The Forecast for 2007 Housing: SUCK

Call it a tale of two CEOs.

At the Citibank Housing Conference, we heard two
versions of the housing implosion from two industry leaders. On the one hand,
Robert Toll (Toll Bros CEO) was saying that his cancellation rate was slowing (unfortunately,
so have been his sales).

In a separate presentation at Citibank, DHI CEO had a few choice words: 

"D.R. Horton, the second-largest builder by revenue, will likely miss its internal goals for 2007 home closings, Tomnitz said today. Closings will likely fall below 2006 levels, he said.

"I don’t want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year,” Tomnitz said. "Our future is not as bright as what we would like it to be.”

There are some in the housing industry who certainly don’t pull any punches. Tomnitz may not win any awards for eloquence, but the guy isn’t spinning investors with crap. At the very least, that is fairly refreshing.

Incidentally, I am working on a related issue for tomorrow — call it the "Wages of Spin" — that looks at the negative impact of real estate industry bullshit . . .



Toll Cancellations Drop; Horton Says Market to `Suck’
Brian Louis and Sharon L. Crenson
Bloomberg, 2007-03-07 15:54

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. GerryL commented on Mar 7

    Toll Brothers was really positive this morning. Of course, Robert Toll has been positive in the past while dumping his own stock at the same time. I guess this means the Horton CEO doesnt have stock to dump. Acutally, I give him credit for honesty. Suck has now become an official Wall Street term.

  2. SINGER commented on Mar 7


    tomorrow they will catch UPGRADES from SUCK to BLOW by some of the major investment houses

    On another note, I heard a soundbite on Bloomberg by Paulsen saying he’s “comfortable with the global economy because there is plenty of liquidity but low inflation.”


  3. Mike M commented on Mar 7

    That is awesome! Every realtor/mortgage broker/RE “investor” in America needs to read that.

  4. Emmanuel commented on Mar 7

    Hey! Quit obliquely picking on poor David Lereah. Paid shills need to make a living too. And, at this point, I think his credibility is somewhere south of zero so there’s less likelihood that there are people out there buying homes with funky mortgages following Lereah’s advice. His entertainment value goes up each time the housing sector tanks some more, yet he blurts out some otherworldly upbeat assessment.

  5. sasso commented on Mar 7

    Now do we take them at their word when they say things will be horrible going forward? Did they have a clue their situation would change when things were great, or do they tend to project the present into the future?

  6. S commented on Mar 7

    The wall street spin will be that when top executives resort to using quasi vulgarities to describe their business at investment conferences, it’s a sure sign of management capitulation. The bottom is right around the corner. Buy ’em.

  7. GerryL commented on Mar 7

    Cancellation rates declining seems to be a major argument that the housing market is stabilizing. I have asked this question a few times and cant seem to get answer to it. Won’t the cancellation rate decline simply because people stop buying homes that they are going to cancel and lose their deposit. I think the cancellation rate declining doesnt mean that the housing market is stabilizing. What it means is that people arent stupid.

  8. sasso commented on Mar 7

    What housing needs for stabilization is bad housing starts #’s, and ceo’s thinking things will suck forever. The problem has been being addressed on the supply side for a year now. Is Tomnitz capitualating here and bottom ticking it? Really don’t know.

  9. Robb Palmer commented on Mar 7

    Never mind the drop off in housing starts and the rise in cancellations. The real question is: At what point in time does the housing ATM machine finally run out of free cash and force the consumer to bite the bullet? When that day dawns, look out below.

  10. Frankie commented on Mar 7

    Any bottom in housing will need this special atmosphere of abundant, uncensored and overt manifestations of hatred and disgust at the very mention of the topic.

    It’ll be the very best way to ruin a cocktail party (some people excel at that) to makes tons of enemies instantly, to earn grunts of scorn (some may called Raaaalph on the Big White Phone…you have been warned!) from co-workers and force the more superstitious to ask Severus Snape to invoke the malefic “Avedra Kaavedra” against the Forsaken delirious enough to utter the sector-that-can’t-be-named.

    Anything less is grade-AAA BS molded in breakfast sausages that spin-meisters have as vulgus for their morning meal.

    Magister Dixit! :-) (j/k)


  11. ManhattanGuy commented on Mar 7

    Why are all these pessimistic postings on the housing market? Isn’t this catch 20/20 situation of what happened 2 years ago. All these negative views make me thing it is time to buy.

  12. KP commented on Mar 7

    Seems to me that it takes more than rampant negative housing sentiment to signal a bottom. Well what’s going to pull housing up? Lower interest rates? Hold your breath!

  13. ManhattanGuy commented on Mar 7

    I don’t see any problems in the real estate market in Manhattan. National housing problems have not affected Manhattan condo market yet. My prediction is that the lower interest rate will spur up the market later in the year. Hindsight is 20/20. Did you bring up these negative points two years ago when we had the top in the housing market? I don’t think so.

  14. Ms commented on Mar 7

    when they were bullish at the top they were also busy selling stocks, last time I checked they weren’t that busy buying stocks at the moment

  15. ManhattanGuy commented on Mar 7

    I’m referring to all the negative news surrounding the real estatte market. This reminds me the stock market in 2003. Now we all know what a bull run we had between 2003 and 2007. Time to buy!!

  16. brion commented on Mar 7

    Talked to my Realtor today. She said the chief economist for CA came in yesterday & predicted falling list prices of .02%.

    That and the downtown condo market (Long Beach) was toast.

  17. Bob A commented on Mar 7

    Bottom line is… do you think the banks have already built in all the loan losses they are ultimately going to take?

  18. IM commented on Mar 7

    RE market is Sh*t wherever I go. Was in Miami last month. The realtors look ready to jump of those high rises that are sitting empty.I get a call from some development group in Tampa begging me to buy some crap condo project they built in a swamp ! California from SF to LA to San Diego stinks. I check out a few properties and now I get 100s of realtors calling me everyday begging for my business. New York and CT are dead. I hear there is a pulse in Illinois but just barely. And Arizona…..prices in AZ will tumble an easy 10-15% this yr based on an inventory of 1 home for every 60 people. Oh and watch out for Texas. 1000s of speculators have headed that way in the last year hoping to buy new construction and flip it for a buck.The Lone Star state is going to see a whole lot of empty homes sitting on the market real soon. My take : The overall real estate market will be dead till atleast 2009-2010.And the worst part is that rates are still really low. Imagine what will happen if rates jump a percent or 2 ? Add in the possibility of a recession , job losses, an astronomical rise in foreclosures, ARMs and on and on and what you have is one giant catastrophe which has barely begun to unfold.

  19. Winston Munn commented on Mar 7

    The only thing currently holding out a lifeline to the housing industry is the still historically low mortgage rates, supported by the frenetic buying of GSE paper by FCBs – they currently hold 44% of all Freddie and Fannie paper. This huge influx of demand has kept rates low – if the subprime melt speads into Alt-A and possibly even AAA, then watch out below. Even the FCBs won’t assume risk that is 100% foolhardy. Without the support of the FCBs, mortgage rates will climb – and it wouldn’t take much of a hike to set off a chain reaction time bomb of ARM reset foreclosures.

  20. ManhattanGuy commented on Mar 8

    IM – Is this the end of the world?? lol. Stop being super pessimistic about the RE market. Your statement reminds me of 2002. In any case Manhattan market is unbelievably strong.

  21. greg0658 commented on Mar 8

    Sure thing – people on top of people engine, financial capital of the world and sure doesn’t hurt being 1st in line to the disaster bailouts.

  22. Tammy commented on Mar 8

    I have great respect for the ceo of Dr Horton. He is finally admitting the truth about the housing market and not lying to the public. I can not stand Toll Brothers. I am in Arkansas and my husband is in West Palm Beach Florida. I cannot sell our house here and have taken it off the market. The Toll Brothers are horrible to work for and the customers are treated awful. YOU WILL BE RIPPED OFF IF YOU BUY ANY OF THEIR HOMES IN WEST PALM BEACH. I know this from the inside guys so it is straight from the horses mouth. They have laid off half the crew at my husbands project since this time last year until now. I am hoping they will lay him off next so he can come home. I would rather him be jobless than be worked to death by the Toll boys while they dump their own stock and walk away from the whole mess while the people who made their company sink in the muck.

  23. Damari commented on Apr 5

    Read Below Letter Sent March 24th,
    Citibank ethics the rape the molesters their lies and more, please sign
    Please sign our petition at–And pray for justice.
    Please help us if you can along with the Senator, the letter below were sent to the Senator
    Go to—, then type in “Working mother and Citibank ethics‘ for search .or,
    go to,
    then click on sign a petition
    go to the bottom of the page, click on all petition
    go down to the ‘w’ and click on Working mother and Citibank ethics
    at the bottom of the petition click on ‘ sign petition’ they will ask you if this is Damari, click on log out and cintinue from there
    I need 1000 signatures within 4 months or my petition will be taken off I have would have to start over, please sign and tell a friend.
    I also received a virus sent from a, and gad to buy a new computer and they did nothing about it, never got back to me about it,to confirm if it was their employee.
    Working mother at Citibank, how did they make the list of the “Best 100 Companies for Working Mothers? Fired for putting daughters needs first? Fired via UPS, 12 days before Christmas?
    Why would a man who feels and believes that what he is doing is right, hide behind a letter of termination by sending it via UPS? Because he was afraid to do it in person and was too much of a coward to wait for me to return? Or because he was on a power trip? Or is he just mean and unsure of himself? None of this makes sense.
    Please forward to anyone that could help us, thanks.
    Keep this story going so we can get help. Tell a friend to tell a friend, how else can the little guy fight corporate America?
    Working mother at Citibank, how did they make the list of the “Best 100 Companies for Working Mothers?
    Please forward to anyone that could help us, thanks.
    Keep this story going so we can get help. Tell a friend to tell a friend, how else can the little guy fight corporate America
    March 24 2007
    To: Senator Barbara Boxer
    Also: Jason J Chan,
    1700 Montgomery Street, Suite 240
    San Francisco, Ca.94111

    Dear Senator Barbara Boxer, Re: Response by the U.S. Department of Labor

    I agree that I mentioned to Ronan Byrne that Citibank had violated the Family and Medical Leave Act, but I don’t believe that I said , I was fired for taking FMLA. I have never felt that I was fired for that reason. FMLA was never brought up to me by Citibank, FMLA was brought up to me by Met Life after papers were filed for STD. In fact, Met Life had told me not to fill out the papers for FMLA just STD and LTD.
    In, October 2005 I was told that the bank was going to start opening on Saturday, I explained to the manager that this would be stressful and a financial burden for my family and I. I explained that my husband worked Saturdays and my daughters was involved in sports, on the volleyball team and that I was team mom. I explained to him that I feared leaving my daughter alone because I had been raped at her age and molested earlier in life. I explained that earlier that year my daughter had been followed home and that is why I was cutting my hours back from 5 to 3. A police report was filed with Seaside PD. I also explained to Citibank how many child molesters there our within ½ mile of my house, and I explained that my daughter had tryouts on Nov. 5, 2005 in Salinas and my husband was already scheduled to work. Although the manager had two other tellers scheduled for that day he would not allow me to change weekends. On Nov. 7 and 8, my blood pressure was up and the doctor told me to take the rest of day off on the 7th and the 8th. Although I did not wish to work Saturdays to care for my daughter , the manager had asked me to go home and talk to my family, which I did. The manager also suggested that I bring my daughter to work and have her go in the back room and watch videos. The manger asked me to meet him half way and at least work one. After talking to my family I asked if I could work on the 3rd Saturday of every month along with my 5 days a week scheduled, my husband agreed to take the 3rd Saturday of each month off to tend to my daughters needs. Two days or so after I discussed this with the manager he calls me just as I am getting off of work and said “:sorry it will have to be 2 Saturdays a month. Yet a teller with less seniority and not as good as I was asked for Tuesdays and Thursdays off and it was granted. I was only asking for one day off a month she was asking for 8 days off a month and she requested this about 3 weeks after my request.
    On the first Saturday that I was schedule they already had 2 other tellers and the managers boss had spoken to me on my cell phone while I was at the doctors office with my daughter waiting to see the doctor. I told her that my daughter had tryouts and that I was driving her there as long has she wasn’t to ill to tryout. My daughters ended up having bronchitis . During our conversation I had said I wouldn’t be in and the manager had also been told along with the supervisor bit I was threaten with a write up if I didn’t go in. Why was the manager flexible with Andrea schedule and not mine. Why was it ok for her to do her homework at the counter, leave about $10,000.00 out and never get written up?
    The manager wrote me up, 5 days later, he could have written me up on the 7th, 8th, 9th, but didn’t , he wrote me up after getting my letter and calling me to find out if the letter was just for him, which it was. The following Saturday that I was scheduled was the 19th, and on the 17th I had gone to the doctors, after work, my blood pressure was up again and the doctor put me out of work for the 18th, 19th,and 20th. The state that in early November, 2005, that I didn’t show up to work during the week, this is a LIE and I had always called in. The only time that I personally didn’t call in was on12/12/05 because my doctor had called in for me due to my blood pressure and also faxed in a note. Andrea had her mother call in for her and she didn’t get fired but my doctor calls in for me and I get fired, why? Citibank did not decide to terminate me in November, Jeff Ursino decided to terminate me because I ask that I be contacted via email to protect me health. I f Citibank had decided to fire me then were was my final check and exit interview and why fire me in the middle of a workers comp pending case? California codes were not follow by Jeff Ursino or the bank. When I requested my file there was no notes that I record had been reviewed or that HR gave Jeff Ursino permission to fire me, why? I was given a medical note not to work on Dec. 6th and then it was extended on Dec. 12 -16th. Citibank states or the letter from US Dept. Of Labor that I sent in my note at the same time that I was being sent the termination letter, yet another lie.
    Kathleen Munoz had been faxed the disability note on the 12th of Dec. Jeff Ursino decided to fire me on 12/13/05, sometime after 1:45 pm, after reading my email. At that point the manager suggested to HR that I be terminated immediately, although he acknowledges receiving my email. I f the termination letter was being sent out at the same time I was sending my note in were was my final paycheck? Citibank rescinded the termination because I did not qualify for unemployment and State disability due to a program the bank carries. But had I not gone thru these steps they would not have rescinded their decision. They rescinded , in my opinion because they realized that Jeff Ursino had made some errors, they ignored that I was ill and they realized that he fired me during an open workers comp case. In fact, Chrys Smith, of HR ,called Carla at Travelers Insurance for workers comp on the 14th of Dec. 2005 to see how the case was going, at that point she was told that it would probably be denied, but she never mention to workers comp that I had been terminated via UPS the day before. I did not apply for workers comp at the end of my Short Term Disability Leave Plan, the workers comp case was started 11/22/05, or so.
    Again just more lies by Citibank, Jeff Ursino and Kathleen Munoz.
    Citibank continues to give false statements. Please don’t stop helping us they are not telling the truth. You have returned my binder to me, thank you , but the proof is all in there, now what do I do? Citibank did not behave in good faith, not fair and equal treatment of all employees. They would tell clients that I left to work for my husband or that I was on vacation, anything but the truth.
    Damari Stratford, 1291 Ord Grove Ave, Seaside, Ca 93955 831-583-9077

  24. G. P commented on Jul 26

    It is sad that working, middle class buyers who cannot come up with
    the down-payment in this depressed real-estate market, are being
    fleeced by publicly traded companies like Toll Brothers. We had
    signed a contract with Toll Brothers for a single family home in
    Hillsborough Chase (Hillsborough New Jersey) for a home that would’ve
    been ready for closing in Jaunaury 2008. To come up with the down
    payment, my significant other had to put his home on the market this
    June for sale. But due to the deppressed real-estate market the home
    had to pulled off the market since it would have had to be sold at a
    huge loss.

    We have already made deposit payments to Toll Brothers of
    approximately $53,000 of our hard-earned money in January 2007. Toll
    Brothers had us also execute a Note in the amount of $40,997, which
    Toll Brothers now purports must be paid due to the cancellation of the
    contract. However, the Note was ever executed and, in fact, the Note
    was presented to us by the sales person at Toll Brothers Hillsborough
    Chase, and were asked to sign without having been given the
    opportunity to consult an attorney. It is also troubling that the
    Note was executed with us prior to Toll Brothers executing the
    Agreement of Sale. Therefore, us signing of the Note utterly lacked
    consideration on part of Toll Brothers.

    Toll Brothers now intends to retain all of the deposit money paid, and
    collect on the Note, and convey the property to a third party free and
    clear of any interest we may have in the property. There are numerous
    court cases which state that sellers, including builders of new
    construction, are not entitled to retain a buyer’s deposit money upon
    a buyer’s default where the seller is able to mitigate its damages by
    a sale to a third party. The very recent case of Cintron v. Select
    Modular Homes, Inc., WL2447771 (N.J. Super. A.D. 2005) sets forth
    current New Jersey law on the subject. In that case, a buyer who
    backed out of a new construction contract was awarded nearly all of
    his deposit money by the court where the builder was able to resell
    the property at a comparable purchase price. As the home is in the
    very early stages of construction, I assume that Toll Brothers will be
    able to resell the home to a third party at a comparable purchase
    price. In such event, retention of our deposit would amount to an
    inequitable windfall to Toll Brothers!

    This is very unfair and unjust. This is up to $100K of our
    hard-earned money that we could have spent on our children’s education
    – now Toll Brothers is snatching their future from them.

Read this next.

Posted Under