Quick Notes - May 2008

    Below you will find this month's Quick Notes and links for prior month's and the most recent Quick Notes.  If you would like to receive my Quick Notes as I post them via email, please send me an email request - Mike@MorganFlorida.org

May 30, 2008 - Four Cheers for Fifth Third Bank - My Quick Notes have been running a bit long lately.  Those of you that remember my early work, remember 10-20 page reports every week.  I do a great deal of research, and just as much time is spent in the field.  In any event, I like to write, but I need to cut back on the length of my piece offered to the public.  It’s just not fair to my clients.  So here is a true Quick Note I would like to share:
 
Four Cheers for Fifth Third Bank – We work with many financial institutions, and we see the full range of poor management.  But today I want to share a Best Practice that other banks need to follow.  I have long said that the banks created this problem along with the greedy builders and real estate agents simply looking for a quick buck.  Of course, it took the speculators to kick it all off, but when you get a taste of the drug it is hard to stop . . . when the banks, builders and agents are pushing more and more . . .  with free money and promises as powerful as a heroin high.  It is no different than poppy seed farmers (builders), processors (mortgage brokers), source dealers (banks), street dealers (real estate agents), and junkies (flippers).  I’m going to get emails about that one.  But the truth hurts.
    Now that we are in the crisis, I’ve said the banks need to help work this out.  Bail outs are useless.  We need to get back to basics.  And this means banks stuck with properties must sell them for the highest price possible.  Unfortunately, that usually means a 50-75% loss.  One key factor hindering the real estate market is the lack of mortgage availability.  Fifth Third is the only bank we work with that has stepped up to the plate to offer mortgages for buyers of their REO properties.  That’s exactly what the rest of the banks need to do.  

May 24, 2008 - Condo Vultures Face Reality - I’ve read a few pieces recently about the Florida Condo Vultures. Peter Wells has raised $200M and Matt Martinez has raised $200M and Peter Zalewski claims to be working with “about 100 investment funds.” Zalewski must be a very busy guy. I see him in the New York Times and on TV and in magazines. But I don’t see any deals. And that is the silliest part of this. We have been hearing about the Condo Vultures for almost a year now . . . and they’ve done zip deals. Nada. Nada single one. We haven’t heard form Jack McCabe in quite some time, but then again, he was a Condo Vulture way before these guys, so if he did any deals, he’s probably got some very angry clients. 
    Martinez claims to have made 32 offers. Zalewski expects to close on his first deal next month for one of his 100 clients. And Wells’ company “has been busy making offers, but its bids have all been rejected.” There are three problems with the “Condo Vulutres.”
    First, I get daily calls and emails from funds and investors that want deals. I tell them all the same thing after I hear what they are looking for. “Sure, great . . . and if you find a winning PowerBall ticket, I’ll buy it.” Let’s face it, the easy money deals are done. Those guys got in, and got out by 2006. Now they’re waiting in the wings. Actually, their probably waiting in the islands drinking cool libations with little umbrellas in them. The Condo Vultures are looking for deals that don’t exist. If they did exist, why in the world would a seller need a middleman with his hand out. There are enough direct buyers getting their heads handed to them in deals that don’t make sense.
    Second, when you make 32 offers and none of them are accepted, you would think it was time you got the message. It generally only takes one or two smacks in the back of the head, before I get the message. Obviously, your bids are too low and you’re too early. 
    Third, what’s the plan? These guys think they can buy condos at $200-$400 psf and “flip” them with enough profit to cover all of their expenses and all the fingers in the pie. That’s nothing more than a fairy tale on crack at this point. In fact, one “astute” investor scooped up a pile of condos, then went on to brag to the media about how he was flipping them for 100% profits. It was Trump-style hype, and the flips never closed. Now this “astute” investor is offering the same condos at less than he paid and compounding his problems by renting them out without a strong property management team (that spells disaster in anybody’s book). Just like Wilbur Ross started to gorge too soon, the Condo Vultures that have made deals . . . are feeling very sick. 
    There is still very little blood in the streets. And even when the blood starts to flow, are the vultures going to swoop in like Wilbur Ross? Yes, they probably will. But the big question is . . . what’s the plan? Something the vultures haven’t figured out, is that in many areas we have far too many units for the population now or for five years from now. This is not a problem that is going away overnight. To make money in this market you need a plan that is more than “buy low – sell high” because that’s why we’re where we are. For some areas, there are “outside-the-box” plans that will work if you invest the time and resources. In other areas, the only plan is “stay away” because the crime element will overwhelm these markets. When you have a 10 year supply of vacant homes and condos, you have squatters and you have boarded up buildings that no one wants to live hear and you have a huge tax base problem putting pressure on the local government to provide basic services. Hogwash? Tell that to the folks in Vallejo, California that just filed for bankruptcy. Tell that to a dozen other counties in Florida that are experiencing massive cuts to police, fire and health services. 
    Most likely, the Condo Vultures will start making bolder offers and start feeding on the crap that no one else wants. If Wells, Zalewski and Martinez don’t make any deals, they don’t get paid. So deals they will make. Unfortunately for their investors, without a very sharp marketing and management plan, as well as a reasonable and carefully planned exit strategy, my clients will be dining on the juicy parts of the Condo Vultures. Visit my institutional website for an analysis of Condo Vultures versus Condo Hawks http://www.morgan-florida.org/Hawk-Fund 
    Stay tuned. It gets better. Actually, it gets worse for most, and then better for some. :)

May 22, 2008 - The HUD Hustle - We’ve all seen the headlines about “numbers” and which ones are real and which ones are fake and which ones we can’t make head or tails of. Remember what my Grandpa said, “Liars can figure, but numbers don’t lie.” The problem is getting the real numbers, because the liars are making up the numbers. And here’s one I will leave for my readers to decide.
    HUD claims there are 7,311 homes in their inventory in Michigan. But in Florida, Arizona and California combined, there are only 946. How do you like that for numbers? How about Tennessee at 954 which is more HUD inventory than Florida, Arizona and California combined. If you believe it, come on down . . . I’ve got lots of stuff to sell you for just pennies on the dollar. Maybe we can get you a fancy-schmancy deal like Morgan Stanley got from Lennar . . . 40 cents on the dollar even though it was only worth 15-20. Hey, we can slice the numbers up any way you want, but if you buy the HUD Hustle, come on down. I’ll put you up at the Four Seasons and have a private jet pick you up this afternoon. 
    Below is HUD’s spreadsheet. I’m not making this up. This is from HUD. And it gets better. If you look at how HUD sells their inventory, you can understand one sliver of the multi-faceted pie, as to why we are headed for complete, total, utter disaster. HUD and Fannie Mae will lead the charge off the thousand foot cliff. 
    More details on this issue and most of my Quick Notes are available for clients. As most of you know, Quick Notes and my Blog are very short takes on issues I am researching and working on for clients.

AK	19	LA	265	OK	501
AL	1180	MA	134	OR	44
AR	230	MD	103	PA	693
AZ	205	ME	28	PR	78
CA	208	MI	7311	RI	29
CO	1641	MN	323	SC	439
CT	109	MO	725	SD	25
DC	11	MS	529	South TX	1541
DE	19	MT	20	TN	954
FL	533	NC	1263	UT	43
GA	3106	ND	21	VA	255
GU	1	NE	145	VI	0
HI	3	NH	20	VT	6
IA	200	NJ	215	WA	109
ID	28	NM	71	WI	236
IL	1219	North TX	2233	WV	74
IN	2053	NV	80	WY	16
KS	234	NY	721	Total	39247
KY	316	OH	4362

May 21, 2008 - Wilbur Ross . . . "Bail Me Out" - I received a call this morning to comment on Wilbur Ross’ article in the Financial Times. My first comment was, "why didn’t he use the Wall Street Journal, New York Times or one of the other great American media sources? I found that odd, until I read the article. 
    So here are my comments . . . Is he kidding? Or what? I had to read it three times. Then I printed it out and read it two more times. Wilbur Ross is basically asking for a bail out. He went on CNBC a few months back and boasted day, after day after day about how smart he was and how he was buying up subprime at bargain basement prices. And we had to listen to Maria and Beckie and all the other talking heads crow about how smart he was for getting in on the "bargains." Well, look back at my commentary then. I said he was too early and didn’t appreciate the magnitude of the problems. And now just a few of those problems are coming to light . . . just a few. 
    I’ve been writing about the tidal wave of defaults moving into foreclosure and then into REO inventory. It has not slowed. If anything, as I said just yesterday, things are heating up. So for Mr. Ross to now come up with his own creative bail out, we must really be headed for something dark. This is coming from a man with extreme integrity and a reputation of being right on the money. In my book, Mr. Ross is up there with Buffet and Graham.
    Mr. Ross proposes that the FHA guarantee dollar for dollar existing troubled mortgages on primary residences for each dollar forgiven by the lender. And the lender should be able to resell the guaranteed portion of its principal amount. This is absolutely ludicrous. He’s asking for a back-door bail out because he bought what he thought was a bargain. He is now acting no differently than the flippers that bought homes to flip. Instead of pre-construction condos, he bought pools of mortgages to service and flip. So please tell me why taxpayers should have any part in the bail out of Mr. Ross?    
    I love the part where Mr. Ross downplays the risk to the FHA, when he points out the FHA’s payments on losers would be spread over many years. Big deal. A loss is a loss is a loss. But here we go again trying to creatively hide the loss and give it a little coating of syrup. Isn’t this what got us into this in the first place when Greenspan gave out money with essentially no restrictions. In this case, the syrup is sticky and a little, tiny, wee bit stinky. And it gets stinkier . .
    Mr. Ross offers an enticing piece of pie, when he proposes a plan where the FHA would share in the gain on the property sale. Pie? Did I say pie? It’s more like KaKa de Poop. And it gets stinkier, because Mr. Ross claims the "appreciation on some sales would more than offset losses on foreclosed homes." He must be kidding. But at this point, I don’t believe this is Mr. Ross writing what I am reading.    
    Two problems with the "pie" are: (1) does he really think there is a sensible way to determine and manage profits (not a chance), and (2) we still have another ugly leg down, where there will be huge additional losses (not profits). So just because Mr. Ross jumped in too soon, he wants what essentially amounts to a bail out? I didn’t hear him talking about sharing all the profits he was intending to make when he bought up all the garbage. I didn’t hear him offering a cut of the pie to FHA or anyone else, so why does he expect FHA to provide a back-door bail out?
    Let’s face the music. A lot of folks made huge, obscene profits on the housing bubble. CEOs at the big builders raked in $100M each over just a few years. Stockholders of the publicly traded builders saw their shares rise 300-400% and more. They made fortunes. And the guys on Wall Street packaging up the mortgages and selling them . . . and reselling them, and reselling them again, and slicing them up and reselling them again . . . these guys made billions. And none of this could have happened if the mortgage rating agencies and insurers were not accomplices to the obscene profits. 
    Unfortunately, there are losers in every trade. Just wait till we see the flood of lawsuits from pension and retirement funds that bought what they thought was safe. These are the big losers that were suckered into purchasing crap. There is no other way to describe it. Crap is crap. So if Mr. Ross wants to talk about a plan, he better start with how to help the guys that got stuck with all the junk paper when they thought they were buying top shelf. If we need a bail out, it is for the pension and retirement funds that are going to be wiped out.
    There are other losers. There are the flippers that saw dollar signs and bought homes like they were buying puts and calls. These folks deserve to lose. Full Stop. Period. There is no logic in a bail out for them. If there is . . . well, I lost money in Vegas a few years ago. And I lost money on some stock I bought last year. I want a do-over too.
    In closing let me bring Mr. Ross around to one other issue in his proposed bail out of his reputation and wallet. His plan is for primary residences only. I get calls from people every week that are losing their primary residences because they bought a dozen condos in Florida, Arizona and Vegas. I get calls from people every week that bought primary residences they couldn’t afford in the first place. I get calls from people every week that used their primary residence like an ATM to buy third cars, vacations, ,jet skis, boats, and you name it. 
    What’s wrong with America? LOA - Lack Of Accountability. Mr. Ross, in all due respect, you need to take your medicine just like everyone else.   C’est la vie Mr. Ross.

May 20, 2008 - Things Are Heating Up - Last week ended with several confusing calls from Asset Managers and Financial Institutions, and this week started off with a bang that is still ringing in my head. In fact, yesterday we started at 6am and were still at it at 10pm. The only thing that ended the day was complete exhaustion from preparing Broker Price Opinions, meeting with locksmiths to secure REO properties, arranging for contractors to get into REO properties for trash-outs and clean-ups, and non-stop calls and emails regarding REO issues. 
    We are seeing the beginnings of panic in the REO market. Well, maybe not panic just yet, but more like “deer in the headlights” reactions from Asset Managers and Financial Institutions that cannot believe the numbers. What numbers?

Number of Days on Market to sell properties.

Monthly percentage decline in housing prices. 

    And these are just two of the more than two dozen numbers we discuss with clients. How about housing starts and permits, as out of control builders continue to compound the problem. 
    And how about the number of homeowners that have missed payments. Or the number of businesses closing their doors, laying off employees and putting more office space and commercial space on the market. Or how about local communities failing to pay their bills, because tax revenue is down, and folks that are paying their taxes are down. We even talk about the price of meat doubling in two years, pump prices, etc., because this means less money for the mortgage. And you are going to put food on the table and drive to work before you pay your mortgage. 
    The numbers go on and on and on. Let me put it this way. There are no “good” numbers. None. Absolutely none. If you want to believe Wall Street and the pumpers on TV, you are failing to accept reality. It gets scarier by the day. 
    Deer in the Headlights – This is the best way I can sum up what I am seeing and hearing from institutional clients. They cannot believe the magnitude of the problem, and they are frozen in what they are willing to do about it. So just like a deer will stop dead and stare at a car as it smashes them into chopped venison, lenders are waiting for the Fed to tell them . . . “you are out of business.” 
    Cockroaches in a Dark Room – Here’s an analogy to shed some light on what happens within these organizations. It’s as if they are all sitting in a dark room, like roaches. The executives and managers don’t want to know what is going on. And as long as no one turns on the lights, everything is fine, But as soon as the lights go on, everyone scrambles for cover. 
    The saddest part of this epic financial meltdown is no accountability and no one willing to prepare a realistic plan that will be executed, despite the pain. 
    My crystal ball tells me the Deer in the Headlights and the Cockroaches in the Dark Room are one step away from complete panic. 
    I’m not a financial advisor, so I can’t sell financial advice. But I can tell you what I am doing. I’m shorting the builders and buying puts. I’m long the double short ETFs like SKF (financials), SRS (real estate), FXP (China).

May 17, 2008 - Mortgage Fraud for Builder - One of the public builders is facing mounting concerns about potential mortgage fraud and other potentially criminal charges.  At the very least there is going to be a very interesting set of lawsuits or a heavy hitting class action.  I have also heard that one of the high-power law firms this builder retained, has walked away from the case.  It seems hard to believe they would walk because of a conflict, as law firms do a conflict check before even talking to clients like this.  And there is more.  There is at least one State Attorney General involved, and I have heard rumors of the Department of Justice asking questions. 

May 15, 2008 - Decession or Depression? - For two years, I have been writing about what I call a Decession, which is far worse than a Recession, but not as bad as a Depression. 
    Today I am convinced we are headed towards a Depression, and I don’t see any means to avoid it. The reason for this statement is simple. Inventory of homes is now beyond a two year supply and growing, while prices are falling off the cliff. That does not even include multi-family housing, as this market was also overbuilt. But it gets worse.
    Even if builders stopped building homes today, prices would not stabilize. And, unfortunately, builders are still building. They are trying to monetize land and they have non-recourse money that is basically use it or lose it. Moreover, if the builders don’t build, the executives can’t get paid multi-million dollar packages and obscene bonuses. So they build. And they lower prices and eat away at shareholder equity. Without a doubt, at least a third of today’s builders will be bankrupt within the next 18 months. Maybe more.     
    Back to why I believe the coming conflagration will top anything we have ever experienced. The largest source of inventory is the homes moving through the foreclosure process and deeds in lieu of foreclosure. I estimate this will extend the national inventory to at least a 36 month supply . . . and in some markets double that. If you think I’m nuts, I’m used to it. Most people have told me I am nuts for the past four years. But I’ve been right on the mark all the way. 
    Over the past few weeks we have seen lenders that are giving up, when it comes to the disposition of inventory. Instead of putting policies and procedures in place, these lenders are slashing staff and outsourcing property disposition. The failure of lenders to get this under control is forcing prices down on a national level. It is not just Florida or Arizona or California. And the reason for the failure is the same reason we are in this position to begin with. There is no accountability and no regulations regarding what the lenders are doing. The snakes have moved out of the mortgage business and into the REO disposition business. These guys are taking the lenders to the cleaners. 
    I’ve written about one example at Fannie Mae. This week we experienced a similar horror story with GMAC. We are seeing outright fraud, but no one wants to make any attempt to stop it. The result is horrifying. Homes that should sell at $300,000 are being sold at $225,000. This lowers the bar for the rest of the inventory, because the appraisals will tag the $225,000 sale. The banks are letting the slime control how their inventory is sold. We have yet to find a single person at any of the lenders that wants to hear about the fraud or the negligence that is common place. They simply don’t care. Their only goal is to unload inventory. But without accountability, process, procedures and regulations in place, all they are doing is destroying the market.
    By the way, property preservation is also outsourced to the snakes . . . and they couldn’t care less. So as this inventory sits, it costs the lenders money, but it also means mold in homes where the electric is turned off, as well as rodent and bug infestations, vandals, etc. Once again . . . no one is at the helm of the ship. Strike that. There are fat cats with big paychecks at the helm of the ship, but they are in the galley gorging themselves on food and drink, living it up at the expense of the country. 
    The second part of this is also lender created. As they dump inventory and allow the crooks to take advantage of them, the lenders pull back in their lending arms. And this feeds the conflagration further. When buyers can’t get financing, prices drop lower until financing either is approved or a cash buyer shows up to steal a property . . . and flip it within days. 
    The cycle is set, and I don’t see any attempt to slow it down or regulate it. I personally don’t see any means to avoid a depression when you have millions of homeowners losing their homes. This spreads out further, because property taxes come down as values come down. Now you have communities that are cutting police, fire, education and the basic elements that make the United States of America GREAT. Look around. Look at what people are selling at garage sales. Read the papers beyond the first page, and you’ll see stories about regular guys robbing banks and gas stations . . . because they have no other way to put food on the table. 
    The banks will fail. They cannot possibly continue to absorb the losses they are taking at the hands of the crooks that now control the REO markets. 
    Maybe I’m not making as much sense today as I normally do, but I’m in a bit of a fog. If you heard the voices of the people I deal with every week, and you saw the tears in the eyes of the kids that are crying because their Dad is crying . . . then maybe you would understand just how bad it is. If you spoke to lenders that are absolutely clueless as to what is going on, and maybe you heard the total disregard the lenders’ executives have for the problem . . . then maybe you’d have some sense of just how bad it is now . . . and what you will be reading about in 3-4 months. The lenders have lost control of the fire. It is no longer a brush fire. It is a conflagration, and the lenders are using jet fuel to try to put it out.

May 13, 2008 - We're At the Bottom - It Can't Get Any Worse - Over the past few weeks, that is what I am hearing from investors of condos and single family homes. Some say it with complete confidence. Others say it with a slight tilt to there head and in a softer voice, as if they are asking me a question.
My response is still . . . it gets worse . . . much worse.
    When and Where: Last week a group of men sat me down for a very serious dinner. They all wore suits and ties, I showed up in slacks, flip flops and a Tommy Bahama shirt. But I took the evening far more serious than they did. It's just that living in Florida has changed me. I'm serious when I'm dressed comfortably. I'm attending a funeral when I am in a suit and tie. Maybe I should have had the suit and tie on for that dinner.
    Who: The group were brothers and brothers-in-law. Three were very prominent businessmen, one a surgeon, one obnoxious, know-it-all hedge fund manager, two high-power attorneys, and a CPA for one of the Big 3, 4, 5 (I'm not sure what they call themselves anymore). 
    What: These brilliant, successful, well-dressed titans of their professions owned a combined 18 condos and a few very large waterfront homes in gated communities. These properties are in Naples, Singer Island, Miami, Vero Beach, Stuart, Orlando and Tampa. All of the units are empty, and they have been empty for on average a year. Some of the units have only recently closed. They are underwater in all of them. The simple math showed they paid a $19,200,000 for the units. But before they told me how much they paid, I did my napkin math and told them the combined units were worth between, $7M and $12M depending upon what I saw inside and where their particular units were located. At first there was mumbling among the brothers, as to who was going to throw me out the window. Instead, the leader of the group decided another round of drinks was in order . . . doubles.
    Discussion: No matter how hard I tried to point out facts, the brothers insisted this must be the bottom. They wanted to know how they could pay $19M for something only worth $7M. They were sure the Baby Boomers were coming and would buy up everything. They were sure prices would return to normal if they held for three or four years. They didn't want to hear about electric bills, utility bills, association fees, club dues and minimums, maintenance, taxes, insurance, security, monthly empty unit checks, etc. At this point I asked the elder of the group to cut off all drinking. I really didn't want to waste my time if these guys were wasted. Now I pulled out my laptop and I ran through some numbers, as well as MLS sales, listings and a variety of information. We were in a private room with a display, so I had the captive.
    The Slow Turn: The bigger the ship and the more crew doing their own thing, the harder it is to turn. But after the picture show, I started putting some numbers up on the white board with the assistance of the CPA brother. It became clear to all, the only way out was to sell now and put the money to use elsewhere (like shorting the builders and financials). The CPA brother ran through several scenarios, and none of them justified holding. But there were a couple of hold outs.
    Solution: We are going to list all 18 properties at the average of the lowest price in their areas, and then drop the price on each by 1% per week until the phone starts ringing with showings. Once we start talking to potential buyers, we will determine how much lower the price must go. Some of these properties will be sold with financing, as some brothers are in that position. They are going to lose more than double their initial investments (down payments). In some cases up to 4x as much, but if they wait, things get worse. You see, these are not the only big boys caught in these problems. The little boys have been running to some extent. They simply don't have the staying power. Up to this point, these titans have had more money and pride, than common sense.
    Up, Up and Away - The hold outs were sure the market was going to turn and return to 2006 levels. We put some statistics up, showing 20-35% price increases during the bubble. We have never in the history of the US seen anything like that, except just prior to the Depression. If we are at the bottom (and I say definitely NO), when prices do start up, it will be a 1-5% appreciation depending upon the area and your particular unit. Even at 3%, it will take 15 years to even get close to where we were . . . and that does not include the carrying costs. 
    Bottom Busters - The majority of consumers, investors, speculators, hedgies and sharp guys at the big financial institutions, think we are at the bottom or we will see it this year. They are all WRONG. I return to my discussion of inventory, which I have been writing about publicly for more than three years. And it has not gotten better. It is worse because builders continue to build, because banks and now the government want to give them money. It gets worse because our economy is in a downward spiral that we no longer control, and these folks are losing their homes. It gets worse because the lenders and groups like Fannie Mae and HUD have no clue how to process inventory. In fact, it is the latter issue that will be the silver bullet we cannot escape. I know, because I have the personal experience with all of these group. I get goose bumps when I hear some of the nonsense coming out of Fannie Mae and HUD. It's not scary, it's like the worst nightmare of my life . . . and it's real.

May 11, 2008 - Fannie Mae Makes it Worse - Much Worse - We received the information below regarding Fannie Mae's new underwriting standards. The bottom line is not what you are hearing from Bernanke, Paulson, Bush and the reset of the Band of Baboons. Lenders are NOT trying to solve the problem. Lenders are NOT trying to put the mortgage system back on track. Lenders ARE covering their butts and hiding under their desks.
    The bottom line of the 25 pages is . . . Fewer Borrowers Qualify and mortgages processing is made tougher.
    As one mortgage expert put it. The latest release is not only grueling to wade through, the new and more constrictive guidelines will be just as difficult for originators to swallow. It is effective on June 1, 2008, in conjunction with Fannie Mae's implementation of a new version of Desktop Underwriter, Version 7.0. Some of the changes, which are applicable to both manual and DU underwriting, include:

• Foreclosures: The new rule mandates five years must pass after a foreclosure before a borrower is eligible for a new Fannie Mae loan. Previously, DU would consider loans with foreclosures after two years. Now, the loan will receive a Refer or a Caution/IV if it hasn't been a full five years. Extenuating circumstances won't be considered unless it's been at least three years after the foreclosure, and the loan will have to be manually underwritten. Borrowers must wait for seven years before they are eligible for a cash-out refinance. After five years, the borrower would have a 10% down payment to be eligible for a purchase. After five years, the borrower must have a 680 or higher credit score.

May 9, 2008 - Ivy Zelman Too Close to Lennar - We just received Ivy Zelman's latest report, and of all the builders, she only has three as Buys - Lennar, SPF and M/I Homes. I say "only" because she seems to think the worst is behind us or just ahead. She's dead wrong . . . again. Impairments have a long way to go.
     I've commented before that Ivy might be too close to Lennar to be totally objective, and you've got to wonder what's up when you read what she is putting out about the industry and the builders . So once again, I've got to question whether she is too close to Lennar, and might be stepping over the line. I'd like to know why she thinks Lennar is so much better than Toll Brothers or NVR or Ryland. Something doesn't add up, and it will be interesting to see how this plays out. She's bragged about her direct line to Stuart Miller. 

May 5, 2008 - Market Update - Residential Markets - I track a number of metrics before coming out with any statements. But the numbers don't tell it all, and they tell us what WAS, not what IS. 
    "What Is" . . . is that we just experienced the worst week we've seen since we started tracking ground zero metrics. Our Open House count this week was just "one," and that's not very difficult to count. 
    "What Is" . . . is that the Internet traffic for home searches was the lowest since we started tracking. As some of you know, I own "m3 Interactive Marketing," so when it comes to tracking this traffic, no one comes even close to our information. Some of the analysts have offered to pay me nice chunks of money for this info, but it remains proprietary. This is my crystal ball. When we can look at what people are searching for and how many people are searching, we know what's coming . . . well before the analysts and TV talking heads. Simply put . . . the combination of no traffic and unbelievably low Internet searches, is all you need to know.

Commercial Markets - I've spoken with a number of attorneys, owners, managers and the BEST of the BEST commercial broker in the State of Florida. Two observations. 
    One - There is a lot of very stupid money chasing property. Very stupid money. We all agree on that. Unfortunately, some of these folks don't get paid unless they make deals. And it doesn't matter if the deals don't work out, because the deal makers will be long gone, leaving the mess for the next guy to clean up. So we all agree to sit back and wait . . . with a few choice exceptions (call me if you are intrigued). 
    Two - Things are getting worse across the board. Let's take the Big Box centers that everyone thought were isolated. Linens and Things just filed BK and several smaller to medium size operators have failed. Restaurants are failing at a record rate in Florida. Retail sales of boats, ATVs, furniture, jewelry and other non-essentials are crumbling and closing their doors. Office space is following the same route. Not a single professional I spoke with had anything positive to say . . . nothing.
    Overall, we are seeing the markets get worse on all fronts. The only positive I can report on, are Pawn Shops.

May 1, 2008 - New Class Action Coming - For those of you that have been telling me I was crying wolf about a coming class action against several builders, I have one thing to say . . . you were wrong.

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