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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   33,194 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

« First        Comments 195 - 196 of 196        Search these comments

195   SP   2007 Nov 21, 1:54am  

EBGuy Says:
Who will save more gallons of fuel per year: the guy who trades in his monster Tahoe for the hybrid Tahoe or Dilbert driving his Civic hybrid instead of the regular version?

Yes, comparing an idiot in a 1 Tahoe vs. a dilbert in 1 Civic, driving the same distance over one year, the volume of gas saved by the Tahoe Hybrid may be greater than the volume of gas saved by the Civic Hybrid. Assuming it is largely stop-and-go commuting. However, this is a flawed argument. Of course you’ll save more fuel moving to a Tahoe hybrid because the Tahoe is MUCH thirstier than a Civic in the first place.

If that’s the main argument for buying a Tahoe hybrid, then it’s not much of an argument at all. In fact it would be interesting to see how much _real_ demand there is if the tax loophole favoring 6000lb+ vehicles is plugged, or if the government actually starts to apply smog and CAFE rules to these cretin-mobiles.

The point was not that putting a Hybrid in a Tahoe was a bad idea - but that calling it the "Green Car of the Year" is ridiculous. Purchasing a ladder after you have fallen into a hole is not nearly as praiseworthy as not falling into the hole in the first place.

196   Zephyr   2007 Nov 21, 8:16am  

HARM you said “Once again, Zephyr Von Knowitall charges in to Make His Point and… gets his facts completely wrong.”

You are certainly quick with the hostility.

First of all I cited no facts to get wrong, nor did I express any opinion about the peak oil theory. You criticize me for things I did not say. You then set the record straight for everyone by giving the real truth, which happens to fit perfectly with the point I was trying to make - that a sudden oil doomsday is not realistic. So I thank you for that. I lament that you did not get my point from what I wrote.

What I pointed out is that for almost 100 years now there have been some people who believe the oil doomsday is about to happen. Their deadlines for running out of oil have come and passed, and we still have oil. In fact, today we are extracting more oil than ever before. This may not be sustainable, but oil production is still rising.

However, I do agree with your comments about peak oil theory, and I do expect that oil will get progressively more difficult to find and extract. But that is very old news.

Technology will bring more efficient use of energy, and improved alternatives to oil. I see no energy doomsday. We have plenty of fuel. The real problem is the environmental consequences of using it.

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