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Lennar decides to "mothball" new O.C. development; local squatters and meth dealers jubilant


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2007 Nov 15, 5:09am   33,224 views  196 comments

by HARM   ➕follow (0)   💰tip   ignore  

your free new home!

Wall Street Journal: "Home Builders Opt for Mothballing" (subscription required)
Free re-post

“As the glut of unsold home remains stubbornly high and housing demand slides, home builders face a dilemma: to sell, or not to sell?”

“Lennar Corp., for one, has joined the ‘not to sell’ camp at its development in Orange County, Calif. The Miami company plans to finish building 259 homes, the first phase of a 1,100-unit development in Irvine, but it has decided not to sell any of them until the constrained mortgage market and swollen housing inventory improves.”

“‘We are better off holding off on sales at this asset and not discounting as steeply as the market is discounting right now,’ says Emile Haddad, Lennar’s chief investment officer, who oversees the company’s large West Coast projects.”

“Analysts expect more builders to mothball projects in the coming months, as they decide that the losses from selling homes at huge discounts are greater than the costs of carrying properties on their books.”

“But it’s not an easy decision. Builders are facing increasing pressure from lenders to service their debt and also have overhead expenses to support.”

“‘It’s the next natural step in the evolution’ of the housing downturn, says Nishu Sood, a home-builder analyst at Deutsche Bank. ‘This normally happens during a recession when you just don’t have a base of demand. But it’s like that now. In some of these locations, you just can’t give a house away.’”

“Standard Pacific Corp., of Irvine, Calif., has been offering discounts and other incentives of as much as 25% on certain homes.”

“Lennar CEO Stuart Miller recently called some price cuts ‘unrealistic and maybe even ridiculous.’ ‘The market has just deteriorated more and more. We don’t want to go below a certain floor, and that is the floor of reasonableness,’ Mr. Miller told analysts on a conference call in late September.”

“Lennar’s move in Orange County is unusual in that the company is mothballing homes. Builders typically mothball partially developed or undeveloped land because vacant homes require watching. One alternative would be for builders to sell their land instead, but that market is even more dismal than the one for housing.”

Well, folks, it looks like we may have *finally* gotten something wrong about the housing bubble here at Patrick.net. It has long been a point of consensus here --an unquestioned assumption really-- that homebuilders do not want to be empty-house owners and that banks do not want to be landlords. We have seen many historical examples from past bubbles of homebuilders that can't move product quickly becoming bankrupt former homebuilders. We have also seen recent examples of builders aggressively undercutting underwater FBs and used-house salesmen in order to move product and avoid that fate.

But now, Lennar O.C. comes along and proves us all wrong. Instead of selfishly putting their shareholders financial interests ahead of everything else, they have courageously stepped forward and decided to "take one for the team". I'm sure local FBs are thrilled to hear this news --less competition, fewer comp-undercutting sales, and a courageous homebuilder willing to pony up the monthly carrying costs, property taxes and upkeep on all those empty houses (which must be considerable). What troopers!

I for one, am a little embarrassed, though the thrilling prospect of my brand-new rent & mortgage-free squatter house in Orange County more than compensates for my embarrassment. I'm sure when word gets out among the squatter, criminal & homeless communities, there will be celebration in the streets!

I'm sure those of you bubble-sitters, homeless people, and/or meth lab 'entrepreneurs' who live in or near Orange County are anxious to get all the details and get your piece of the action, so I've collected some useful links here for you:

Wikipedia's Adverse Possession page (the formal legal term for 'squatting')
Cornell's AP site
Homes Not Jails (CA Squatter portal)
Nolo Press's "Neighbor Law: Fences, Trees, Boundaries & Noise"

Discuss, enjoy...
HARM

#housing

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118   HARM   2007 Nov 19, 8:58am  

For those of you out there seriously interested in squatting in SCAL, you might even be able to find a squatter's palace already furnished:

Vacant houses: picking up the pieces
Business booms in collecting items left by residents hit by foreclosure

...An old gas stove with a skillet full of dust was found. In the back yard, there were mattresses, a microwave, two mangled couches and a bulky refrigerator.

But it's all gone. Cleaned up.

Foreclosed homes all over the Inland Empire are turning into what Lisa Carvalho calls "trash-outs" - wooden and stucco carcasses with piles of junk left behind by former tenants.

...Sometimes her workers stumble across gems - like prized computer parts. But it's been a potpourri of things, such as cars, computer monitors, stoves and washing machines.

The High Desert offers even more interesting tales.

The area is full of tract homes in subdivisions that have stacks of furniture piled inside every room, she said.

"These typically look like they're occupied, but they're not trashed," she said about these homes. "(The owners) just walk away and wash their hands of it."

Mike Meyers sees the same thing.

...He's seen what looks like pricey televisions and other expensive electronic entertainment gadgets left behind by tenants thrown out.

"There are times we've gone to a house and we've stood with 4-foot-high furniture in every room," Meyers said. "A lot of times we just take it to the dump. It's usually pretty horrific when we go out to these jobs."

119   Jimbo   2007 Nov 19, 9:04am  

Our offer will be 50% off of 2005 last sales price and 40% off what they’re currently asking.

What city are you making this offer in?

120   GallopingCheetah   2007 Nov 19, 9:05am  

Some live for the future; many more in the present; a few in the past. Each group looks at the other two with sneer and disdain. But, your happiness is, and ought to be, independent of what others do. Besides, those who live for the future take advantage of the vast majority who live in the present; and, vice versa.

121   sa   2007 Nov 19, 9:05am  

I live in a collage town where most students drive a SUV. They would work part time jobs and eat free junky snacks at work place just to save lunch $$. They still want their SUV.

122   DennisN   2007 Nov 19, 9:15am  

Harm,

Well OK then. I own such a vehicle so Peter P. should be all right with me, especially since my F150 gets me to the good fishing grounds around here. The best raw fish to eat is that which you pulled out of the river yourself and banged on the head with your club.

My point being that a $23K paid-cash-for F150 is a lot more responsible use of money than a $50K (?) MEW or leased Escalade. I know a single lady attorney at a firm in Palo Alto that leased an Escalade even after I told her not to. She's one of those people who faint at the sight of dirt...and who would never get involved in any outdoors activities like skiing or camping. Why on earth would she buy an Escalade? She thinks they "look cool".

123   HARM   2007 Nov 19, 9:22am  

Hey, anyone who owns a truck or SUV, either because they need it for their job, or for offroading, or due to bad roads, or just because they think it "looks cool" will get no lip from me --another SUV-owning a$$hole American. I just think we could really do a whole lot better on mileage/CAFE (hasn't budged in over 20 years) without sacrificing too much in creature comforts or safety.

124   FormerAptBroker   2007 Nov 19, 9:32am  

HARM Says:

> (Disclosure: HARM drives an older model Toyota
>4Runner that averages 20-21 MPG and would like
> to purchase a hybrid SUV that gets 35MPG or
> better next time).

The Lexus RX 350 costs about $5K less than the Hybrid RX 400 that will average about 5 mpg better (even more if you just drive around town on the battery).

If you drive 1,000 miles a month you save a little over $400/yr. in gas (at $3/gal) every year with the Hybrid (but you will make $250/year if you get 5% on the $5K you save on the non Hybrid).

With the Hybrid you will break even in just over 30 years (~15 years if you drive 2,000 miles a month) or even less if gas goes over $4/gal.

Last time I took the SUV to Tahoe I used over $130 in gas driving just under 500 miles in a weekend (not much less than a cheap roundtrip ticket to Salt Lake City)…

125   EBGuy   2007 Nov 19, 10:16am  

With the Hybrid you will break even in just over 30 years (~15 years if you drive 2,000 miles a month) or even less if gas goes over $4/gal.

Come on FAB. This is a freakin' Lexus. You buy this so you can drag race the Porsche Cayenne S (okay, he may win) and then laugh at him at the gas pump (and on the showroom floor).

126   Brand165   2007 Nov 19, 10:29am  

skibum says: On the other hand, it makes sense if you think about it this way. $4-5/pop for starbucks coffee’s? Two drinks is the price of a whole pound of coffee beans from Starbucks.

Think of it as $1 for pressurized water forced through bitter plant seeds, and $3 for participating in a cozy social scene with an abnormally high number of attractive women.

The same could be said of a pint of beer at your local pub vs. a bottle purchased in bulk and consumed at home. If it were purely utilitarian, only a fool would choose the former over the latter.

127   goober   2007 Nov 19, 11:06am  

From hybridcars.com:

"Lexus LS 600h L

If solar panels on Al Gore’s 20-room mansion and Vanity Fair’s 300-page annual green issue make you feel queasy about the eco-chic spin on our sustained environmental and energy crisis, then the Lexus LS 600h L might make you feel downright nauseous.

The Top 10 list of why the Lexus LS 600h L is the most bizarre and misguided hybrid:

A hybrid powertrain on a 5-liter V8 engine.

430 horsepower (equivalent of 6-liter V12).

City/highway mileage rating in the low 20s.

70-percent cleaner emissions than the “cleanest” of its V8 competitors.

Noise and vibration levels are about half of conventional cars. (“This is the kind of vehicle that travels slightly detached from the road, the local environment, and anyone else that doesn’t have a near 7-digit income,” writes Art Vatsky in AutoBlogGreen.)

Since you can’t hear anything outside the cabin, the vehicle uses two-cameras and a radar system to detect approaching objects and humans. A third camera mounted on the steering column monitors if the driver’s head is turned to the side. If a car, object, or pedestrian gets too close, the “advanced pre-collision system” alerts the driver with a chime and a flashing light.

Each vehicle is hand-sanded twice during the painting process.

Lexus aims to sell 1,200 to 2,000 units in the U.S. (Is this profitable for Lexus?)

Starts at $104,000. (At this price, you could buy four Priuses, keep one for yourself, and give three away as cute gifts).

The Lexus LS600h L is an amazing showcase of Lexus’s creativity and technological sophistication—all applied to a vehicle that is completely out-of-step with our times."

128   HARM   2007 Nov 19, 11:11am  

less need to force GM to build a car that runs on dog poop and smells like roses

This sounds all well and good, sure, but what about cat poop?

129   DennisN   2007 Nov 19, 11:45am  

Hey, Fluffy Pumpkin wants to know about a car that runs on cat poop! :)

130   justme   2007 Nov 19, 12:01pm  

Bap33,

Couldn't agree with you more that driving style has a big effect on energy efficiency. Some of the worst offenders are realtwhores hurrying between their many important appointments in their big-ass leased Esca-Lexus machines. I just hate it when I see people driving like complete idiots from an energy perspective, accelerating like madmen from one red light to the other, as if it saves them time.

That being said, we should all strive to use small and efficient vehicles, not just have big ones that we drive efficiently.

Goober, it is indeed awful that so many car companies have perverted the concept of an efficient hybrid car into a muscle car. For god's sakes, the 2007 Chevy Tahoe Hybrid just won the green car of the year award. Talk about having your head way up your ass to vote for something like that.

Here's the rub: The only way to get insipid boomer Americans (and their devil spawn) to stop wasting oil is to hit them in the only god-damn fucking place they care about, which is their pocketbook. It's the only thing that works. I can talk until I get blue in the face about saving scarce resources for future generations, but nobody gives jack shit unless it costs them MONEY (apologies to surfer-X for the not-so-good imitation).

Here's to $6/gallon gas. At the rate we're burning it, it will arrive sooner rather than later.

131   skibum   2007 Nov 19, 12:52pm  

If it were purely utilitarian, only a fool would choose the former over the latter.

Well, therein lies the rub. Folks pay for participating in the "Starbucks Culture" with the price of a latte, but in the end, what does it get you? 2nd rate coffee and an illusion of being in a hip world? I'll take the utilitarian choice any day.

Wouldn't say the same for a beer at a pub, though...

132   Brand165   2007 Nov 19, 2:06pm  

skibum says: Well, therein lies the rub. Folks pay for participating in the “Starbucks Culture” with the price of a latte, but in the end, what does it get you? 2nd rate coffee and an illusion of being in a hip world? I’ll take the utilitarian choice any day.

If I recall, there is a Mrs. Skibum? This limits the utility of a place where you can come into casual contact with eligible young women. :o

What does any social pseudo-mating ritual get you? A chance at mating. Considering how much people spend on cars, clothes, electronics, haircuts, perfume, shoes, houses, furniture, cutlery, china and other possessions in order to impress potential mates, I declare the cost of a latte to be absolutely insignificant. If one enjoys a brief flirt with faux hip culture in a cookie-cutter "unique" setting, so be it. The suburbanites have spoken.

Wouldn’t say the same for a beer at a pub, though…

Context is subjective to personal tastes. It's still a social ritual. :P But I'm sure that Peter P can produce a more insightful observation on such behaviors...

133   Brand165   2007 Nov 19, 2:07pm  

My comment is awaiting moderation. :(

134   Zephyr   2007 Nov 19, 3:36pm  

Every oil field has a finite supply and its output reaches a peak and then declines. It is sensible to believe that the collective supply of all the world’s oil fields would do the same. Of course, new oil discoveries change the calculation. But, it is impossible to know how much oil remains undiscovered.

All my life I have been hearing about the end of oil. In the 1970s the prediction was that we would run out of oil around the turn of the century. So, we should be freezing in the dark by now, with our useless vehicles all abandoned. But, with each new oil field discovery that day of reckoning keeps getting pushed back.

Is the end upon us? Here is a quote that provides an interesting perspective on the timing of this crisis:

“The question of the possible exhaustion of the world’s oil supply deserves the gravest consideration. There is every indication that we are face to face with this possibility.” - Scientific American, 1913

It seems that the end has been near for a very long time.

135   justme   2007 Nov 19, 4:07pm  

Bap33,

Life without oil will be nasty, brutish and short, to misquote Thomas Hobbes. Preserving oil for as long as we practically can will buy us time to develop alternative energy sources. And we really need all the time we can get.

Our whole civilization is built upon the assumption of plentyful oil, and it will collapse like a house of cards if oil suddenly disappears (not that it will, instead it looks like it will be a long and very painful process).

If it is your grandchildrenes lives that will be be nasty, brutish and short because of lack of oil, are you still willing to let market forces rule? I think regulation of mileage standards and high taxation of wasteful vehicles and practices is the way to go.

Oil -- they aren't making any more of it.

136   justme   2007 Nov 19, 4:36pm  

Zephyr,

Certainly there is undiscovered oil out there. It just isn't easy to get to. And yes, a simple application of the principle of conservation of mass is that there must be a finite amount of already existing oil out there.

Sure, new oil can be made if a large swath of a forested area of the planet sinks into the sea (polar icecap meltdown, anyone?). But it will take a few thousand years to make oil out of it. In the meanwhile, it will be a cold day in hell :-).

Just checked on Wikipedia; Saudi Arabia's proven reserves will run out in 66 years.

137   SP   2007 Nov 19, 4:43pm  

Brand said:
The same could be said of a pint of beer at your local pub

Not really. The drunks at the pub are at least fun to hang out with. The hipster-doofi that I see at SBUX seem to be very different - and not in a good way.

138   SP   2007 Nov 19, 4:45pm  

justme said:
For god’s sakes, the 2007 Chevy Tahoe Hybrid just won the green car of the year award.

"The Truth About The Green Car of the Year"
http://tinyurl.com/ytvbtx

139   justme   2007 Nov 20, 12:07am  

Check out the huge drop (and partial recovery) in the stock price of FNM and FRE this morning. It is getting very bad for the mortgage lenders and guarantors, even the non-jumbo ones.

140   DinOR   2007 Nov 20, 12:16am  

"Everything matters"

Yes it does. While it may not be practical check your tire pressure prior to every day's commute here's one thing we can all do (and it doesn't cost a dime!)

Try to pretend like you've done this before. Make every attempt to act like this isn't your first day on the job. Given that you drive an identical route approx. 480 times a year try not to let on that your memory slate is wiped clean each time the clock strikes 7:00am or 5:00pm.

When approaching the same hill you climb 5 times a week try to ANTICIPATE this daily event by building speed to an appropriate level so as not to cause those behind you to downshift and rev. up to 7,000 RPM? (Gosh you mean that burns extra fuel?)

Considering today's technology driven workplace, driving TO work is probably the most challenging thing you'll do all day! We are much more likely to become injured during the commute than at work. Humor the rest of us by acting like it might actually be important. Oh, and just because we didn't actually "trade paint" doesn't mean "it's all good"... you dipsh!t.

141   skibum   2007 Nov 20, 12:31am  

If I recall, there is a Mrs. Skibum? This limits the utility of a place where you can come into casual contact with eligible young women.

True, true.

142   justme   2007 Nov 20, 12:54am  

DinOR,

Your example is a specific case of what I would call an adaptive/predictive driving style. There are several aspects of it:

--learning from experience
--adapting to the driving conditions
--predicting slowdowns (and speedups) so as to smooth out the speed variations

From my own earlier example, racing towards a read light is incredibly stupid. You will get past the light no sooner by getting there early, and you just burned lots of oil for no good reason. Except maybe someone needed to look cool and manly.

Of course, if you just stopped at Starbucks on the way, you can now sit at the red light and drink your overpriced coffee.

General principle: At low to moderate speeds (city driving), a large fraction of the energy loss is associated with acceleration and deceleration, rather than wind resistance, rolling resistance or changes in potential energy (elevation, as in the hill example). At high speed (unimpeded freeway driving), wind resistance is the biggest loss. During stop-and-go freeway driving, the stop and the go again are the biggest loss mechanism.

143   DinOR   2007 Nov 20, 1:09am  

justme,

More excellent points. OR's seem to have some difficulty with that "adapting" part? Even the best of drivers can encounter surprises, but other than objects that were launched out the unsecured bed of a pick-up (trust me) that same pothole will be here tomorrow. And the next day.

After 15 years of driving basically the same route I was amazed at how little most people seemed to be able to retain from one day to the next? Look at how many commuters seem to "almost miss their exit" EVERY MORNING! If we can't get the basics down I think we can safely dismiss the finer points of bap33's best practices.

144   SP   2007 Nov 20, 1:47am  

Brand said:
a place where you can come into casual contact with eligible young women. :o

Eligible? Maybe. Interesting? Okay, I will even go that far. But Desirable? Only if you're into trendy, neurotic, suburban, 'i am bored lets go to the mall' types.

145   SP   2007 Nov 20, 1:49am  

justme said:
racing towards a read light is incredibly stupid.

What's worse is a lead-footed neanderthal in a 'sport sedan' attempting to out-drag a GSX-R from a light. Yes, I am looking at _you_ Mr. Infinity-G35-on-Lawrence-Expwy yesterday night. What the heck?

146   DinOR   2007 Nov 20, 2:07am  

In ways, that's almost preferable. For someone to "throw down the gauntlet" it at least implies some level of awareness of their surroundings. Anyone THAT into their car is likely less a danger than the avg. oblivious commuter. Well, I can't say for sure (maybe Mr. Infinity shaves on the way into work..?)

What's surprising is the "T-Crurves" (Terwilliger on I-5 South) almost ALWAYS 'knot up'. It doesn't even have to be close to rush hour so can we please not act shocked when brake lights come on? Hmm?

I really believe in bap33's mileage tips and for the most part try to live them but now after leaving the commute behind, I'd just as soon not drive at all. You have only two extremes left out there. Boomers (that have taken a sudden interest in longevity) and a younger crowd that doesn't seem to mind putting others in danger. IMHO.

147   justme   2007 Nov 20, 2:19am  

Bap33,

>then and only then will a different go-juice be found by a free market capitalists (American).

I had to laugh when I saw this one. It reminded me of a friend of mine. She thought that energy shortage would be abated by applying brain power and "inventing new energy sources", "such as hydrogen".

Energy cannot be invented, It just *is*. What can be invented is new methods for extracting/converting energy from known sources. Or we can just use known methods to convert energy from one form to another, e.g. manufacturing hydrogen using nuclear power as the energy source. I don't know how palatable this is going to be. Governor Schwarzenegger is trying to sell us on turning California Interstate 5 into a "hydrogen superhighway". In reality, what he is trying to do (*) is to soften up the public opinion on nuclear power. I5 will have to become a nuclear superhighway before it becomes a hydrogen superhighway. There is no other way, unless one thinks it practical to pave the central valley over with solar cell panels.

(*) Actually, I don't even know whether Schwarzenegger is bright enough to understand that hydrogen is just a proxy for nuclear power. Maybe it is just his handlers or pollsters telling him that hydrogen is cool. Arnold may have had a little too much of his own special type of go-juice in his younger days and too little training of his analytical thinking skills to understand the finer details. I don't know.

148   justme   2007 Nov 20, 2:23am  

SP,

Yeah, I just saw a dim-witted Corvette owner yesterday that seemed hell-bent on achieving liftoff speed between each red light. And there weren't even any babes watching. For some people, showing off their oil-burning proficiency seems to be second nature, even when there is nobody watching.

149   justme   2007 Nov 20, 2:29am  

Brand,

Just saw your comment that came out of moderation. Yes, an enormous amount of waste of resources (energy and otherwise) stem from men trying to get laid, and the women who are impressed by same display of waste.

150   HeadSet   2007 Nov 20, 2:37am  

There is no other way, unless one thinks it practical to pave the central valley over with solar cell panels.

Actually, we could be only one invention away from a clean electrical source, which could be used to make hydrogen or recharge an advanced battery. If someone would just invent a room temperature superconductor, we could have hydroelectric plants in Canada, Scania, and Russia power the whole norther hemishere. Of course, this would imply efficiencies in use of that power other than lossless transport, such as LED lighting or direct on wheel drive electric cars (16 horsepower). The room temp superconductor would also allow lossless transport from solar panel farms and less loss from the grid in general.

So, someone be a hero and invent that superconductor.

151   justme   2007 Nov 20, 2:51am  

Headset,

Low-T superconductors would be great, but how much would we gain?

Per wikipedia the estimated energy loss in electrical transmission is 7.4% in the US, and 4000 mile lines are technically feasible. I think the real limit is the amount of buildable hydropower sources, and the related environmental impact (not just displaced chinese villagers, but also climate changes and other *real* problems from large dams and water diversions).

My overall point about energy is that we MUST ACT NOW to conserve, rather than engage in hopeful thinking about what we may or may not able extract of alternative energy sources in the future.

152   Glen   2007 Nov 20, 2:59am  

Wow...Fannie and Freddie are getting *spanked* today!

153   DinOR   2007 Nov 20, 3:05am  

"MUST ACT NOW to conserve"

Our elec. bill in the summer avgs. around $50 and $120 in winter. The remarkable thing is that we heat w/ elec. and in emergencies use a kerosene htr. We have a SunHeat "infra-red" htr. and it uses half the electricity of other elec. units. I work at home and my "new" office is about 1 block away. We are working at getting my wife out of the workforce so she will be one less commuter.

I am hardly an environmentalist. In ways (I couldn't care less) so to me it's about waste. Get ready for a big screen TV in every American home burning 2 to 3 times what older sets used. Now THAT'S "progress"!

154   justme   2007 Nov 20, 3:16am  

DinOR,

My hat is off to you. Those numbers are not bad at all. Myself, I clock in at $22/summer and $45/winter, but that is down here in California in a smallish dwelling.

What gets me are the folks that complain about the price of electricity and their $800/month McMansion A/C bill.

155   HeadSet   2007 Nov 20, 3:21am  

justme,

I fully agree on the conserve part. I'm am just hopeful that a a new invention, whether superconductor or something else, will become a feasable alternative when coupled to a more efficent use of energy.

Conservation is probrably a necessity for alternative forms of energy to work.

156   justme   2007 Nov 20, 3:32am  

Headset,

Thank you. I know your heart is in the right place (subjective, I know, :-))

I think there is still hope that printable solar cells, low-T superconductors and other technologies will eventually become feasible and practical, but we cannot hold our breath or stick our head in the Saudi desert sand while we wait for these technologies to arrive.

As you said, conservation is key, even with new technologies arriving. Not many alternative energy forms have the concentrated energy density and practical usage model of petroleum/oil.

157   DinOR   2007 Nov 20, 3:46am  

Wow, $22 in the summer! That's fantastic. I have to keep in mind the actual kw consumption. Remember though, I do work at home so fax machines, computer and Bloomberg do take some power.

The real test comes when my elec. bill does/doesn't go down by the amt. I use at my new 182 s/f office! At our last HOA mtg. sec. lighting came up and I suggested just having the courtyard lights come on intermittently. Thiefs know that their victims are creatures of habit. If the lights are "on" all the time, no one worries about thefts? There's nothing a good thief likes more than predictability. To me, it's about anything to throw a would be thief off balance.

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