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Originally Posted by aceventura3
I really enjoy this thread, because all the predictions we document here will prove to be correct or incorrect. I am impressed by the resiliency of our economy. After the "sub-prime meltdown", "real estate market bubble bursting", currently anticipated recession, dollar devaluation, $100+ oil, historic national debt levels measured in dollars, billions in banking write-downs, the war, and the general credit and regulatory crisis - the general economy continues to chug-chug-chug along.
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The reason it seems to still "chug-chug along", IMO, anyway, and the reason the_jazz is getting mixed signals from the RV business, is denial and "dislocation":
This POS homebuilder is on the hook for many of the mortgages it wrote, it has it's own mortgage division, and it's website says it provides mortgages to 80 percetn of buyers of Centex built homes:
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Centex Land Deal: And I Thought Worst Was Almost Over
Posted By iana Olick
Topics:Housing | Real Estate
Sectors:Financial Services | Construction and Materials
Companies:Centex Corp
CNBC.com
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Every time I want to say that the bleeding is over, I'm proven wrong. Centex Centex CorpCTX
[CTX 24.93 0.72 (+2.97%) ] just announced that they sold about 10 percent of their land holdings to a joint venture for what analysts compute is about 18 cents on the dollar.
The joint venture that is led by Dallas-based RSF partners paid $161 million for 8,500 lots in 11 states. The book value, according to Centex, was $528 million at the time of sale, but analysts say that was already after significant write-downs. They say the land was worth $900 million originally.
Centex will receive the $161million plus $294 million worth of tax refunds, so the total cash receipt is $455 million. “This transaction is consistent with our near-term goals of reducing our land supply and generating cash,” says Centex CEO Timothy Eller. “This land sale accelerates our move to a more asset-light operating model, sharpens our focus on strategic markets and consumer segments, reduces future land development cash obligations and monetizes a meaningful portion of our deferred tax asset.”
The majority of the land is in California and Nevada, obviously the heart of the housing bust. Pali Research analyst Stephen East notes, “Given the well-known weakness in the markets, we are surprised that CTX had not been more realistic in its mark down of land in its impairment process the prior quarter. Did they really think three months ago this land was worth more than 3X what it was sold for?”
Hope springs eternal, I suppose.
Questions? Comments? RealtyCheck@cnbc.com
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They announce today that they sold 8,500 building lots for 18 cents on the dollar....they do two things, build homes on the lots and lend money to the people who buy the homes.
They lost 82 cents on every dollar that they paid for the land, they lost the opportunity to build homes...for profit....on the lots they sold. Chances are that they sold to raise cash to meet another margin call on the sinking value of the mortgage portfolio they lent out to customers, but couldn't sell. They announced last fall that they had a credit facility for almost $500 million from JP Morgan to issue mortgages from....
....and this minute, my Level II quote display foe their stock, CTX, shows it is trading at $25.27 per share, up a full $1.00 vs. yesterday's closing price.
They will go BK, they cannot borrow money to meet new margin calls on their junk mortgage portfolio, and they can't make money selling new homes, but the stock is trading at the same price as it was last fall.
I predict this is all gonna get REAL ugly when reality sets in,and we don't just flirt with it and forget it, like the market did when Bear Strearns collapsed on March 14. That was only 17 days ago, and on CNBC, the talking a-holes are proclaiming a "bottom is in", on stock prices..... whew!!! That is enough for now, but it is alarming, and it shows the ignorance and disconnect that was required to get us in this crisis that most are not yet ready to even face.