“Safe as houses” now, finally, only said with irony

Hard as it is to pull from the haystack of needles (that is the current crop of financial reports) a single one. Lennar corp. is coming good on previous promises to be losing more money:

The company took a $1.86bn impairment charge for land, inventory and goodwill in the quarter ending in November, which included a $740m loss on 11,000 lots the company sold to its joint venture with Morgan Stanley. Lennar said its land portfolio was worth $4.5bn at the beginning of its first quarter, down from $7.8bn the year before.

The impairment charge takes the total amount written off by the housebuilding industry to nearly $20bn since the beginning of 2006, according to calculations by Standard & Poor’s.

“You’re going to see a lot more land sales,” said Stephen East, an analyst at Pali Capital. “That’s going to depress land and housing prices further.”

Stuart Miller, Lennar chief executive, called his group’s results “disappointing”. He said: “It is apparent that 2007 was a very tough year. At the back end of this year I do not expect to see sales or price acceleration.”

I’m not one to say ‘I told you so’, so much as ‘oh, hi guys – where in hell have you idiots been?‘ Lennar made this promise, while losing money, back in June of 2007. While everyone else appeared blithely to follow the tripe spoon-fed by the National Association of Realtors, this was a picture of Dorian Gray’s house, becoming more and more ugly.

Now, of course, people are noticing.

The US housing market closed the books on a dismal year on Thursday, recording a 2.2 per cent drop in the pace of existing home sales in December to an annual rate of 4.89m units, which was slower than expected.

The downturn in the US housing market has been at the heart of the credit crisis that has shaken global markets and worsened the outlook for US economy.

Funnily enough the same article contains this nice piece:

Earlier in the day, however, the labour department issued a more upbeat set of figures on the US economy, showing that the number of new jobless claims fell 1,000 to 301,000 in the week ending January 19. The downward move marked a surprise compared to analysts’ expectations of a small rise. It was the fourth weekly decline in new jobless claims.

So, recognition that the economy piled on 1m fewer jobs than last year, and is set to give workers six of the best, pants down, is apparently still going to be a little while coming (watch for ‘the papers’ to be surprised, 4 months from now, to see the employment numbers worse than they expected. It’s like an army of Forrest Gumps: the great thing about being stupid is that you are constantly surprised).

The Wall Street Journal has a good piece pulled together for city-based housing markets (click the image to view the full chart):

wsj pic

Even Manhattan, where prices continued to rise briskly last year, looks more vulnerable to a slowdown. Falling home prices and soaring defaults elsewhere have created more than $100 billion of losses on mortgage-related securities at Wall Street firms, destroying many jobs in the New York area. The number of homes listed for sale in Long Island and Queens at the end of 2007 was enough to last 18 months at the current sales rate, up from a 12-month supply a year before.

Few expect a quick recovery. Stricter credit policies at mortgage lenders have disqualified many potential buyers, and foreclosures are adding to an already glutted supply in many areas.

Ouch. Hardly unexpected, but ouch.


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