Lawsuit against Centex dismissed
Bloomfield Hills, Mich.-based Pulte Group has announced a class action lawsuit against one of its subsidiary companies, Centex Homebuilders, has been dismissed by the United States District Court for the Central District of California.
In the class action lawsuit, the plaintiffs alleged Centex engaged in misconduct that contributed to the mortgage crisis. Seven other similar suits against other large home builders have already been dismissed.
All eight dismissals were with prejudice, meaning the plaintiff’s attorneys cannot amend their complaints.
The suits were filed based on a report issued by the Laborer’s International Union of North America (“LiUNA”) that attempted to blame large home builders for the national mortgage crisis.
Greenspan on hot seat for housing bubble
Afederal commission charged with investigating the subprime mortgage meltdown grilled former Federal Reserve Chairman Alan Greenspan for more than two hours yesterday for his role in creating the housing market bust, according to an article in the Los Angles Times.
Members of the Financial Crisis Inquiry Committee, who convened on Capitol Hill, questioned Greenspan’s free-market ideology during sometimes combative testimony. In particular, they asked Greenspan whether he had done enough to regulate some of the nation’s largest banks and pass rules to protect consumers from unscrupulous lenders during his 18-year tenure.
Greenspan blamed the selling of subprime mortgages in securities to investors as one of the causes of the financial crisis. Affordable housing mandates set by federal officials on Freddie Mac and Fannie Mae also contributed to the housing bubble, he said.
Improving, but not so fast
The Home Improvement Research Institute’s (HIRI’s) spring conference pointed to signs of a recovery for economic trends and spending around the home. But growth will be slow, according to the clear consensus.
The mood was palpably improved at this year’s conference, compared with the same event last year. Attendance was up also, though only slightly. Nearly 100 people participated in the day-long event organized by HIRI.
One of the main metrics under examination was the total size of the home improvement product market. Here, IHS Global Insight forecast a 1.7% increase for 2010, and a 5% increase in 2011. This after a year that saw market contraction of 8.3%.
“Product sales will begin a gradual recovery,” said Jim Gillula, managing director, IHS Global Insight.
Speaker after speaker offered some variation on the theme that “the worst is behind us.” Even the conference binders pointed to “Moving Toward Recovery in Home Improvement.” Another consensus held that the recovery will be a slow one. The day’s first presenter, Ian Sugarman from Morgan Stanley, pointed to the modest, pre-bubble year of 1999 as a good example of what the new normal will look like.
In 1999, real home improvement spending per home in 2009 dollars amounted to about $675. That figure boomed up higher than $850 in 2006, its peak. Morgan Stanley’s research shows that in past cycles, the average decline after the past three peaks was 30%. And this cycle has already fallen 31%.
What makes Mark Delaney of the NPD Group optimistic about 2010 is research that shows that the average amount to be spent on projects, according to the NPD Consumer Panel, is up. In February 2010, the average amount was $641, up 7% compared with February 2009. “That’s huge,” said Delaney. “Whether it’s pent-up demand or projects that people have put off from last year, this is extremely good news.”
Also on the lineup of presenters was Sarah Catlett, director, Western Region of The Futures Co. She explained that risk and uncertainty are growing parts of the home improvement consumer’s daily life. In fact, only 35% of respondents said they could easily find a new job if they had to. That’s down from 55% in 2008, an unprecedented drop in 35 years of surveying consumers.
“We’ve had 40,000 opportunities for a data point to change 20 percentage points in one year, and it’s never happened,” she said. “It shocked us, but this is what consumers are dealing with.”
Still, she saw growth potential in the consumer mindset: “Frugality is not an American aspiration, it’s a coping mechanism,” she said. “Consumers are still out there to look for innovative ways to do the things they do and innovation to make their homes and lifestyles better.”