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Top Homebuilder Struggles, Market Slides MoneyNews
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While mounting data continues to show a slowdown in residential real estate growth, no such woes face the commercial real estate sector, according to a group of economists that met in Orlando, Florida last week. At the Mortgage Bankers Association of America's (MBAA) annual conference at Walt Disney World, the consensus was that momentum would carry the industry through 2006 and beyond.
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"We're looking for a pretty good year, at least as good as last year and possibly better," said Doug Duncan, the MBAA's chief economist. "There's no evidence of capital drying up." Duncan said that financing is not a problem, adding that foreign investment is at a record high. With the U.S. economy firing on all cylinders, loan delinquency rates are low and not an issue to lenders who hold the purse strings to fund new commercial property projects. Lending was up in the sector last year, as office properties led the way, followed by apartments, retail and hotels. Speaking at the Orlando conference, Kieran P. Quinn, vice chairman of the trade association and CEO of Column Financial, noted that the recent extension of federally backed terrorism insurance has helped fuel commercial property market growth. She said that the market really took off after the 2002 terrorism insurance law passed in Congress, as insurance companies grew anxious about covering office buildings and other high-profile structures. Congress has extended the law for another two years and raised the level of federal government involvement from $5 million to $50 million. That figure will rise to $100 million in 2007.
2. Top Homebuilder Struggles, Market Slides On the residential real estate side, the news continues to be less than encouraging. Stock market analysts blame yesterday's slide in the Standard & Poor's Index on lousy performance within the U.S. construction sector – most notably that of Toll Brothers Inc., the largest residential homebuilder in the U.S. The company announced this week that 2006 sales will not meet recent forecasts. Toll Brothers is struggling with a new-home market that has tumbled by 29% for the quarter ending Jan. 31, 2006. The news from Toll Brothers "caused some concern as to what a slowing housing market would do to the economy," Eric Thorne, a money manager at Pennsylvania's Bryn Mawr Trust Co., told Bloomberg yesterday.
The S&P 500 declined by 10.24 on Tuesday, or 0.8%, to 1,254.78. The While Toll Brothers stock slid $1.73 to $29.47 after it revealed that sales will rise by only 4.9% in 2006 (about half its original forecast), analysts still expect all S&P companies to average 9.8% growth in the first quarter of 2006. And while that's not the 10% growth that these companies have averaged since the third quarter of 2003, it's not far off the mark. Still, the construction industry woes could dampen U.S. economic growth. "The Toll Brothers data is telling us that the fairy dust of rising home prices is floating away," Morgan Stanley chief global economist Stephen S. Roach tells Bloomberg. "The economy is going to slip back to a weak pace of underlying income and labor growth." And it's not just Toll Brothers.
According to Bloomberg, D.R. Horton Inc., the largest U.S. homebuilder, lost $1.28, falling to $33.67. And Pulte Homes Inc., the second-largest, fell
Last year, the stocks added 18 and 23%, respectively.
3. Your Financial Habits: Spender or Saver? Does your attitude about money define you as a person? Some experts think so. Just as attitudes about love, family, work and fun define the human condition, money leaves its own unique imprint on the average person. A new book by financial planner Diane McCurdy examines why different people spend their money the way they do. And most importantly, it tells how everyone can survive and thrive today while still building a healthy nest egg. "We all have deep-rooted attitudes about money that control the way we use it," notes McCurdy in her book "How Much is Enough? Balancing Today's Needs With Tomorrow's Retirement Goals." "For some, cash is a vehicle used to build empires, while others see it as a luxury that makes life exciting and entertaining. At the same time, some people can't sleep at night if they don't have their whole paycheck sitting in the bank. A person's various attitudes must be taken into account (pun intended) if any financial program is going to work for them." In the book, McCurdy cites four consumer-finance "templates" that fit Americans.
Spenders love money for the things it buys them. They prefer to have something concrete (cars or trendy gadgets) as opposed to having something as abstract as savings.
"They enjoy having the newest 'toys' and are often the envy of their friends, much like the fabled Joneses," McCurdy insists. They can get into trouble when they spend everything they have – or more. This category of people has the most difficult time saving money. A spender who doesn't pay off his monthly credit card debt, for example, may find himself on a very slippery slope toward bankruptcy. "Each month, take out your allotted savings and expense money immediately," she advises. "The rest is yours to spend however you wish.
Builders see money as a tool. They use it (and sometimes risk it) to turn their dreams into reality, says the author. Builders receive joy from the creative process involved in their projects and may even work at mindless jobs just to have the resources to build their dreams. Most entrepreneurs and corporate leaders are builders and they make excellent mentors because of their creative endeavors. However, they are prone to miscalculating the funds and risks that are involved in their projects and neglect to leave themselves a margin of error just in case.
Society couldn't get along without givers, as they make up the volunteers, charity donors and do-gooders of the world, says McCurdy. They buy extravagant gifts for friends that they would never purchase for themselves and deny their own wants so they can give to others. "Givers put their time, money and energy into what they believe in," McCurdy writes. "Some of them view having money as almost a sin; therefore, the only proper thing to do with it is to give it away. They also find pleasure in making other people happy or in doing good." Givers tend to get in trouble because they may ignore their own needs. They also may hurt their children by not teaching them how to take care of money.
Savers are lifesavers. Without them, who would the rest of the world borrow from? Savers create a fortune in the bank very quickly, while still living a comfortable life – sometimes even on a tight salary. "Savers are great at spotting money-wasting activities and avoiding them without thinking twice," McCurdy insists. These types are organized and not impulsive buyers. They don't like risk and require a cushion of savings for their own peace of mind. But they can be too conservative and often avoid investments that could actually make their money grow, says McCurdy. They also may postpone enjoying their money for so long that it becomes too late. McCurdy advises determining how much savings is "enough" to meet security needs while still allowing you to actually enjoy life along the way. "Once you reach this number, keep your peace of mind but spend a little money on something nice that you deserve. Life is just too short." Editor's Note:
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