How BAD is KB home as a builder?
- Thread starter FTHB
- Start date
NEW -> Contingent Buyer Assistance Program
I never put too much stock on a home builders inventory figure on their balance sheet. That number can be heavily inflated. If they bought land 5 years ago they might still be valuing it at that price and not taken a write down to the current value.
If there balance sheet was so solid, they would be trading at a much higher price. Currently their net tangible assets is at 650 million and their market cap is 1 billion. That is a very high book value. That alone tells me investors dont trust that inventory figure.
Usctrojancpa can probably explain the balance sheet issue better.
Nobody is "acting like they are doing KB a favor", all I was saying is that their pricing model for a condo, with so many negative points, doesn't reflect the market reality. Thats all. I hope at least you will agree to that part of this discussion.
I do think TIC is probably charging a premium for their land and since no builder wants to shoulder that risk (despite Irvine being a fairly in-demand market), TIC decided to resurrect Irvine Pacific and maximize their profit (and selling homes so quickly last year probably also had something to do with it).
Irvine is FAR from fully corrected. I'm surprised they didn't take $250/sqft from you right now. By Fall when those units are still NOT sold, after carrying cost, and agent commission, they will take a bath, and be forced to sell to you at $250/sqft anyway. Why not cut their losses now?
This may be true, but I think KB would have gotten a markedly increased foot traffic/interest in their product if it was known thru this forum that they allowed negotiations down to around $250/sqft. That may not be a bad thing for them. Once they get more people (people who are actually interested in their product and willing to buy at a certain price) in the door, I am sure they can throw different combination of incentives to sell their products.
@akim997
Plan 2 is 545K (some selected plans) not 520, just FYI. If you think this is good price, then I have to say Sevilla offers better pricing, their detached homes are about 300 per sft, which is detached, well built and lesser HOA.
Capistrano @ SGE also around same price
Noma said:
I never put too much stock on a home builders inventory figure on their balance sheet. That number can be heavily inflated. If they bought land 5 years ago they might still be valuing it at that price and not taken a write down to the current value.
If there balance sheet was so solid, they would be trading at a much higher price. Currently their net tangible assets is at 650 million and their market cap is 1 billion. That is a very high book value. That alone tells me investors dont trust that inventory figure.
Usctrojancpa can probably explain the balance sheet issue better.
usctrojancpa
Well-known member
But the funny thing is that they are doing them a favor. Those Ironwood condos will be hitting MLS in the near future with a full 3% broker co-op just like their Primrose project.Noma said:
usctrojancpa
Well-known member
Agreed...inventory can become impaired very quickly as can land. Also, the company's lender/s have loan covenants that will spell out how much "spec" inventory (completed but unsold homes) they can have hanging around on their books.qwerty said:
usctrojancpa
Well-known member
Some basic analytics show that while sales are down in the teens, inventory levels have increased in the teens....this is not good as it means their inventory isn't turning over as quick as it used to plus they've been slowly bleeding cash.rickr said:
waitin4ever
New member
Interestingly, When Monterey finally sold out including the models sometime last year I asked
someone at brookfield staff about whether they were building any new projects in Portola. I was told
that they didn't bother buying any land from Irvine company to build the development.
For some reason they thought the land price was too much and that they may not sell fast enough and get stuck
for long time like their Paloma project. this Inspite of the fact that monterey sold for them almost a year before their
own projections.
someone at brookfield staff about whether they were building any new projects in Portola. I was told
that they didn't bother buying any land from Irvine company to build the development.
For some reason they thought the land price was too much and that they may not sell fast enough and get stuck
for long time like their Paloma project. this Inspite of the fact that monterey sold for them almost a year before their
own projections.
USCTrojanCPA said:
tamilraj2003
New member
Noma said:
Nobody is "acting like they are doing KB a favor", all I was saying is that their pricing model for a condo, with so many negative points, doesn't reflect the market reality. Thats all. I hope at least you will agree to that part of this discussion.
tamilraj2003
New member
If you extrapolate pre-boom irvine real estate market to current level (including inflation), the square foot price should be around $250 to 275. Thats median for all types of homes. So for condo without driveway and yard, it should be lesser. Whole irvine market is about 10 to 20% overpriced (varying degree). Thats my opinion. If people on this board feel irvine pricing is got corrected now, I have to buy somewhere else.
irvinehomeowner
Well-known member
I believe none of the builders in the 2010 Collection bought any land. They were just contracted to build and sell the homes but TIC did not sell them any parcels.waitin4ever said:
I do think TIC is probably charging a premium for their land and since no builder wants to shoulder that risk (despite Irvine being a fairly in-demand market), TIC decided to resurrect Irvine Pacific and maximize their profit (and selling homes so quickly last year probably also had something to do with it).
IndieDev
New member
tamilraj2003 said:
Irvine is FAR from fully corrected. I'm surprised they didn't take $250/sqft from you right now. By Fall when those units are still NOT sold, after carrying cost, and agent commission, they will take a bath, and be forced to sell to you at $250/sqft anyway. Why not cut their losses now?
bones said:Maybe the reason they said no is because you discussed it on this board? I'm sure most of the irvine builders read this site. If they agreed to your $250, then everyone would ask them for $250... because I agree with you - I think $250 is a fair ask if what people are saying on this board about lack of sales is true. Just a theory
This may be true, but I think KB would have gotten a markedly increased foot traffic/interest in their product if it was known thru this forum that they allowed negotiations down to around $250/sqft. That may not be a bad thing for them. Once they get more people (people who are actually interested in their product and willing to buy at a certain price) in the door, I am sure they can throw different combination of incentives to sell their products.
tamilraj2003
New member
I don't think discussing in this forum would have changed their mind, if so, TIC would have got some sense and corrected the pricing of its condo products. TIC fix its pricing just by gauging the demand. Some products has lot of demand others don't. You can see this behavior on multiple products recently. Coranado sold fast, where as SC still lagging in WBE. Similar with Casero and Primrose in Portola South, same again with Sevilla and Ironwood @ Portola North. So it differs from product to product.
Ironwood Plan-2 and Plan-3 are currently listed/offered @ almost or < $250 per sqft. Just by looking @ sqft price don't loose the overhead cost of Tax, mello-roos and HOA. Together it comes about 2.9% per year, which is really really high for a condo just near to a toll road.
Ironwood Plan-2 and Plan-3 are currently listed/offered @ almost or < $250 per sqft. Just by looking @ sqft price don't loose the overhead cost of Tax, mello-roos and HOA. Together it comes about 2.9% per year, which is really really high for a condo just near to a toll road.
Wow... even with the high tax rates, Ironwood II at $520K seems like a decent deal.
Tamilraj: so if you believe that pricing should be as it was before "Irvine got real popular", how are you going to convince TIC to cut pricing on Maricpoa homes to $703K starting? Based on overall demand, do you agree that there would be no support on pricing at even slightly higher levels? I agree that prices are too high, but I am also highly skeptical that (overall median) prices will be at $250/ft.
People say "it happened before"... yes its happened before, but that was based on the 2007 highs. We are off those highs. Who knows, I may be an optimist as I also do not believe in Dow 4000....
Tamilraj: so if you believe that pricing should be as it was before "Irvine got real popular", how are you going to convince TIC to cut pricing on Maricpoa homes to $703K starting? Based on overall demand, do you agree that there would be no support on pricing at even slightly higher levels? I agree that prices are too high, but I am also highly skeptical that (overall median) prices will be at $250/ft.
People say "it happened before"... yes its happened before, but that was based on the 2007 highs. We are off those highs. Who knows, I may be an optimist as I also do not believe in Dow 4000....
i won't quote trulia's accuracy of $336 per foot for Irvine, but you are asking for a 26% drop in Irvine real estate. Irvine is generally viewed as a more favorable location to live in. What would this say for surrounding, less attractive areas? I don't say I agree or disagree, but just think its an interesting viewpoint.
In a recent phone call with an well known investment mgmt firm in OC, 4 major headwinds were cited that affect housing:
1) persistent unemployment
2) rising food and energy costs
3) lack of available credit
4) no home equity
In a recent phone call with an well known investment mgmt firm in OC, 4 major headwinds were cited that affect housing:
1) persistent unemployment
2) rising food and energy costs
3) lack of available credit
4) no home equity
irvinehomeowner
Well-known member
And btw, smaller attached products usually command a higher $/sft than the median, so you may want to take that into account.
tamilraj2003
New member
akim997 said:
@akim997
Plan 2 is 545K (some selected plans) not 520, just FYI. If you think this is good price, then I have to say Sevilla offers better pricing, their detached homes are about 300 per sft, which is detached, well built and lesser HOA.
Capistrano @ SGE also around same price