STUART — After weeks of hearing homeowners complain about mold, leaky roofing tiles and shoddy workmanship, Martin County officials have had enough.By the way, I briefly spoke with Mike Morgan today and the intent is to take this forward, county by county. If that happens Lennar's problems have just begun.
The county has told a national home builder to prove its homes meet county standards, fix the problems, or get out and don't come back.
"These horror stories just keep getting worse," said County Commission Chairman Susan Valliere after residents complained Tuesday of problems with homes built by the Miami-based Lennar Corp. "This is really getting upsetting."
Mike Morgan, a Stuart real estate agent, has been complaining to the commission for weeks about faulty electrical wiring, stucco wall and roof problems caused by shoddy building on Lennar's homes in the Martin's Crossing subdivision on Kanner Highway. On Tuesday, Morgan brought the five homeowners to the commission meeting and said he plans to bring 20 to the next meeting to voice their complaints.
"It's been a nightmare," said Rick Scimeca, who said his house has had problems with leaking roof tiles. Scimeca also said his neighbor had a plumbing leak that caused mildew inside her walls. "It's a brand-new house. These things shouldn't happen."
County Building Official Larry Massing met with Lennar officials on Tuesday about the homeowners allegations. Massing said he is requiring the company to inspect the homes with him present and to send him all its reports on roofing tiles, stucco and electrical wiring used in the homes. The county will require Lennar to do more inspections later.
"If I feel Lennar is not doing everything necessary, you'll be the first to know," Massing told the commissioners.
Mark Sustana, general counsel for Lennar, said the company has agreed to have Massing, an inspector hired by Lennar and a private inspector check the electrical wiring on several randomly selected homes at the same time on Friday.
But commissioners were so upset by the homeowner complaints that they suggested going further, such as banning Lennar from building new homes in the county.
"If their workmanship is shoddy, maybe we shouldn't allow them to work here," said Commissioner Michael DiTerlizzi.
Commissioner Sarah Heard also suggested shutting down Lennar's Martin County projects.
"I've heard enough," Heard said. "I think we should suspend operations out there and have them solely focus on bringing houses up to code."
Commissioner Lee Weberman said that if it turns out Lennar's workmanship is poor, he would support revoking its license to do business in the county.
With thanks to Highfructose on the Motley Fool here are Lennar's cash positions for the Febuary quarter endings from 2002-2006
Quarters ending February; cash in 000
2006 112,030
2005 509,068
2004 545,522
2003 500,227
2002 483,573
Got a little cash flow problem have we?
Sure seems like it to me.
I suspect this is not just a Lennar problem either.
All along many homebuilders have been meeting earnings targets by buying back shares at bloated prices. If cash flow problems have finally started to matter, then look for that "buyback support" to drop dramatically.
In the interest of fair disclosure I am not currently short Lennar or for that matter any other homebuilder. For technical reasons I played for a bounce that did not happen and have watched all of them just keep on sinking. Besides I was mainly short WCI anyway (not Lennar). My interest is in fair reporting and if Lennar wants to answer some questions and give me their point of view I will post it. Of course I reserve the right to buy or short Lennar at any time but I do not want anyone to think I am picking on Lennar or any other homebuilder because I am an "evil short".
Let me say however that "shorts" or "bad reporting" are not Lennar's big problem. The problem with homebuilders in general was overexpansion and greed and poor quality. It happens every cycle. Builders build because that's what they do.
They will keep building until they go broke. Many continued to buy land at insane prices (or options on land at insane prices), and are now struggling to get rid of it. A private company can close shop and scale down, but a public company builds until it goes bust (with the CEO cashing out stock options all the way down).
Given that none of the public companies pay dividends there was never any reason other than the greater fool theory to own any of them anyway. Seriously think about that. In fact, think about that in general as opposed to a statement about homebuilders. After the final crash takes place the companies remaining will probably all be paying huge dividends. That will be the time to look for growth, not now.
In the meantime please consider this silly question: Are Sickly Newspaper Revenues Behind Attacks On The Real Estate Industry?
Newspaper advertising doesn't work, according to many Realtors, so they've been putting their advertising dollars elsewhere, creating a slow drain on the revenues of newspapers across the country. Could falling revenues be behind recent large-scale newspaper editorial attacks on the real estate industry?If ever I saw a bunch of self serving, bury your head in the sand, collection of total nonsense that was it.
"From personal experience, I never get phone calls from classified ads on real estate for sale. It is a waste of money so I quit it," says Realtor Bill Barnes, Lake Havasu City, Arizona. "What works is an MLS listing. And 85 percent of homes sell through Realtors. It's free to a potential buyer, and buyers want to have an experienced person handle their transaction."
In recent months, the number of negative stories against the real estate industry has been staggering. From real estate commissions to the alleged real estate bubble to high home prices, the media has steadily given residential real estate, its practitioners, and its investors a hard time.
What's the reason behind the negative focus on residential real estate? Some believe it could be a power play to get more agents and/or for-sale-by-owners to buy ads since many former customers say they no longer buy ads, and they realize newspapers aren't their friends.
Recently, Tribune Company (owner of The Los Angeles Times and Chicago Tribune, among others) acquired ForSaleByOwner.com, causing many agents to assume that newspapers are drawing their line in the sand -- against agents. Tribune is also part of a cartel that owns Classified Ventures which recently purchased HomeGain, a company that "matches" homebuyers and sellers with agents willing to compete using their commissions.
Says Denver, Colorado, broker Judith Clausen, "I stopped advertising in newspapers about two years ago. I figured they were after us."
It make me want to scream "Look you morons just what is it you do not understand about this housing bubble? Real wages are falling, prices relative to wages are four to five standard deviations above the norm (a good indication of a bubble), and you complain about reporting that for the most part has been favorable. Now please crawl back under your rock, listen to your top cheerleader Lereah (who will be totally disgraced before all is said and done), ignore the quality problems at Lennar and other places as if they do not exist, and go on pretending you are an ostrich".
That's what I want to say but the ostriches have their collective heads so deeply buried in the sand they could not possibly hear me no matter how loudly I scream.
The Chicago Tribune is part of a "cartel" against the industry. What a bunch of total nonsense. A note to ostriches everywhere: Your misery has just started. Wait until the MLS system collapses which it should and will do because of market forces, not because of an evil cartel.
Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/
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