Interesting story in today's New York Times about how the flailing home sales market is being negatively influenced by too many doom and gloom news stories that keep appearing in the media. And that a turn around would happen at a quicker pace if we just stopped talking about all the bad news. HH tends to agree with Toll on this one. A positive outlook attracts a positive life. Here's the piece:
Blame for Poor Home Sales? It’s the Press, a Builder Says
By FLOYD NORRIS
Published: November 9, 2007
The housing market is horrible in most parts of the country, says the chief executive of the luxury home builder Toll Brothers, and he fears it will not get better until the newspapers stop saying how bad it is.
Work continues on Toll Brothers luxury homes in the Brier Creek Country Club development in Raleigh, N.C., despite record cancellations and plummeting sales, down 36 percent.
Toll Brothers, which has operations in 22 states, said yesterday that it expected to take a write-down of $250 million to $450 million because of declining land values when it reports results for the quarter that ended Oct. 31. The company said sales for the quarter fell 36 percent, to $1.17 billion, and that customers backed out of 39 percent of their orders, the highest rate ever.
Robert I. Toll, the chief executive, handed out grades for 37 markets that the company operates in, and most got a mark of F or worse.
“The fact that I differentiate between F, F-minus and F-minus-minus” shows just how bad things are, he told analysts during a conference call. He said those grades “go from miserable to outright purgatory.”
The lowest grade went to Las Vegas and Tampa, Fla.
“Perhaps as the presidential campaign heats up and moves to the front page, negative articles about housing will move off the front page,” he said. “Then, hopefully, the positive underpinnings of low interest rates, low unemployment and a decent economy will raise new-home-buyer confidence.”
The company said many of the canceled home purchases were for its more expensive homes. The average price of new orders in the quarter was $646,000, but the average price of canceled orders was $788,000.
He said a survey of Toll customers who canceled contracts showed that only 11 percent reported trouble getting mortgages. More either had personal financial problems or were unable to sell the homes they already owned. “People who just wanted to walk” accounted for 17 percent of the cancellations, he said.
“Translation, they’ve read one too many Times articles, and decided now is not the time to buy a home,” he said.
Nearly all the decent grades went to markets in and around New York City, while some of the worst grades were given to once-hot second-home markets.
The best grade, B-plus, went to Toll’s “city living” apartment projects in the New Jersey suburbs of New York, while similar projects in the city received a B, as did Princeton, N.J., and the states of Delaware and Connecticut. The suburban New York counties of Dutchess and Putnam, which he views as one market, earned a C-plus.
The F-minus grade went to the vacation communities of Hilton Head, S.C.; Palm Springs, Calif.; the Maryland shore; and the Poconos area of Pennsylvania, as well as to Michigan and Atlanta.
The F grade was the one most often given, going to Arizona, Massachusetts, Rhode Island, Minnesota and Southern California outside of Palm Springs. The cities of Chicago; San Antonio; Charlotte, N.C.; and Reno, Nev., got the same mark, as did the eastern and northern parts of Florida. Mr. Toll noted that Minnesota had improved to get its grade up to an F.
Another area that has improved, he said, was the western part of Florida, which moved up to a C, although he said that might reflect Toll’s aggressive price cuts. He also awarded C’s to the Texas cities of Austin and Dallas. Colorado got a C-minus.
Raleigh, N.C., fell to D-plus, while D’s were given to most of New Jersey and to Northern California, as well as to Washington and its Maryland suburbs, and the Philadelphia suburbs. D-minus was the grade for West Virginia and central Florida, including Orlando.
Mr. Toll said the downturn was worse than the one in the early 1990s, adding “the growth in the rate of cancellations, the decline in new contracts, and the weaknesses we observed in October suggest that we still have tough times ahead.”
Click here to read the article on The New York Times website.
