Housing News
Big home builders lay off staff, CEOs still receive huge paychecks
Laying off staff, fattening exec pockets
With new home sales rates bouncing up and down, the big builders are in a state of adjustment. Some are cleaning house, others are closing their eyes and writing blank checks to their executives. D.R. Horton, the largest builder in America laid off 53% of their staff as recently as 2007. Horton saw a 55% increase in home sales in the first quarter of this year, exceeding forecasts that they would see a decline in sales, according to KansasCity.com.
In Q1 of 2010, Horton earned an impressive $11 million, perhaps justifying the major increase in executive pay, namely D.R. Horton founder Don Horton who made $17.6 million between 2007 and 2009, and whose annual compensation rose from $2 million to $7.6 million according to Reuters. Reuters reports that Horton’s CEO also saw a “similar pay hike” and both will see raises in base salary this year.
Why not give fat paychecks?
Why not give the executive gobs of money if in Q1 they beat all expectations, stocks are doing better and earnings were over $11 million? Perhaps because in 2009, total losses were at $91 million and since 2007, Horton has lost over $3.9 billion.
Also perplexing is the 53,099 closings Horton saw in 2006 fueling Don Horton to predict 2010 breaking 100,000 closings despite 2009 only closing 16,703 homes. The decline in sales doesn’t appear to support Horton’s model of expansion and acquisition and their pricing set to compete with foreclosures.
Horton isn’t alone in rewarding builder CEOs
D.R. Horton big bonuses aren’t new by any means, in 2005 alone, Horton and CEO Tomnitz each banked cash bonuses of nearly $13 million.
Horton isn’t alone in padding executive pockets. KB Home paid CEO Jeffrey Mezger $6 million in his first year for “cutting debt and headcount and improving the company’s customer satisfaction levels. The company lost $929.4 million that year,” according to Reuters.
The average annual compensation in 2007 and 2008 for CEOs of the 10 biggest builders was $6 million.
Not all builders are following suit
Meritage Homes Corp CEO Steven Hilton took a voluntary pay cut and turned down his bonus during the worst years of the housing crisis. Hilton’s compensation fell 29% between 2007 and 2009 to $2.5 million, well below the average CEO compensation.
Candice A. Donofrio, Fort Mohave, AZ Realtor said, “Big bonuses to CEOs after laying off half the staff, to me, is the mother of all negative investments into the future of a company.”
“A CEO who accepts that bonus while laying off half their staff is, quite frankly, unethical since he demonstrates a lack of regard for those who have given him their loyalty under his leadership,” said guerrilla marketing specialist, Mark Eckenrode.
Kansas City reporter Mitchell Schnurman said, “What’s more, Washington helped CEOs secure those bonuses. An accounting change known as the “net operating loss lookback” was particularly helpful here. The lookback, which has been on the books for years and was extended in 2009, allows businesses to recoup old taxes by reducing a past profit by the amount of a current loss.”
Fat paychecks are being cut with the help of politicians and lower level staff got laid off – seem ethical to you?
CC Licensed image courtesy of somewhatfrank via Flickr.com.
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Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Click here to continue reading this story…
Housing News
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.
…Click here to continue reading this story…
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Benn Rosales
May 7, 2010 at 12:16 pm
Absolutely incredible. And here I was actually concerned about the welfare of the home builder in this economy, I guess they’re doing just fine.
BawldGuy
May 7, 2010 at 2:26 pm
I wonder, if the $3 Billion loss, had been that much of a profit, would folks be upset if he’d been rewarded with a $30,000 bonus for performance? (1%)
Lani Rosales
May 7, 2010 at 2:50 pm
Jeff, no one questions if a 500 lb guy eats a salad for dinner, but everyone questions if he eats a 40 oz steak with greasy fries, a side of bacon and a gallon of sweet tea.
Benn Rosales
May 7, 2010 at 3:23 pm
No, but that sounds like a television show I would watch! Awesome!
Benn Rosales
May 7, 2010 at 2:54 pm
BG you once said through me roughly the same thing to the same guy we’re talking about… salary caps are a bitch… rules for you and me aren’t the same for these cats.
Jonathan Benya
May 7, 2010 at 3:55 pm
The public is outraged when companies take bailouts and give fat bonuses. Who cares if the builders give out bonuses when they DIDN’T get bailouts? I can be too upset here, DR Horton stock is up over 75% since July ’09 ($8.50 vs. $14.69). obviously cutting their work force has improved profits, sales, and company health, so what’s wrong with the head cheese getting rewarded for that?
Matt Stigliano
May 7, 2010 at 6:29 pm
These stories are almost a dime a dozen…Company A’s CEO got paid X million (his bonus of Y million + his base salary of Z million)…it seems you read them all the time.
I am not an economics or investment brainiac – I like to declare that before I go off on a tangent.
What I don’t understand about the CEOs making ridiculous sums (and this applies to all companies, not just this situation) is that in bad times they typically don’t take pay cuts, but the minute a profit arrives, everyone pats each other on the back and slips a new $100 dollar bill into their pocket to show their appreciation. What bugs me is that the workers are often the first ones to face layoffs, job cuts, cuts in benefits, hours, etc. Now of course a company is out to make profit, I don’t fault them for that, but is it any wonder that people don’t put a ton of pride into their work? People see no point in caring about their jobs, because when push comes to shove, their job probably won’t care about them. It’s a sad cycle and one we ought to be thinking about into the future.
Why not find a way to reward workers for their investment – their time? Yes, they get a paycheck, that’s their reward, I know, I know. Time is more valuable than anything in my book (I wish I was a time millionaire). When a company prospers, they should be thanking their workers and making them know they’re desired, appreciated, and most importantly, valuable. They are what the company is built on, without any workers who will run these companies, manufacture their products, and build their profits?
I know it’s probably Utopian of me to think that there’s a better way – or perhaps I’m a socialist or even a Communist (tongue firmly planted in cheek) – but there has to be something more to work than a time card that the company pays because it has to, not because it deems it as a way to fuel them.
LemonMeister
November 30, 2010 at 6:54 pm
It’s that time of the year again for KB Home. KB Home will lay off staff so their C E Owes can still receive huge paychecks and bonuses for the year. The bonuses are due to layoffs more than performance gains from building sound product.
At the end of the year KB Home are laying off construction superintendents, subdivision sales agents, finance specialists and other employees, a telling sign that metropolitan’s new-home market has taken a radical turn from lousy to worse.