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Tuesday, June 3, 2008

Housing/Subprime/Credit Roundup — June 3, 2008

Items of Interest:

Toll Brothers, Hovnanian post quarterly loss -- Write-downs weigh on results; Toll CEO says housing demand's still weak

After markets closed on Tuesday, Hovnanian Enterprises, a Horsham, Pa.-based homebuilder, said it swung to a loss of $93.7 million, or 59 cents a share, for the three months ended April 30. This included after-tax write-downs of $174.6 million, or $1.06 a share.

Hovnanian said it lost $340.7 million, or $5.29 a share, in the period. Wall Street was looking for a loss of $2.64 a share. The company took $251 million in pre-tax charges in its fiscal second quarter, mostly from land impairments. Revenue was $776.4 million in the latest period, down from $1.1 billion a year ago. Home builders have been taking charges as a result of falling land prices and home values, as well as their exposure to joint ventures.

"Demand continues to be weak in most markets as our clients worry about selling their existing homes or entering the market before prices stabilize," said Robert Toll, chief executive, in the earnings statement...

Neil Cavuto / Fox News:
Housing Mess Still Taking Toll on Toll Brothers
Of Two Minds blog:
Could 50% of All Homes End Up in Foreclosure? -- Just how bad could the housing bust get? How about half of all urban homes being in foreclosure? As stunning or unbelievable as that may sound, it already happened once in the U.S., in the Great Depression, as documented in this report: Lessons from the Great Depression (St. Louis Federal Reserve).

Though history doesn't repeat, it certainly echoes, and the parallels between the present and 1934 are particularly sobering. The only "missing ingredient" to a full-blown depression is job loss/income contraction, and many of us foresee a long, painful wave of lay-offs and downsizing on a global scale just beginning...
Washington Independent:
The Other Subprime Loans -- The Same Team That Cooked Up Subprime Mortgages Also Thought of Auto Loans

Wall Street has suffered two sharp downturns in the first two trading days of June. It's a disappointment after all the cheering for the market’s positive performance in May.

Monday’s worries were mostly about the financials, especially the struggles at Lehman Bros. and Wachovia. The shocker on Tuesday was General Motors' announcement that double-digit declines in the SUV/light truck categories would lead to big production cutbacks and shutdowns of four factories.

GM’s problems had been foreshadowed a few weeks ago when Ford’s CEO, Alan Mulally, rescinded his promises of near-term profitability because of a steep May dive in sales of SUVs and pick-up trucks. The bigger vehicles are the U.S. companies’ profitability sweet spot, so the market’s collapse is tantamount to financial disaster. Even the Japanese companies like Toyota and Nissan that have made big commitments to the high-margin big-car category will take serious profitability hits...
Nouriel Roubini / Economonitor:
The Complacency that the Worst Was Behind Us in Financial Markets is Rapidly Fading Away - The complacency that took hold of financial markets (equity and partly credit) - after the bailout of the Bear Stearns’ creditor and the extension of the lender of last resort support of the Fed to systemically important broker dealers (those that are primary dealers) – is rapidly fading away as financial markets and financial institutions are again under severe stress.

Let us detail how....

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia