waterfront are moving forward, including a sports-themed office and recreation park south of M&T Bank Stadium and a mix of new homes, shops, offices and a hotel along Westport's formerly industrial shore."

* City Schedule Grand Opening of West End Farmer's Market [City of Alexandria]
"The public is invited to the grand opening of the West End Farmers’ Market at 10 am on Sunday, September 16 at Ben Brenman Park, located at 4800 Brenman Park Drive. The West End Farmers’ Market is open to the public on Sundays through October from 9 am to 1 pm, and features home baked goods, breads and pastries, and locally grown organic produce."

Loudoun Home Buyers Get a Little Help from the County..

Last I wrote, City of Alexandria helps first-time buyers with assistance of up to $30,000. Now, Loudoun County also decided to help buyers as well. It's called the "workforce housing" program. It will be launched across the county this summer for first-time buyers including those repeat buyers, who might be making too much according to income cap for other jurisdictions in Northern Virginia.

The Virginia Housing Development Authority (VHDA) has allocated funds for Fiscal Year 2008 for the FlexSPARC program, a new, below market rate, home loan program offered in Loudoun County. The program, administered locally by the Loudoun County Department of Family Services, is tailored to meet the needs of first-time homebuyers. The funds will be available until fully utilized or through June 30, 2008.

via Loudoun County

click to enlarge (+)

There are two programs working side-by-side. Here is how it works.

1. Under the new program, individuals who make up to $108,000 and couples who make up to $135,000 may borrow up to $417,000, with the interest partly subsidized by the Virginia Housing Development Authority.
2. A similar program is available for first-time or repeat homebuyers who make 70 to 100 percent of Loudoun's median income, which is $94,000 by the county's calculations.

via Washington Post

Loudoun has $4.5 million in their coffers, so not everyone will be qualified. Time is of the essence - you better hurry up. It doesn't take long to disburse the funds.

Disclosure: I am a certified Trainer for VHDA class.