Wednesday, May 03, 2006

Why Are Real Estate Big Boys Bailing?

According to this newspaper, this newspaper, and this press release, the real estate market is still booming.

So why is Cendant's (Century 21, Coldwell Banker, ERA Real Estate, and Sotheby's International Realty) CEO ready to bail?

From the Northern New Jersey Real Estate Bubble Blog (Scroll down to April 27):

Cendant CEO Doesn't Believe The Realtors

From Inman:

Cendant may consider other options if spin-off plans fizzle
Company expects real estate business to be flat in '06

If Cendant Corp. plans for spinning off its massive real estate franchise and company-owned brokerage business as a separate publicly traded company fall flat, the company might consider other options, CEO and chairman Henry Silverman said today during a discussion of the company's first-quarter earnings.

He did not rule out the potential for a private sale of the company's real estate segment, which re-branded this year as Realogy, or other business segments that the company plans to spin-off as separate companies. Silverman, who will serve as chairman and CEO for the first 18 months of the spin-off real estate company, prefaced the comment with a statement that there is no plan at this time to sell off the real estate business.
He also said that Cendant's real estate business should be roughly flat this year, with some improvement expected in the second half of the year.
In its first-quarter earnings announcement, Cendant announced that transaction volume dropped 10 percent for its franchise business and 6 percent for company-owned business compared to first-quarter 2005, and total revenue for franchise and company-owned business dropped slightly while earnings before interest, income taxes, depreciation and amortization, or EBITDA, fell 25 percent compared to first-quarter 2005. The first quarter is typically slow for the real estate industry, with most profits coming during the second and third quarters of the year, Silverman said.
While the National Association of Realtors released existing-home sales data this week that showed an improving market from February to March, Silverman said he is unconvinced that the market is getting better at this time. "I'm not sure the (association) data is terribly relevant. They typically sample only 20 percent of MLSs and then they adjust those numbers with a number of variables. I think that with 30 percent of the market -- as we believe we have at least on price and size in terms of dollar volume -- statistically you could argue we are the market."

He added, "So our results are more likely to be accurate as to the market than whatever (the association) is projecting or ... has reported."


For those who don't know who Cendant is, I'll give you a hint... They own Century 21, Coldwell Banker, ERA Real Estate, and Sotheby's International Realty.

It's rather suprising that the CEO of Cendant doesn't put much weight on the National Association of Realtors numbers.. They only 20% of the market and adjusting "those numbers with a number of variables"? I can see why he wouldnt. I wonder just who gets to pick which markets are sampled?

Caveat Emptor!

posted by grim 53 comments

6+ points, adjustable rates, along with higher gasoline, home energy and food costs, should give one pause... Believing the housing market is still a good investment at today's prices just because you read it in the newspaper is downright stupid.

If you still believe anything big biz gets published, you're probably still expecting BushCo to find WMDs in Iraq.

By the way, foreclosures are up by 63%.

There is no
Foreclosure Rescue Fairy.

Truly heavy sigh.

So you think you know Delilah?
Judges 16:19--


Blogger Granny said...

My city (Merced CA) has been going through a building frenzy as people travel further distances to work (as far as 135 miles to San Francisco in some extreme cases). Rents have soared as well.

Now the houses are going unsold and people who have bought are trying to sell.

10:22 AM  
Blogger Tom Chambers said...

I have been hearing so much about this housing boom bubble and how it will burst. I will tell you one thing that I have sure noticed. A lot of people are getting thier real estate licenses. Our website The Real Estate License Professor helps future realtors realize thier career goals and I tell you we have helped a lot of these people lately. I am not sure if this will affect supply or demand having so many "middle men" selling but it sure is a sign that real estate is hot. I hope it stays that way.

8:47 PM  

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