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Allan Merrill Named CEO of Beazer Homes

Source: BIG BUILDER News
Publication date: June 13, 2011
By BB Staff
Beazer Homes USA, Atlanta (NYSE:BZH) early Monday abruptly announced that Ian J. McCarthy, the company’s president and CEO, had left the company. He is succeeded by CFO Allan Merrill, who was named president and CEO.
The company said only that McCarthy “is leaving the company and has resigned from the board of directors.” McCarthy, who ran Beazer and its predecessor companies since 1991, entered into a settlement with the Securities and Exchange Commission in March in which he agreed to return his entire 2006 compensation, including $6.5 million in cash and 40,103 restricted stock units and 78,763 shares of restricted stock, to the company under section 304 of the Sarbanes-Oxley Act. That provision “requires reimbursement by chief executive officers and chief financial officers of certain compensation and stock sales profits they earned while their companies were in material non-compliance with financial reporting requirements due to misconduct.” It was the third SEC enforcement action stemming from the results of an investigation into accounting misconduct at the company during the 2006 fiscal year.
Merrill was the driver behind Beazer’s recapitalization effort as CFO for the past four years. The new CEO previously worked for Move, Inc. after working for 13 years for Dillon Read & Co. Inc., and its successors, including UBS, where he managed the firm’s Housing, Construction and Building Materials group. In that capacity, Merrill was lead adviser to Beazer on its IPO in 1994 and on several acquisitions.
Succeeding Merrill as executive VP and CFO is Robert Salomon, a veteran home-building financial executive who was Beazer’s chief accounting officer. Salomon joined Beazer in 2008 and has more than 25 years of financial management experience, including over 19 in the home-building industry. Prior to joining Beazer, Salomon was CFO and treasurer of Ashton Woods Homes for nearly 10 years, which he joined from M.D.C. Holdings (NYSE:MDC), where he held various accounting and finance positions over a 6 year period.
“Over many years Ian McCarthy has ably guided the company to its current position as one of the ten largest homebuilders in the United States,” said Beazer Chairman Brian Beazer. “During this time, the homebuilding industry and the company have experienced many complex issues which Ian has dealt with to the benefit of the company. The board appreciates his leadership and many contributions to the company. For these efforts we would like to thank him and wish him all success in the future.”
Of the new executive team, Beazer said, “We are pleased that Allan and Bob have accepted these appointments. Both possess many years of industry experience and have demonstrated a commitment to the success of our stakeholders.” He added that the pair will “conduct a thorough review of the company’s operations and potential growth opportunities.”
David Golberg, home-building analyst at UBS, said in an investor note, “It is clear from our conversations with mgmt that increased focus will be placed on top line growth, as much of the low hanging fruit in terms of cost reductions has been realized. In our opinion, this reflects the continued dedication to improving operating leverage, especially as conditions normalize.”

Texas Housing Market Shoulders the Burden of Performing Well Under Pressure

From www.bigbuilderonline.com

While the nation mostly zigged, Texas zagged. While most corporations stockpiled cash and plunked all their lean-production savings on the bottom line of profits, Texas’ oil-driven economy kicked and buckled and kept people in jobs, and even expanded some capacity beyond the immediate, foreseeable demand for its inventories.

What’s more, Texas dodged the bullet of a bubble housing economy, which didn’t feel so very good during the last-decade boom, but feels pretty derned blessed right now. Consequently, hordes of folks weren’t buying homes as part of the national Ponzi Scheme of getting something for nothing, then flipping it to go onto the next square in the game. On the contrary, folks in Texas mostly bought their homes to live in them. What a concept!

This is why Texas tends to break the model when it comes to matching up failed loans with loan types. So many of those folks in Texas who bought homes during the past decade were among the riskier quality borrowers, with semi-ok credit scores and low- to no-down payments. Yet, percentage-wise, more of their loans are intact today than in most other regions of the country. Which is why there’s a relatively normalized–although low-pulse–marketplace for housing in the Lone Star State.

The big issue there is access to home loans and down payments. Since all regions are tarred with the same brush as the worst of them when it comes to rolling up the statistics on loan risk, banks don’t tend to look at Texas and say, “well, okay, we’ll accept a 580 FICO on a Federal Housing Administration-backed loan.” Just isn’t happening. So qualifying your average paycheck-to-paycheck style household, the backbone of home buyer populations for lo, these many yeaers, is well nigh a pipedream.

So, Texas, being Texas, is going to have to set a good example at helping the rest of the nation figure this dilemma out. And it probably will do just that.

Here is the Texas Housing Update from equity research analyst Buck Horne and his team at Raymond James & Associates.

Texas Housing Update: March Sales Fall 11% Y/Y; Median Price Flat Y/Y

* Sales fall 11% y/y. Existing home sales in Texas dropped 11% y/y in March, which was comparable to February’s 10% y/y decline. From our view, the negative y/y sales totals are not terribly surprising and should be kept in the context of 1) increasingly difficult y/y tax-credit sales comparisons, 2) relatively fewer foreclosure liquidations in the region, and 3) the state’s price stability. Overall, Texas remains a very competitive market, but over the past two years, it has been one of the few bright spots for many homebuilders. More recently, though, increasingly difficult mortgage underwriting and higher fee structures for GSE/FHA loans are creating new challenges in Texas, in our view, given its higher mix of credit-constrained buyers. Thus, with difficult tax-credit comparisons still ahead, we suspect y/y existing home sales results will likely remain negative at least through May until the tax credit comparisons are lapped. Locally, North Texas pending sales (Dallas area) were down 13% y/y in March. Similarly, Austin area pending home sales dropped 17% y/y. Houston area pending sales only fell 1% y/y in March, but both KB Home and Lennar recently noted renewed signs of pricing pressure among new homes for sale in Houston.

* Major market sales drop 10% y/y. Transaction activity in the four largest markets for public homebuilders (Austin, Dallas, Houston, and San Antonio) outperformed the state as a whole but were still down 10% y/y in March (versus a -7% y/y comparison in February). Drilling down, sales in Dallas fell 14% y/y, and Austin sales declined 12% y/y. Meanwhile, Houston reported the least severe decline among the major markets in March, falling 6% y/y. Overall, we believe San Antonio area home sales have been buoyed by the Defense Base Closure and Realignment Commission (BRAC) initiative. That said, sales dropped 10% y/y in March as this submarket lapped a difficult year-ago comparison (+28% y/y).

* Inventory slides 2% y/y. March listings in Texas were down 2% y/y but up 3% from February to 126,051 units. Since 2004, the average seasonal sequential increase between February and March has been roughly 4%. Texas’ total listings represent 7.5 months of supply, which is up from 7.1 months of supply reported in March 2010 but still below the 8.4 months of existing home supply reported nationally as of March. Existing home inventory declined in three of the four major markets. The only y/y increase among the major markets continues to be reported in Houston, where inventory grew by 5% y/y (a deceleration from the 9% y/y increase reported last month). Elsewhere, San Antonio listings dropped 4% y/y and Dallas listings fell 2% y/y. The most substantial y/y decline was registered in Austin, where listings dropped 12% y/y.

* Median home price flat y/y. After climbing 4% y/y in February, the median home price remained flat y/y in March. Over the last 24 months, y/y median price comparisons have oscillated in a narrow range between -3% and +4%. In our view, this suggests that Texas home prices have remained relatively stable. At a median price of $143,700, Texas’ existing median home price is 10% below the March national median price of $159,600 (-5.9% y/y). Thus, in our view, Texas will likely avoid the level of price declines seen in markets still flooded with distressed properties. On a local level, two of the four major markets reported a y/y increase in the median sales price in March, with the breakdown as follows: Dallas (-2% y/y), Houston (-2% y/y), Austin (+3% y/y), and San Antonio (+3% y/y).

* Fewer foreclosures in Texas. Recently released fourth quarter mortgage delinquency data from the Mortgage Bankers Association revealed only 1.9% of loans (69,000 mortgages by our estimate) in the state were in foreclosure versus 4.6% nationally. While slightly above the rest of the nation, the level of implied future foreclosure activity is still far less threatening than many other key states for the homebuilders. Specifically, 9.2% of Texas mortgages were delinquent versus 8.9% nationally and 10-12% in the states hardest hit by the foreclosure crisis. Supporting the Mortgage Bankers Association data, according to Lender Processing Services, the “non-current” rate (delinquency rate + foreclosure rate) in Texas for February remained comfortably below the national average (10.5% versus 13.0%).

* Texas faces fewer headwinds than most markets. In our view, once a sustained recovery is underway, homebuilders with a strong presence in Texas will ultimately benefit from the state’s 1) limited foreclosure overhang, 2) highly affordable housing markets, 3) business-friendly growth policies, and 4) relatively small percentage of borrowers in a negative equity situation. Specifically, based on data from First American Core Logic, only 10.4% of properties with a mortgage were “underwater” in Texas as of December (versus 23.1% nationally). After ending its streak of 16 straight months of y/y declines in employment last May, job growth has steadily accelerated in Texas. Specifically, based on seasonally-adjusted data provided by the Bureau of Labor Statistics, Texas payrolls rose by 251,100 jobs, or 2.4% y/y, in March. Evidencing the favorable market dynamics, M/I Homes announced in early April it acquired the assets of privately held TriStone Homes, based in San Antonio.

* Builder exposure. For reference, as a percentage of their total 2009 unit closing volumes, Meritage Homes, The Ryland Group, and Lennar Corp. have the largest respective exposures to Texas.

Building boom in affordable housing underway in South Florida

www.bigbuilderonline.com

Source: The Miami Herald
Publication date: April 18, 2011

By Toluse Olorunnipa, The Miami Herald
April 18–There’s a quiet building boom taking place in South Florida, but it’s nothing like the mid-decade condo rush that ended in an epic economic bust.

The new towers going up today are not being built on the water for the affluent, but on the chipped sidewalks of gritty neighborhoods for the region’s poorest families.

The 2009 federal stimulus package and other government programs aimed at fixing the housing crisis have helped boost the affordable housing sector, which uses government funds to build rental communities for low-income residents. It’s the only sector of South Florida’s housing market in which demand is outpacing supply, analysts say, and thousands of new units are currently being constructed.

There are more than 25 affordable multifamily projects either recently completed or under construction in Miami-Dade and Broward counties, making up a large chunk of all new development in South Florida and providing a boon for the for-profit developers that specialize in affordable housing.

Usually financed with a mix of private lending, federal funds and local government subsidies culled from surtaxes on real estate sales, affordable rental projects are designed to meet the need for reasonably priced housing options in urban communities.

That need has been especially acute in South Florida, as the recession and foreclosure crisis have lingered, turning many homeowners into renters and dropping many middle-income residents into the low-income bracket. South Florida’s shortage of low-priced housing options was evident even before the recession, as the real estate boom pushed the cost of housing up so rapidly that many were priced out of the market.

“Because of the large number of condo conversions that were going on from 2000 through 2007, there is a shortage of affordable rental housing,” said Arden Shank, president of Neighborhood Housing Services of South Florida. “It means that rental prices are going up, and there’s a significant need for affordable housing.”

In South Florida, the average consumer’s “housing burden”– the percentage of one’s income that goes to pay for housing — is the highest in the nation. About 42 percent of South Floridians spend more than half of their income on housing, according to a recent report by the Center for Housing Policy. That compares to only 23 percent across the nation.

Michael Cox, co-founder of Miami-based developer Biscayne Housing Group, said the region’s high cost of housing has been particularly tough on South Florida’s poorest residents, creating a snowball effect that has contributed to social problems like crime, pollution and homelessness.

Cox sees affordable housing not only as a way to combat all of these ills in one fell swoop, but also a way to lift blighted areas out of the dumps and spark neighborhood-level revitalization.

For his company, it’s also been a surefire way to strike a profit.

His five-year-old business is one of the few developers that kept busy during the course of the recession, building new structures amidst a collapsing housing market that has been plagued by a bloated inventory of homes and condos for sale.

Biscayne Housing Group (BHG) has completed more than 1,200 units since 2009, and has six projects under development in Miami-Dade County. Cox and his partners say that virtually every unit built will be occupied by paying residents.

“We have occupancy at our projects really at about 100 percent. They’re all full, and they have waiting lists,” Cox said. “In the last three years, three of our projects were fully leased in 10 weeks.”

Responding to this level of demand — and to more than $2 billion in federal stimulus funding for housing aid in Florida — BHG and other developers have been busy breaking ground on mid-rise towers in Liberty City, Overtown, Allapattah and other inner-city neighborhoods.

Last year, BHG began construction on Notre Dame, a mixed-use building in Little Haiti that will house 64 families when it is completed in December. The $18.1 million project received government funding worth $5.6 million, a large chunk of that coming from the federal stimulus package. When it is completed, it will have an exercise room, a library, 12,300 square feet of retail space and a 112-car parking garage.

“It’s not the stereotype project that people think about when you say affordable housing,” said Gonzalo DeRamon, co-founder of BHG. “We’re building market-rate developments with income restrictions.”

In Overtown, builders have just topped off The Beacon, a 90-unit apartment complex being developed by Miami-based Carlisle Development Group. The $25 million project has capitalized on funding from the stimulus, as well as county and city subsidies. The gray 13-story skeleton is expected to come to life by Christmas, and will house families whose income qualified as low or very low.

Carlisle is also erecting a 467-unit complex next to the Metrorail station in Brownsville. That $100 million project is the largest of Carlisle’s seven low-income rental properties under construction.

In Sunrise, the Pinnacle at Avery Glen complex will soon have 140 new units of workforce rental housing. The $26.4 million project is one of a handful of stimulus-funded developments set to open in Broward County this year.

Along with other developers in the space — Carrfour Supportive Housing, Cornerstone Group and Pinnacle Housing Group are examples — Carlisle and BHG are filling the void left by luxury and market rate developers, who have been sidelined by a tight credit market and the fallout of the condo bust.

Some of those luxury developers have shifted gears toward affordable housing as well. The Related Group, the Miami-based mega-developer responsible for skyline-defining projects like Icon Brickell and Trump Towers in Sunny Isles Beach, is building two low-rise rental properties in Little Havana, as financing has all but dried up for the type of luxury condo buildings that were the company’s forte.

All told, there are more than 5,000 new or rehabbed affordable rental units set to open in South Florida in the near future. The developments stretch from Florida City up to Sunrise, and range in size from a few dozen units to multi-phase complexes.

Profit margins for affordable developers are generally lower than for luxury builders — rent prices are set based on income restrictions, and are far below market rates. Private developers are able to survive on such low rents because much of the development cost is subsidized by the government.

Rent at The Beacon, for example, will range from $369 to $874 for two- and three-bedroom units.

Alexander Smith pays below market rent for his one-bedroom apartment at Village Carver in Little Haiti. He’s been living there since 2009 and said its many amenities are a big upgrade for an area marred by substandard housing. The eight-story complex and its fresh coat of pastel paint brighten up the neighborhood, he said.

“This is my neighborhood — I grew up here,” he said. “I’m really impressed, and I can tell they’re trying to improve and make things better in Little Haiti. It’s going to take a little time, but Rome wasn’t built in one day.”

Smith’s low rent is, in effect, subsidized by taxpayers, something critics of affordable housing decry. Others point to past failures of publicly funded housing projects as evidence of government waste. With funding from the stimulus winding down and state legislators seeking new budget cuts, the affordable building boom could be short-lived.

Ken Naylor, chief operating officer of Carlisle Development Group, points out that the pool of available money for new projects is rapidly shrinking.

“As there have been fewer [real estate] transactions and as land has sold for less money, the pool of available subsidies has shrunk,” he said.

Gov. Rick Scott has put a $123 million affordable housing trust fund on the table, seeking to steer that money away from housing and toward the state’s $3.7 billion budget hole.

“At the time we need it the most, the funding is down,” said Cox. “There’s not enough money, and there’s no easy solution.”

It’s a thorny issue for Scott because government-subsidized housing projects also create jobs, many of them in the reeling construction industry. Scott has acknowledged that the housing industry is crucial to any job creation effort in Florida, but has also vowed to curb state spending.

For every $1 million the state spends on affordable housing, 77 jobs are created, according to a 2009 report by the Hendrickson Company, a financial advisory firm specializing in the housing industry. That $1 million generates $7.7 million in economic activity, according to the report.

Cox said he has witnessed the job-creating power of affordable housing development firsthand.

“When each of these developments is operating, you have somewhere between 30 and 35 full- and part-time jobs created,” he said. “That goes from the guy who mows the lawn to the accountant on the property, to the elevator crew. During the construction and development phase, each of our or developments [generates] about $7 million in local income.”

He estimates that each project creates 300 to 350 temporary construction jobs, boosting an industry that has been devastated by the housing crash.

Many of the jobs go to people who live in the communities where affordable housing is located — that’s often a requirement for receiving federal funding — and those neighborhoods are often plagued by higher unemployment rates.

By bringing jobs and modern buildings to struggling communities, developers say they can spur an economic renaissance. Artists’ renderings of the completed housing projects show clean, vibrant streets that hardly resemble the blighted areas that exist at those sites today. While many have tried and failed to revitalize South Florida’s poorest neighborhoods, Pinnacle Housing Group CEO Michael Wohl said affordable housing has a proven track record of doing just that. He pointed to Wynwood as an example.

“Ten years ago, Wynwood was blighted,” he recently told a group of real estate professionals interested in investing in low-income communities. “We’re a great believer that affordable housing should be the first new development in an area, and it can be a catalyst for change.”

—–

To see more of The Miami Herald or to subscribe to the newspaper, go to http://www.herald.com.

Copyright (c) 2011, The Miami Herald

Distributed by McClatchy-Tribune Information Services.

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Poll: US economy improving despite global events

Source: Associated Press/AP Online via www.bigbuilderonline.com
Publication date: April 18, 2011

WASHINGTON – Economists say the U.S. economy is gaining strength despite political unrest in North Africa and the Middle East and last month’s devastating earthquake and tsunami in Japan.
A survey from the National Association for Business Economics finds that economists are hopeful that the broader economy is substantially improving, with rising employment reported for the fifth quarter in a row. The survey found that “companies appear to be positioning themselves for a firming economic environment,” said Shawn DuBravac, an economist with the Consumer Electronics Association, who analyzed the findings.

The outlook for employment rose slightly, reaching a 12-year high. No firms reported significant layoffs, with the only reductions coming from already planned cuts.

Sales increased for the third consecutive quarter, profit margins continued to improve and the number of economists whose firms increased spending over the previous quarter held steady. Nearly all of the 72 economists surveyed, about 94 percent, now expect the economy to grow at least 2 percent in 2011.

The quarterly survey includes the views of economists for private companies and trade groups who are NABE members. The data are reported by broad industry groupings. Many results in the survey are expressed through the Net Rising Index, or NRI – the percentage of panelists reporting better outlooks minus the percentage whose outlook is bleaker.

The survey looked at two new questions for its April survey, gauging the financial impact of anti-government unrest in the Arab world and the deadly Japanese earthquake and tsunami.

Nearly 60 percent of those polled said they expected higher costs because of political turmoil in Bahrain, Egypt, Tunisia, Libya and Syria and about 52 percent said they expected economic growth to be weaker in 2011 because of the protests and fighting.

The March 11 earthquake and tsunami, which left nearly 28,000 people dead or missing and sparked a crisis at a nuclear plant, had less of an impact on the economic forecasts. About 31 percent said costs would be higher and 40 percent said it would weaken the broader economic recovery.

In the first quarter of this year, 63 percent of economists said sales rose from the previous quarter – the highest percentage since 1994. The NRI rating for sales rose 11 points from the previous quarter to 54, and the improvement was across all industry sectors: goods, utilities, information and communications, finance, insurance and real estate, and services.

Profit margins rose to an NRI figure of 31 – the highest rating since 1983. The number of economists reporting rising profits has almost doubled over the past year, to 45 percent from 25 percent.

Prices rose, with about one third of those surveyed saying their firms had made increases over the past three months. Two-thirds of the goods-producing industry, which includes farming, mining, construction and manufacturing, reported their firms had raised prices. Similarly, the costs paid for materials rose for the third quarter in a row and wages and salaries jumped to the highest reading since a survey in October 2007.

The survey was conducted between March 16 and 31.

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6 Housing Markets Hitting Bottom!

Great news for 6 US housing markets!! – JCP

Via www.bigbuilderonline.com

Source: USA TODAY
Publication date: April 7, 2011

By Julie Schmit
The U.S. housing market looks like a scorched landscape.

Nationwide, home prices are down almost 32% from their 2006 peak. Many economists expect them to fall at least 5% more this year. Some predict even steeper declines.

Even if home prices bottom later this year — a big “if” for many markets — they’re not likely to rise much for several years, forecasters predict.

“It’ll take a long time for markets to recover,” says Paul Dales, economist at Capital Economics.

That’s because millions of homes still face foreclosure. Lending standards are tight. Almost one-quarter of homeowners with mortgages are underwater, which means it will be tough for them to move up into nicer homes because they owe more than their current house is worth.

Yet, even charred terrain sprouts green shoots eventually. And some areas have laid the groundwork for better days, according to an analysis for USA TODAY by real estate website Zillow.com.

Of the nation’s 100 largest metropolitan areas, Zillow identified six — Las Vegas; Fort Myers, Fla.; Stockton and Vallejo, Calif.; Hartford, Conn.; and Columbus, Ohio — that show best what housing markets look like when they are bottoming out but not yet in recovery mode. To identify them, Zillow considered factors such as the trajectory of home prices, housing affordability based on a ratio of prices to local incomes, and foreclosure rates.

None of the six is seeing price gains, just lessening declines that are expected to continue. Their foreclosure rates have peaked, so the worst could be behind them. Homes in these markets also are becoming more affordable, relative to local incomes, than they were before the real estate boom and bust of the past decade. Investors in many of the markets say the housing deals won’t get much better.

“In these markets, you can kind of see a light at the end of the tunnel, and it’s been a pretty long, dark tunnel,” says Stan Humphries, Zillow.com chief economist.

Las Vegas

Flat: The new up

Investors are betting that the home market here has bottomed — or is about to.

Daniel Callihan, 57, a former mortgage company officer, sees that when he hits foreclosure auctions held in a parking lot near downtown. There are twice as many bidders as a year ago, Callihan says. He’s bought and sold 10 Las Vegas homes in the past two years.

Many Las Vegas investors are paying cash. In February, more than half of southern Nevada’s existing homes were bought with cash, local agents say. Investors also are turning many homes into rentals, says Paul Bell, president of the Greater Las Vegas Association of Realtors. No wonder: Homes that sell for $60,000 can fetch $800 a month in rent — an investment return almost three times the rate in Manhattan or Los Angeles, says Patrick ONeill, CEO of ONeill Group, which is buying Las Vegas homes.

Before softening in recent months, Las Vegas home prices had been largely flat for more than a year. “Flat, for us right now, is very good,” Bell says. Whether prices will stay flat is another matter. Moody’s Analytics doesn’t expect Las Vegas single-family-home prices to bottom until mid-2012. One problem: The city still has thousands of homes headed to foreclosure, says University of Las Vegas economist Stephen Brown. He says it will take at least three years for the market to absorb the excess homes.

Perhaps the only sure bet in Vegas? That its housing bottom “will be a long one,” Brown says.

Vallejo, Calif.

Bruised but with ‘good bones’

Realtor Ramon Torres has a front-row seat on the housing wreckage in this San Francisco suburb.

Seated next to a living room window during one of his recent open houses, he saw just one couple coming up the steps in the first hour. They stayed less than five minutes, apparently underwhelmed by the $269,000 five-bedroom house with streaked windows and chipped paint. The owner, who owes $470,000 on the house, wants a short sale.

Sixteen similar homes are for sale within a 1-mile radius, and Torres fears that the “worst is yet to come” for Vallejo as more homes are lost to foreclosure.

Last year, one in 16 homes here received a foreclosure filing, the nation’s 10th-highest rate, RealtyTrac says. Torres also fears that Vallejo’s reputation will scare off home buyers, given that the city declared bankruptcy in 2008 and has made deep cuts in city services, including police and fire personnel.

But Vallejo, along with Stockton, Las Vegas and Fort Myers, also was hit early and hard by the national housing bust and will be one of the first to recover, Zillow says. Last year, Vallejo’s foreclosure filings dropped 12%, while they edged up nationwide almost 2%.

Today’s Vallejo buyers are mostly investors who can get good rent for some of the lowest-cost housing in the San Francisco Bay Area, real estate agents say. “There’s a very strong investor presence,” says David Tipp, owner of Tipp Realty at Glen Cove.

Jay Boberg, 52, a Los Angeles-based investor, has bought four Vallejo properties in the past two years. He’s rented them all and immediately went cash-flow positive. He sees Vallejo as a city with “good bones,” including a waterfront, views of the San Francisco Bay and proximity to San Francisco.

“The fact that you can rent an apartment or a house here, with a view of the (San Francisco) Bay, for $800 to $1,300 a month is incredible,” Boberg says. “I can’t believe real estate here won’t be worth much more in 15 years.”

Columbus, Ohio

Getting in young and cheap

First-time home buyers are having a hard time in today’s market, given tight lending standards and competition from all-cash buyers. In February, 34% of existing-home buyers were first-timers, a National Association of Realtors survey says. In a healthy market, that would be 40%, the NAR says.

But Columbus and the five other markets Zillow analyzed for USA TODAY have become so affordable that people who didn’t think they could afford to own are finding that they can. Lisa Lee, a 25-year-old business analyst, recently bought a $60,000 three-bedroom home in a suburb here that had gone through foreclosure.

Her monthly mortgage, including insurance and property taxes, will run about $140 less per month than the rent she paid on her two-bedroom apartment. She secured an FHA-backed loan. Her down payment and closing costs came to about $2,900.

“I couldn’t believe the house was so cheap,” Lee says. “Why keep wasting money on rent?”

Columbus is also getting a little boost from consumers with stable finances who put off buying homes during the recession, says real estate market analyst Robert Vogt of Vogt Santer Insights. Given signs of a national recovery, people are “getting the confidence to move,” Vogt says.

Fort Myers, Fla.

New values ‘wow’ buyers

Ray Bayer, 59, of Pittsburgh has long planned to retire in Florida, but prices were too high. In January, the postal worker finally bought a $255,000 Fort Myers home that he says would have fetched $400,000 at the market’s peak. Bayer and his wife, Kathy, 57, a nurse, expect to retire to it in a few years.

Fort Myers, like much of Florida, has been battered by foreclosures. In 2010, one in 12 Fort Myers homes had foreclosure filings, the nation’s second-highest rate after Las Vegas.

Even so, Fort Myers’ foreclosure pace last year was down 28% from 2009. And recently, banks have slowed the pace at which they put homes on the market. That’s driving multiple offers and buyers who have to settle “for their third or fourth choice,” says broker Terri Lodge of Century 21 Sunbelt Realty.

In February, the number of single-family homes for sale in Fort Myers was down 52% from the same month in 2009 and sales were up 2.4%, says Bob Groves, managing broker of Coldwell Banker Residential Real Estate. Snowbirds and retirees are fueling much of the activity, Realtors say.

“They’ve seen the deals and said, ‘Wow,’ ” says Rob Keller, a Coldwell Banker agent.

Hartford, Conn.

Jobs to help

Adam and Clare Baroncelli have been on the open-house circuit for several months and have seen good homes get snapped up more quickly.

The increased activity drove them off the fence. They have made an offer on a $370,000, four-bedroom home in Simsbury, near Hartford. “There’s a lot more activity,” says Clare, 34.

The Baroncellis moved in August from Florida to Connecticut because of Adam’s job change. Job growth is expected to help the Hartford region.

Of the four major labor markets in the state, Hartford has the best prospects for job growth, says Steven Lanza, editor of The Connecticut Economy, the University of Connecticut’s economic publication. Late last year, just 12% of homeowners with mortgages in the Hartford region owed more on their homes than they were worth, Zillow data show. That’s far better than the national average, then 27%. Fewer underwater homeowners means there are more homeowners who can move up into more expensive homes.

Rob Giuffria, president of Prudential Premier Homes in Farmington, Conn., says there are huge differences among Hartford areas in terms of the current housing market. Some upper-scale neighborhoods — fueled by white-collar workers and executives — may be bottoming, while some inner-city areas are worsening, he says.

Lanza looks for a broader “recovery” soon. As with the other markets Zillow analyzed, that doesn’t necessarily mean improvement.

“It means you’re not getting worse and maybe you’re getting better,” he says.

Stockton, Calif.

Pain and opportunity

Few areas have been through a longer and darker tunnel than this central California city.

Since peaking in 2006, Stockton’s median home price is down 62%. For three of the past four years, Stockton ranked in the top five nationwide for foreclosures, says market researcher RealtyTrac. In January, six of 10 homes for sale in the city either were bank-owned, in foreclosure or tied to a delinquent mortgage.

Yet there are glimmers of change. Last year, Stockton dropped to No. 7 in foreclosures nationwide. Local Realtors say there are more non-distressed homes for sale now than there were a few years ago. More low-ball offers are being refused. And multiple offers are common on lower-end homes. “It’s a very competitive market,” says Jerry Abbott of Grupe Real Estate in Stockton. He recently got six offers for one home priced at $121,000, a short sale in which the lender agrees to sell a property for less than is owed.

The big concern is when banks will begin to list for sale more of the distressed homes they’ve kept off the market, which could hurt prices. Banks slowed their foreclosure processes last fall after a public outcry over thousands of improperly documented foreclosure cases. The other issue is when Stockton will regain jobs. The unemployment rate in the local county — 17.6% in February — is one of the nation’s highest. Moody’s Analytics predicts Stockton-area home prices won’t return to their 2006 peak for more than 20 years.

Still, some people say it’s time to buy, including Cary Fopiano, 41. Since 1996, she and her husband, Steve, 50, have made money on two of the Stockton homes they’ve owned. They lost money on one but are still far ahead.

The stay-at-home mom and manufacturing manager bought their fourth home last year, on a lake in an upscale neighborhood. They’re shopping for another to turn into a rental investment.

“Prices are about as low as they can go,” Fopiano says.

(c) Copyright 2011 USA TODAY, a division of Gannett Co. Inc.

A service of YellowBrix, Inc.

Rents’ rising tide could lift house prices’ ships

Great artice from Builder…

The apartment folks and the for-sale “single family” folks mostly think of themselves as fierce competitors for the same universe of households. Scratch that. The Great Deleveraging of U.S. households, businesses, local governments, and eventually the Federal government is a game-changer. In fact, households, including the fact that they’ve not been forming at their hisorical pace, have been in a state of reaction to pain. Now, they’re beginning to regroup–rental vacancies are dramatically down. This means empty places to live are getting absorbed. Rents are going up. As excess supply gets tight, house prices will take their turn at stabilizing and eventually going back up. Calculated Risk has comment and pictures, and a Tom Lawler forecast bearing this out.

To read more click here: http://www.calculatedriskblog.com/2011/04/forecast-rising-rents-to-slow-house.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29&utm_content=Google+Feedfetcher

The Billion Dollar Taylor Wimpey Deal—Behind the Headlines

Taylor Morrison’s president says the deal won’t change the company’s strategy or operational model, at least in the near term.
By:John McManus

For the three diversified, global financial interests who teamed together officially last night to ante up 1.04 times book value for Taylor Wimpey PLC’s North American operations, the clock sets at zero hour at the end of May on just under a $1 billion bet.

That’s when the $955 million purchase of Taylor Morrison’s U.S. operations and Monarch Homes’ Canadian operations by TPG Capital, Oaktree Capital Management, and JH Investments is set to close.

Sheryl Palmer, Taylor Morrison president and CEO, tells Big Builder she expects near term that it’s “business as usual” and that the deal affirms her team’s management strategy, its low-overhead structure, its hybrid merchant builder-land developer operational model, and above all, its land position in challenged, but high-potential Sun Belt markets.

The new owners, for whom the transaction—facilitated by J.P.Morgan as financial advisor to Taylor Wimpey PLC—gives them a buy-low, sell-higher platform, will decide all of that after they get time on the board of the new entity, which will retain the current brand names Taylor Morrison in the United States and Monarch Homes in Canada.

It’s too soon to tell whether they’ll look at the next stretch of months as a time to offer a vote of confidence to current senior management or bring in fresh blood; to expand capital resources for investment, or stay away from adding debt while the operation’s U.S. divisions tread close to negative cash flow as it is.

Their goal, as financial players, is to make money, and they’ll get a bit of a tailwind on that objective right out of the shoot since Monarch Homes, one of the Top 5 home builders in Ontario, Canada, is making money, and Taylor Morrison is said to be about break-even.

Beyond the present moment, as Canada’s hot home building cycle is widely expected to lose steam and the U.S. market is equally widely expected to make at best an anemic go at gaining steam, the three financial partners have to figure that their entry point is just about as good as they’re going to get.

In the macro housing context, a billion dollar mergers and acquisitions transaction affirms that cyclical forces of housing will sooner or later reassert themselves despite a number of profound housing finance policy-related issues hovering in the atmosphere that fundamentally could change the demand universe over the next five years.

For now, though, TPG, Oaktree, and JH Investments (which is parent to a Western Canada-based real estate and home building operator called IntraCorp) wanted into the possibility that one-time book value could easily ride cyclical traction to one-and-a-half or two times book value within the next two or three years.

While both strategic (home builder operators) and financial (private equity and hedge fund) players indicated a strong interest in the Taylor Wimpey North American assets, financial players prevailed–i.e., bid higher at the end of the day–because their return timelines allow for a bit more play at the outset than the crop of today’s land-prudent public home builder operators can afford to be.

“Non-strategics are going to pay more for this now because they want a platform,” commented an executive familiar with such transactions. Strategics–i.e., home building companies who are already up to their eyeballs in land “opportunities” and are wringing their hands over when and how what is obviously pent-up demand will begin to manifest itself–were less willing to value the 14,000-lot asset package at about $70,000 per lot.

For private equity and hedge fund players, there’s real money in being able to front a big play for an even bigger return that could come relatively quick if the cycle behaves as industry veterans believe it should.

Do TPG, Oaktree, and JH have an exit timeline? According to an executive who’s qualified to give such a characterization, the answer is, “Yes, but …”

In fact, the answer is, “It could be five years or it could be five minutes, it’s just a matter of how fast they make their money.”

John McManus is editorial director of Big Builder.

JCP's own Erica Lockwood with Myers Barnes and Mike Lyon in Big Builder Magazine!

An inside-out look at what it takes to succeed as times stay tough.

Source: BIG BUILDER Magazine
Publication date: October 8, 2010

By Teresa Burney

Erica Lockwood’s home builder clients think her job recruiting home sales managers should be easy. At least, that’s what she thinks.

“The typical response I get is, ‘Well, Erica, you should have hundreds of people to choose from.’” As she sees it, the perception is that, in the wake of all the industry layoff s, there must be sales managers aplenty.

The problem is, there aren’t many good ones now, because there weren’t many good ones before the crash, say recruiters and sales trainers. The overheated market covered up a lack of basic sales skills, plus the skills a sales manager needs now are considerably different and broader than they were in the past.

“The truth is, there are not any more ‘A’ players in the workforce now than there were five years ago,” says the Kingwood, Texas–based recruiter. Plus, most of them remain employed, have become more loyal to their employers during the downturn, and are reluctant to move to a new employer that may be less economically stable, she adds.

“Those people are very sought after,” she says.

That demand is increasing as more builders seek to bring back middle-level sales managers to bulk up for recovery in the new-home market. Not just any sales managers will do. They’re looking for professionals who can motivate and train frontline sales agents who have been beaten down by the market and who may have never learned what it takes to sell in a depressed environment.

“The need for top-notch salespeople has increased dramatically over the past six to nine months,” says Lockwood.

TANDEM TRAINING

Lockwood and other experts point out that the best sales managers now must exhibit a wide range of skill sets, some old-fashioned sales tools that were left by the wayside during the boom years and some new ones created by the technology revolution. Plus, he or she needs to be able to demonstrate those skills, teach them to agents, and insist that they use them.

“The salesperson has not gotten markedly better than they were in 2005,” says Jeff Shore, an Auburn, Calif.–based new-home sales trainer. “That’s not universal, but it is common.” He says that’s because sales training requires more than just an occasional lesson or role-playing exercise. Successful techniques and strategies need to be regularly demonstrated in the field, in a real-world environment, by somebody who knows how to employ them.

“It’s coaching, not just training,” says Shore. “These need to be sales managers who work shoulder to shoulder with the sales professionals.”

“[Sales managers] need to spend at least four hours a day in the field, side by side with the agents, shadowing, teaching, showing,” says Kitty Hawk, N.C.–based sales trainer Myers Barnes. “You almost have to touch these people daily.”

And for those whose salespeople are spread too remotely for daily contact, Barnes is a fan of Skype, the video-chat Web site, which he sees as a potent new tool.

“You can call them up at 10 o’clock randomly,” says Barnes. “You can chat face-to-face with a person every day. These are powerful tools of technology.”
Click here for larger image

Still, lip service is one thing. Salespeople, and sales trainers, are known to talk a good game. For hands-on training to prove successful, managers need to have the right kind of personality to be accepted by the trainee. “Oftentimes, they’re not welcomed by the seasoned [sales] veterans,” Shore says.

“They need to truly be a motivator,” adds Lockwood. “To the point that [the sales associates] don’t know they’re being motivated.”

It takes more than a pep talk to combat the negative energy that most sales centers exude these days, says Shore.

“It’s a retail market to which people are bringing a negative energy,” he says. “That sales office has got to be a positive-energy experience.”

HUNTER VERSUS FARMER

The ability to motivate is especially key in a market where sales agents get little positive reinforcement from the meager sales that do occur and where agents need inspiration to work harder and more creatively than they have had to work before.

The experts say they need to learn to work differently, as well.

“It was a paperwork job,” says Barnes. “Now, it’s people work. You were handling sales, and that’s the operative word, ‘handling.’ Today, you need to be the creator of sales. Most people don’t grasp that.” Teaching sales agents to hunt for customers rather than wait for them to come in the door is one of the biggest challenges, say sales trainers.

“A builder can no longer say, ‘We are going to provide you with all the traffic,’” says Barnes. “Now, you have to prospect” for leads and customers.

Building partnerships with Realtors is one often-overlooked way to generate leads, says Barnes. During the sales boom years, Realtors were frequently all but ignored by home sellers because, frankly, they weren’t needed as much (and then there’s the matter of commissions).

“Today’s customer is no longer just the customer,” says Barnes. “Today’s customer is a Realtor, too.”

Another source of live prospects is the builder’s Web site. Most home buyers begin their search online, yet many sales agents are failing to mine those lists of cyber-shoppers, explains Shore.

“You need to connect with the leads you already have,” he says. Online leads are valuable because you already know they’re interested enough to click on specific neighborhoods and floor plans, he adds.

“Take every prospect lead as far as it will go,” says Shore, though he admits that doing that is a skill that most sales agents have lost—or never had.

“Only 10 percent of sales executives will follow up more than three times,” says Shore. “It takes five to 12 connection points for people to make a buying decision. We lose it at three.

“Lead conversion should be the No. 1 focus of every sales manager,” Shore continues. “Saving a few bucks on a flat of flowers, that is not lead conversion,” he says. “Sitting in a meeting you don’t need to be in is not lead conversion.”

CYBERSPACE, NOT MODEL SPACE

Since most people are shopping on the Internet first, most of the work of selling a home now can and should be done via Web sites, e-mails, and text messages before a customer even sets foot in a model center, say sales consultants. They say the ideal sales manager is comfortable with technology and knows how to use it to market, hunt down leads, and sell homes.

“Twenty to 25 percent of sales are coming from online leads, calling, and e-mailing,” says sales consultant Mike Lyon, of Tulsa, Okla. “If [sales professionals] can’t specifically point to 20 to 25 percent of sales coming from online leads and sources, then they’re missing a huge opportunity.”

That number can easily be boosted to 30 to 35 percent by focusing more on mining Internet leads, he says.

That requires agents who have enough tech savvy to communicate primarily through e-mail, text messages, and social media, as well as by telephone with many clients. Yet the industry still has old-school sales agents who are reluctant to embrace new technology or who have done so infrequently and grudgingly, says Lyon.

Builders need sales managers who go beyond telling agents to use the technology—they need to use it themselves and demonstrate its effectiveness.

“If you’re not doing that as a manager, and you’re not committing, how can you expect that to be transferred down to a sales agent?” says Lyon.

That extends to lead management systems, too, which some agents are reluctant to use consistently.

“The sales manager better know how to use these sales systems,” says Lyon. “If they don’t, the salespeople see it and call their bluff and say, ‘He’s not going to be able to check up on me anyway.’”
CULLING CONSEQUENCES

Holding sales employees accountable for poor performance is a new mantra among builders and sales trainers.

Lockwood hears builders complain that “sales-people aren’t organized [and are] not willing to play within the black-and-white rules that people have in place.”

Agents have gotten used to managers who create new systems or roll out new technology and then look the other way when agents don’t use them consistently or at all. “It’s a question, over time, of variable standards,” says Shore. “You look the other way when salespeople tell you they won’t work on them.”

Barnes goes his colleagues one better. “I don’t believe in accountability management,” he says. “I believe in consequential management. I’m not just holding you accountable. If you don’t do it, there are consequences attached to it.”

But the problem is, if you let somebody go, you need somebody better in line to replace them. That’s why Barnes thinks the ability to recruit new, better talent is a must skill for sales managers.

“You almost have to be running like a professional sports franchise, building a deep bench,” he says.
TEACHING SUCCESS

A seasoned sales veteran shares his insights on the importance of coaching and mentoring today’s sales professionals.

Two years ago, when Shawn Ricks went on a cross-country job search for a management job selling and marketing houses, he met with rejection despite 10 years of builder sales and marketing experience and 10 more years as a successful custom home builder.

“Everyone was bracing for the worst, and these positions just evaporated,” says Ricks, who eventually found a job working for Sivage Homes in San Antonio. “Sivage had the opposite attitude,” Ricks remembers. “It was, ‘If there ever was a time to invest in sales training and a good sales force, now is it.’”

During Ricks’ tenure, Sivage gained market share and turned a profit, despite considerable pressure from the big production builders in town.

“We had tremendous results in the face of the toughest market in history,” says Ricks.

Recently, bigger builders came calling, looking to recruit him. He had offers from Meritage Homes and PulteGroup before deciding to become general sales manager for the latter’s San Antonio division.

The results at Sivage, and the way Ricks helped achieve them, made him the model for the type of sales manager builders are looking for as they work to refill their middle sales ranks.

“I’m a guy who has actually delivered in a tough market,” he says. “I am very proud of that.”

He chalks up his success to hands-on coaching and mentoring. “Honestly, that’s my secret sauce. That’s what made me different. I am deeply involved in the sales counselors’ lives.

“I work alongside them,” explains Ricks. “I don’t mean competing with them. We tag-team buyers, side by side; I’m teaching them, showing them how to follow up on phone calls, doing role playing, just real in-the-trenches, hand-to-hand combat.”

Such intense coaching is necessary because salespeople either have forgotten or never learned how to really sell, says Ricks. “I think there’s an entire generation of salespeople out there who are very ill-equipped to sell homes in today’s market.

“If they’re old dogs, they’ve either forgotten or can’t quite bring themselves to go back to what they had to do 10 to 15 years ago,” he explains. “And, if they’re younger, they don’t know what a tough market is. We have a bunch of sales counselors who don’t know what to do, or how to do it.”

Ricks says he understands why many sales agents are downtrodden and confused these days, especially because so much about selling houses has changed since the go-go days of home building. One of the hardest things he had to realize is that whatever he had done in the past doesn’t matter; it’s how you perform in today’s market.

“I think there are a lot of people who think that their laurels, their past successes, are sufficient to get them hired,” he says. “I went through a period like that. It was a rude awakening for me. It’s kind of a harsh reality.”

It’s how sales agents have dealt with that harsh reality that serves as a gauge to help Ricks decide whom to hire. He asks all sales applicants how they’ve survived the market and what they’ve learned.

“It’s amazing what you hear, and I can tell if somebody has really grown and improved and reinvented themselves or if they are in denial and have their heads in the sand,” he says. “About half the people out there haven’t changed; they’re just hoping things are going to change for them.”

Ricks looks for candidates who have “grabbed themselves by their bootstraps, who are humble, teachable, open-minded. Your pride is not what it used to be.

“And there is no resting on laurels these days. Every day is war.”