Big builders warming up to land purchases
Despite the housing slump, major builders are revisiting land purchases and development, according to a Reuters report. Companies including Lennar Corp., KB Home, Hovnanian Enterprises Inc. and Meritage Homes Corp. are buying and developing land "or at least talking about it," according to the article, and that troubles some analysts. KB expects to spend $300 million on land and $400 million on land development this year, and Lennar spent $162 million on new land in the second quarter, Reuters reports.
Cramer: Expect more banks, builders to fail
Former hedge-fund-manager-turned-pundit Jim Cramer says the future of mortgage giants Fannie Mae and Freddie Mac may hinge on who wins the November elections, and that financial markets won’t bottom out "until all the banks that have to fail do so and GM files bankruptcy along with Ford."
Fannie and Freddie might be able to recoup heavy losses if they survive two more years, but only if the government allows them to "limp through" the downturn, Cramer said in a column published on TheStreet.com today. The companies’ best hope is that "a Democrat becomes president and shows the usual love to both," Cramer said.
Citigroup, Wachovia, Washington Mutual and National City are all "in trouble," Cramer says, and while Bank of America says it isn’t, recent declines in the company’s stock demonstrate that investors don’t believe management’s pledge not to cut dividends. He doubts that home builders Hovnanian, Lennar, Pulte and Horton "will all make it" through the downturn.
Moody’s lowers ratings on Fannie, Freddie
Citing their reduced flexibility to raise additional capital, Moody’s Investors Service today downgraded the preferred stock rating and the bank financial strength ratings of Fannie Mae and Freddie Mac.
Moody’s lowered Freddie Mac’s bank financial strength rating — a measurement "of the likelihood that an institution will require extraordinary financial assistance from third parties, such as the government or shareholders" — two notches, from B+ to B-, and placed it on review for a possible further downgrade. Adverse market conditions have reduced Freddie Mac’s ability to raise additional equity capital, "thus limiting the company’s ability to build further cushion to offset unanticipated stresses in its asset quality," Moody’s said. Freddie has pledged to raise $5.5 billion in capital, which regulators expect it to do by the end of the summer. Recent declines in the company’s stock value could make it more difficult to raise that money.
Moody’s lowered Fannie Mae’s bank financial strength rating from B to B-, citing diminished flexibility to raise capital and increased potential for credit losses "in excess of Moody’s prior expectations. In Moody’s view, these risks outweigh the benefits of Fannie Mae’s recent ($7.4 billion) capital raise.
Moody’s kept its debt ratings on Fannie and Freddie in place, saying the companies benefit from "from very high systemic support because of (their) central role in mortgage finance in the United States, as well as the importance of housing within in the U.S. economy."
Sales of new California homes plummet
The pace of home sales at California new-home communities was significantly depressed in May, reversing what had been a recent trend of shrinking year-over-year sales declines, the California Building Industry Association reported today. The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new-home sales in May were 51 percent below May 2007. The drop represents a worsening in the trend of year-over-year decline, which had shrunk to 44 percent in April after coming in at 49 percent in March. The median price of homes sold compared in May was nearly unchanged from April at $375,000.
Weichert announces 11 new franchise offices
Weichert Real Estate Affiliates Inc. announced this week that it has opened 11 new affiliate offices in the past two months. Weichert has about 500 franchise and company-owned offices throughout the country, with about 18,000 sales associates. The company operates in about 330 market areas and 36 states.
HomeVestors names top 10 cities for investing
HomeVestors of America Inc., the company behind the "We Buy Ugly Houses" billboards, has named the top 10 markets for real estate investing, based on the findings on the number of houses bought in each market by the franchise network during the second quarter. Four markets in Texas were on the list, with Dallas ranking first. In second place was Houston, followed by Atlanta; Denver; Fort Worth, Texas; San Antonio, Texas; Charlotte; St. Louis; and Milwaukee. Chicago and Kansas City tied for 10th place. Franchise Brands LLC, a company created in 2005 with support from the founders of Subway restaurants, announced last month that it had acquired a majority interest in HomeVestors, which buys houses and resells them to investors and other buyers for a profit.
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