Tuesday, February 14, 2006

That Was Then…

“Our results to date in fiscal year 2006 reflect these broader market trends. In the first two months of the year, we experienced and increase in home order cancellations and a decline in net orders for new homes when compared to the same period last year.”—KB Homes 10K

One of the big headlines in today’s Wall Street Journal is that KB Homes is seeing a surge in order cancellations amidst a cooling real estate market.

Now, it’s only fair to point out that statement was made in a 10K filed on February 10th so this is not exactly breaking news.

But the change in direction is notable, particularly in comparison with KB’s optimistic outlook a mere 60 days ago.

Back in its December earnings call, KB Home’s management told Wall Street’s Finest all was well in the housing bubble.

“Housing demand remains solid in the vast majority of our markets,” CEO Bruce Karatz said on the call, despite a moderation in the overall housing market which he characterized “as expected.”

Asked for specifics, the KBH COO said the company was “still seeing incremental small [price] increases in both” Phoenix and Las Vegas. “We are not seeing a lot of buildup in the resale inventories.”

When asked if “there are any markets that you guys are maybe seeing very different slow conditions today versus what you were seeing maybe a few months ago…?” the company’s COO said this:

“No. As a matter of fact I would say—I mean you are comparing it to a few months ago. I would say generally improving conditions in the weaker markets.”

That was then. This is now.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.


Its_strange said...

FNM just cold called me . They just "expanded" thier "qualifications" for low interest loans .

A pal in the business tells me sellers are still in a dream world . Prices need to drop before anyone even makes a offer . Thats in north Jersey

Phil Saunders is really putting on a show over at his website and yahoo boards

rvac106 said...

it's strange:

what kind of show?

homebuilder said...

its strange,

Can you give me more details on what they were talking about at FNM?

Its_strange said...

Phil is talking about a formal SEC investigation of Rocker with subpoenas and lawyers and courts and robes and the whole works ....He is flapping away about the DTCC getting subpoenas..He is wondering why Rocker's lawyer hasn't contacted him . He claims Rocker's lawyers were threatening OSTK witnesses ..He is all over the yahoo boards ..Only thing he hasn't posted about is OSTK's recent earnings and conference call and NFI's recent earnings delay ....Well he did think it might be about a special dividened

FNM cold called ....They told me they just "expanded" thier " qualifications" for low interest loans ...I hung up on the guy ...I mean does FNM think i'm so stupid that i don't know if i want a loan or not ? ...We live in very strange times.

whydibuy said...

Since when does FNM cold call individuals? They're a mortgage packaging institution that resells to other institutions and provide default guarantees on those bundled mortgages. Sounds like some mortgage co was passing itself off as FNM to sound legit. They may ship their mortg to FNM but it wasn't them. Probably another shady mortg originator, one of 0000's setup within this last refi boom since 2000.

Its_strange said...

That could very well be . I hung up on the guy ....

credibility said...

mark cuban exposes the real bad guys on his blog today.
ncans that is

rvac106 said...

Roddy Boyd, NY Post, just confirmed that the DTCC has been subpoenaed by the State Security Regulators of Connecticut and Utah. Some flap. I wonder if any of his other wild claims will bear out?

Its_strange said...

Phil will stop naked shorting by creating a exchange ??? You guys gotta read Mark Cuban's blog ..You gotta take a look at the business plan of Private Trading Systems, inc . ...Which is run by Bud Burrel who has links to OSTK's lawyer

rub1232000 said...

thought this was timely:

New York Post reports Naked Shorting Targeted

The New York Post reports that two state securities regulators have issued subpoenas to get at the trading records of Wall Street's largest firms in a quest to stamp out the controversial practice of naked short-selling, sources said. Utah and Connecticut regulators' first line of attack will be to get Wall Street firms' trading records via the Depository Trust & Clearing Corp. The Post states that regulators will be looking for the trading and customer ledgers of Bear Stearns, Morgan Stanley and Goldman Sachs. Connecticut's subpoena asked for information on four companies "with a strong connection to the state," sources said. Utah, on the other hand, requested a large amount of market-wide data regarding alleged naked short sales.

BelowTheCrowd said...

Back on topic, the LA Times reports today that median housing prices in Socal have dropped yet again. The peak -- or at least the recent peak -- appears to have been last summer.


Barry Ritholtz said...

Hey Jeff,

Not coincidentally, I get an email from David, who thinks that all these Housing starts are a way builders lock in extra dollars as these order cancellations surge:

"Everyone is citing warm weather as the reason for the January jump in housing starts. Based on my daughter's experience buying a house from a major builder in 2005, I have a slightly more cynical interpretation. She was required to put down about 1% ($5000) when she initially signed and reserved her place in the que. When the house was "started" she had to put up another 6% ($30,000). (I believe this is a fairly standard payment schedule).

Is it possible that the builders are racing to increase the walk-away price for the buyers currently in their build queues?"

More than possible: In fact, quite likely . . .

See this for more: Housing Market & the Economy

rashomonus said...

Since OSTK became a topic here and specifically the statement of financials: dont know if it has been asked, but didnt OSTK by announcing that slight accounting mistake on freight just get an excuse for a late 10K filing given the historical and current restatements? They are due 3/15, are we gonna see an N10K referencing this relatively minor adjustment? What timing