Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

The California Housing Fiasco

“THE CALIFORNIA HOUSING FIASCO”

Hugh Pavletich
Co author
Annual Demographia International Housing Affordability Survey
DEMOGRAPHIA
Christchurch
New Zealand

October 5, 2008

D R Horton as Americas largest home builder, constructed nearly 53,000 homes during the peak year 2006, but since the housing bubble burst, it has been rapidly disposing of surplus land holdings, as explained within this Wall Street Journal article Developer Sells Land Dirt Cheap To Reap Tax Benefits - WSJ.com.

This article focuses on a 2000 lot subdivision in Desert Hills Springs, a blue collar community in the far reaches of Southern California’s Inland Empire.

It would appear D R Horton paid $US110 million for the raw land ($US55,000 per lot) through the inflating bubble years, completed land clearing and infrastructure works (low estimate $US20,000 per lot) plus holding and other costs (low estimates $US10,000 per lot). The total subdivision works costs would therefore likely have been in excess (and likely well in excess –since this is California) of $US60 million.

D R Hortons total financial commitment to this subdivision would have been a conservative $US170 million – and likely considerably more.

The Wall Street Journal reports County Records show that D R Horton recently sold out of this subdivision for $US7.8 million – which would represent $US3,900 per lot.

Conservatively – this would indicate that D R Hortons loss on this particular subdivision would have been at least $US162.2 million.

California, with a population of 37 million, is expected to erect just 70,000 residential units in total during 2008, according to the California Construction Industry Research Board, as reported within State's home builders expect worst year since 1954 - sacbee.com.

This represents a build rate per thousand population of 1.89 / 1000 – which is below the annual build rates through the Great Depression years of the 1930’s in California (2.18 / 1000 on average through these years).

The California Association of Realtors latest August 2008 Sales and Price Report indicates that house prices fell 40.5% August year on year and the Mortgage Insurance Group PMI Group in its latest Report, is expecting prices to fall further over the next two years. Within its latest Report with respect to foreclosures, RealtyTrac is expecting elevated foreclosure levels, with the resetting of the half a trillion dollars of Option ARM’s – 60% of which are in California.

Not surprisingly, California’s unemployment level in August was 7.7% as reported by SanDiego.com > News > State -- California unemployment rate hits 7.7 percent. Nationally – the United States lost 159,000 jobs in September.

Understandably – California is currently experiencing a (another) “fiscal crisis” – with Governor Arnold Schwarzenegger recently requesting a $US7 billion loan from the Federal Government – as reported by ABC News: Arnold to Hank: Can You Spare $7B?.

Currently - Mickey Mouse and Disneyland LA appear to be the happiest and best performers in California. A great State for mice – but a struggle for humans.

ENDS

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Superu Report: Land Regulation Drives Auckland House Prices

Land use regulation is responsible for up to 56 per cent of the cost of an average house in Auckland according to a new research report quantifying the impact of land use regulations, Finance Minister Steven Joyce says. More>>

ALSO:

Fletcher Whittled: Fletcher Dumps Adamson In Face Of Dissatisfaction

Fletcher Building has taken the unusual step of dumping its chief executive, Mark Adamson, as the company slashed its full-year earnings guidance and flagged an impairment against Australian assets. More>>

ALSO:

No More Dog Docking: New Animal Welfare Regulations Progressed

“These 46 regulations include stock transport, farm husbandry, companion and working animals, pigs, layer hens and the way animals are accounted for in research, testing and teaching.” More>>

ALSO:

Employment: Most Kiwifruit Contractors Breaking Law

A Labour Inspectorate operation targeting the kiwifruit industry in Bay of Plenty has found the majority of labour hire contractors are breaching their obligations as employers. More>>

ALSO:

'Work Experience': Welfare Group Opposes The Warehouse Workfare

“This programme is about exploiting unemployed youth, not teaching them skills. The government are subsidising the Warehouse in the name of reducing benefit dependency,” says Vanessa Cole, spokesperson for Auckland Action Against Poverty. More>>

ALSO:

Internet Taxes: Labour To Target $600M In Unpaid Taxes From Multinationals

The Labour Party would target multinationals operating in New Zealand to ensure they don't avoid paying tax if it wins power and is targeting $600 million over three years through a "diverted profits tax," says leader Andrew Little. More>>

ALSO: