Many have been asking for a Florida update from Mike Morgan at Morgan Florida. He has been quite busy with his consulting business giving tours to hedge funds but he sent me this update today. Here goes from Mike Morgan:

This past week we conducted two tours with hedge fund managers. Following is a brief recap of what is going on in the Treasure Coast. Those on our retainer service will receive a much more detailed version on Monday.


1 – Listings fell by 15% but this is not that significant. This is a seasonal effect coming off the bounce up after the New Year. Unfortunately, we are still running 20% above new listings for November-December. More disturbing is the growing number of spec homes that builders do not list. There are a variety of names for these homes, but bottom line is they are still spec homes regardless of what they are called.

2 – Pending Sales are off about 10%. Once again this is not significant in and of itself except that pending sales are up almost 100% from Q3 of 2006. Don’t get too excited however. Q1 is Florida’s peak selling season, so the numbers should be much higher than Q3, which is typically one of our slowest quarters. If I was the Wall Street Journal, I could write a headline about Pending Sales UP 100% or I could write a headline that Pending Sales Fall 50%.

3 – Actual sales are worrisome. Sales are off 37% and we are now back to Q3 numbers. This number should be spiking now but it is not. How does that correlate with the rise in Pending Sales? Easy. Many Pending Sales do not close. And we are now seeing much tighter credit requirements for mortgages.

4 – Price Drops are basically flat but four times what it was a year ago. Needless to say, we have not seen the bottom.

5 – New Listings to Sold are up 35%. This is yet another disturbing number. This means inventory continues to grow. The number would be much worse, except that people that are pulling homes off the market and renting them. The other factor is that builders have not been listing inventory.

6 – New Listings to Pendings are relatively unchanged, but still more than 3:1.

7 – Total Inventory is up 1.2%. This is not a good sign in our selling season.

As an aside, it is becoming quite clear that WCI has several projects that will fail and Corus Bank will need to rethink their 65% safety net number. Prices are dropping in towers and sales have come to a halt with the exception of a couple of Miami hotshots that still seem to be able to bring in new speculators for flips.

In addition to the inventory, price, mortgage and other issues you read about daily, another issue that will effect tower closings is multiple units. People that bought Mosaic and Colony and Hammock Bay are now stuck. How much more they can handle is a big question. Another big question is how many multiple buyers will be able to close on Bal Harbour and other towers. Reading about all of this is useless. You need to see it ground level and hear both sides – the sales offices – and the local real estate offices with resales.

Thanks Mike!
Starting sometime next week Mike Morgan will be joining the Housing Board at The Market Traders. Come check it out.

Coming shortly….
A two part blog on currencies with a special focus on the Yen and the Carry Trade but covering the British pound, Canadian dollar and the Euro as well. Stay tuned.


Overnight there were several news releases regarding WCI. Following are two of them.

Reuters is reporting Homebuilder WCI to explore sale of company.

WCI Communities Inc. (WCI), a U.S. homebuilder that has attracted the attention of activist investor Carl Icahn, said on Monday it retained Goldman Sachs & Co. to explore a possible sale of the company, sending shares up 5.4 percent.

The Bonita Springs, Florida-based builder of high-end Florida homes and condominiums said Goldman would also look at other possible changes to its capital structure.

WCI last month adopted a shareholder rights plan, commonly known as a “poison pill” after Icahn said he had boosted his stake in the company to 14.6 percent.

MarketWatch is reporting Builder WCI’s shares rise on takeover speculation.

Florida home and tower builder retains Goldman Sachs for strategic review.

Shares of home and tower builder WCI Communities Inc. got a lift Monday after the Florida-based company said it’s retained Goldman Sachs to assist in a review of the company’s operations and potential sale of the company.

Chief Executive Jerry Starkey said the company expects to generate about $1 billion in free cash flow during 2007, which will allow it to pay down its debt. “We also are exploring the disposition of certain assets, which would further increase liquidity and reduce leverage,” the CEO said.

“Once our [tower] receivables are collected and our debt is reduced, we believe our ability to enhance shareholder value through a variety of strategic alternatives, including additional stock repurchases and potentially the sale of our company, will be greatly improved,” Starkey added.

In late January, the company said it expected to post a loss for the fourth quarter on higher-than-expected defaults, delayed tower closings and land-related charges. Underscoring the difficulty, WCI said its cancellations exceeded new orders in Florida.

WCI is scheduled to release fourth-quarter earnings on Feb. 27.

Analysts at Goldman Sachs said Monday they have temporarily suspended their investment rating and target price for shares of WCI.

First a poison pill and now this statement from WCI Chief Executive Jerry Starkey: “We also are exploring the disposition of certain assets, which would further increase liquidity and reduce leverage.” How much desperation is there in the voice and actions of Starkey when he says and does that? Seems to me he is in a liquidity crisis of sorts.

Morgan WCI Update

Mike Morgan sent me this update this morning as well.

As we predicted more than a week ago, WCI has confirmed the rumors of an alignment with Goldman Sachs to seek out value. We find this nothing more than a delay in the inevitable, or a means to create some complicated new math for us to all wonder about. As if Icahn’s trades are not amusing enough, considering what we know, it appears the only mystery here is what we don’t know that we should know.

We have been spending a great deal of time at WCI properties and analyzing their land. In fact, probably three times as much time as on any other housing company. Nothing changes with the Goldman announcement, other than a PR pop.

Overall, the numbers don’t add up, no matter what math you use. 2007 is likely to get get very ugly unless a white knight with more money than brains shows up.

We are booked solid for WCI and Corus Florida tours now through the end of the month. If you would like to join one of the one person tours, I can generally arrange it. There is nothing like a field trip. You can’t do it from the numbers or the documents. We are also offering tours of Lennar, Centex, Horton, KB and Toll Brothers, but for the time being the concentration seems to be on WCI and Corus.


Notes on The Market Traders

For those that have not yet heard, I have launched a very feature rich message board. The announcement was made in Counterfeiting Money – Crime or Good Economics?. Those of you that have not yet seen it, I ask that you please click on that link and read the section starting with the bold Announcements label about 1/3 up from the bottom. The rest of this post pertains to that announcement.

Some have asked for a “flat view” on TMT and while we are working on that across topics, it is quite possible to achieve at least in regards to discussion of this blog. The key is to be in unthreaded batch mode. You must be signed in it seems to get this view, but every post pertinent to the latest blog will show up on a single click once you are in that view. Play around a bit. You should be able to get to that view. Let me know if this helps. I also disabled (for now) opening up new topics in that specific forum so that all responses have to go to one of my posts. This will collectively keep all replies together for a single blog post.

Finally I want to point out how to take advantage of the new Google RSS feeder. Those that just want to see everything sequential for the entire board have a way to do so. You can even click on a post and reply.

Read this post called RSS and the new Google Reader try it out and let me know what you think. The nice thing about this is you can be selective. If you only want Metals and Energy but not economic discussion you can easily achieve that view, in sequential timestamp sequence. You can even click on a post and reply. The only thing missing from the RSS view is the ability to see responses but you do see every subject title and if you then click on a post in RSS it will take you the responses.

These things may not solve everything that everyone wants to do but these are additional capabilities that many of you may not have been aware of.

Mike Shedlock / Mish/