Holy Home Sales Batman

Oh please, puhlease let this be the start of the good news…

Ryland Home dropped on us today that they are growing their home sales numbers.  Granted, showing growth in a minuscule number is not earth shattering.  However, considering the fact that even the small figures have been getting even smaller, this is a welcome reversal.  Ryland also claims that they have not prosecuted any unusual incentives that would account for this uptick. 

Here’s what is being reported:

Dreier went on to say that the company captured new orders for 165 homes in October, 151 in November, and 228 in December.

The good news was that things were looking up so far for the first quarter of 2009. In an uncustomary disclosure, Dreier provided analysts with a quarter-to-date update on sales. Thus far in January, the company’s new contracts for the month were roughly double the amount of contracts secured in October.

Robots must die!

An article in the morning’s NY Times describes a scene in which JPMorgan Chase is foreclosing on a medium sized home builder in Tempe, Arizona.  No real story there.  What is the story is that the “deadbeat home builder” hadn’t missed a payment and had been in good standing with the bank.  It appears from the article that the home builder’s revenues had substantially dropped and JPMorgan got nervous.

I am sure that this is a situation in which JPMorgan’s internal lending barometers triggered the loan to be called.  This is where reason should kick in to override JPMorgan’s internal robots.  Furthermore, it seems to me that this is a perfect situation for TARP money.  However, this robotic system is about computerized lending rather than relationship lending.

What is the lesson; there is no such thing as relationship lending!  Banks are robots.  Unless and until the knuckleheads running these banks allow for reasonable lending, our banking system will continue to be collapsed.  Furthermore, I really wish our Washington Leadership would wake up to the fact that THE ROBOTS MUST DIE!

And so it is.

As I have written and told everyone who would listen, Denver is the Green Capital of the World (I really don’t care that the word “green” is on the out).  While no panacea for the financial depression, Denver is reaping the green as evidenced by the story out of Boulder that the American Solar Energy Society and research firm Management Information Services completed a study that found, according to the Rocky Mountain News:

Funded by the state government, Xcel Energy, the city and county of Denver and others, a study released Thursday concluded that Colorado’s renewable-energy and efficiency industry created more than 91,000 jobs and generated $10.2 billion revenue in 2007.

Rock on Colorado!  It appears that we are leading the charge to resolve our own financial issues which is as it should be.

Free at lance?

CNN is reporting that more businesses are outsourcing to freelancers.  No surprise here.  Cutting costs is a favorite game of today’s companies big and small.  What is interesting is the impact that will no doubt be felt on space needs.

As I stated before, with the 2.5 million jobs no longer needed, there is 625M square feet of un-needed real estate.  This outsourcing simply means that many of these jobs wont be coming back anytime soon.  What could cause a company to take on the expense of adding employees when they could use freelancers?  Honestly, with today’s amazing technological control, a freelancer is the same as an employee working from home…just cheaper!

Dry, Dry, Dry

Big news in the WSJ this morning that commercial real estate developers are now begging to be fed at the same trough as the banking industry.  It makes sense that property owners are getting in trouble; their tenants are struggling to pay the rent.  In turn, their property is worth less and their loans are coming due.  This is just one more sign that our economy is spiralling out of control.

One unintended consequence will be the perception by lenders that all commercial developers are too risky for lending and the spigot will (already has?) shut off.  This, in-turn, will perpetuate the depression.  What lender would lend money into an industry that is struggling?  Furthermore, if they are willing to lend, can you imagine the usurious rates they will want?

I am curious though.  Could someone please tell me where all the money went?

The Reckoning

There are plenty of people asking, “Where economy going and what is the resolve.” These are good questions. To confuse matters, the near constant barrage of media spewing the intricate details of the market collapse make the future even less clear.

Take for instance last night’s piece on “60-minutes” about the next wave of toxic mortgage debt. You can see it HERE. During the story, Scott Pelli interviewed an analyst who spoke of another type of high risk loan with roll over dates coming in the next few years.

What I thought was most interesting was the detail where Mr. Pelli toured a bank owned condo in Florida that had originally been sold for $2.4M and was now being marketed at $900k. If you do the math, the bank will take a $1.5M hit on this one deal alone…that is if they can find a buyer.

Traditionally banks have used the foreclosure as the hammer to enforce their rights as a lender. They necessarily have the skill set to handle this procedure. However, it seems strange to me that a bank would chose to recognize the $1.5M loss when they have another choice; workout with their clients.

Take our case above. What if the borrow could afford to make the payments on a new loan based on a $2M value. This is assuming that the borrower has income and the current lending rates were low enough to structure these payments. Wouldn’t the bank be better off to take the $400k hit, make a loan fee and not put another condo on the market that would compete with what is certainly an oversupplied market?

It is this type of thinking that has eluded Wall Street Banks. When banks finally wake up and join the party, the current credit crisis will end.

Bailey S&L

As reported in the Rocky Mountain News today, the rate of home foreclosures in Colorado has significantly slowed. Truly this is exciting news. Unfortunately, the Rocky Mountain News approached this story with a negative spin stating that the rate of foreclosure has only decreased as banks have decided not to exercise their foreclosure rights.

The fact that banks are coming to their senses is definitely newsworthy. Historically banks have brutally followed their “policy” of exercising their foreclosure rights. Make no mistake, they have rights as spelled out in the terms of the loan documents and governing laws. However, banks have never been one to put the customer first. Think of it as “It’s a wonderful life” - Potter’s bank  – and you’ll get an idea of the typical banking approach; pay or we will take everything from you…after all it is our legal right.

The story reported in the RMN suggests that the Colorado banking industry is heading in the direction of the Bailey S&L. I suggest that this approach will lead to a healthier resolve for the banks. They will get paid and possibly forgiven for their malfeasences perpatrated on Wall Street.