Hearthstone Homes Business News

News and releases from metro area businesses

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Post by Guest »

Just heard today that Wells Fargo stopped all accounts and loans on Hearthstone.  Also apparently a VP of something in office quit one week ago.  Bank friends said they are filing Bankruptcy in 2 weeks. My liens are still......unpaid.
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Not surprised

Post by charlie123 »

I'm surprised that a few people actually thought that Hearthstone would be saved.  It's unfortunate that there are going to be incomplete subdivisions and unpaid subs that have been strung along for so long now that won't get paid.  Hearthstone clearly got in over their heads and didn't slow down when the economy and housing boom did.   If I recall, they were CSI homes at one time, then also Brighton homes at one point as well.....both also failed!   I'm sure they'll be back someday under a new name.  Watch out then too!
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Post by HskrFanMike »

Hearthstone has reinvented themselves several times over the years under various names.  I think they had a "Signature" brand as well at one time.

I'm sure they'll be back at some point down the line with another name.
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Post by jessep28 »

HskrFanMike wrote:Hearthstone has reinvented themselves several times over the years under various names.  I think they had a "Signature" brand as well at one time.

I'm sure they'll be back at some point down the line with another name.
When I was a kid, my family built a house using them in 1997. Back then there were two brands: Brighton (smaller entry level cookie cutter houses) and Signature (larger, more expensive cookie cutter houses).
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Post by thenewguy »

My brother and his fiance had a home built through them just last year.  The builder did a good job, its a smart layout in a nice neighborhood (regardless of the design's originallity).  They were able to start a life together with a very respectable home at a cost they wouldnt have been able to afford with a traditional stick build.  Do i like neighborhoods that feature virtually them same repeating home design?  no.  But making them out to be the antichrist of city planning or suburban utopia isnt fair either.
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Post by Coyote »

Bank seeks control of 46 HearthStone houses
Cindy Gonzalez WORLD-HERALD STAFF WRITER wrote:HearthStone Homes, one of the Omaha area's biggest homebuilders, has failed to pay a $17.5 million loan and its bank is seeking control of nearly 50 houses, according to a lawsuit filed in Douglas County.

Kinkaid said that multiple investors have shown interest in HearthStone and that owner John Smith was coming close to a decision that would keep the company in the Omaha area another 40-plus years.
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Post by jessep28 »

Hmmmmm

http://www.ketv.com/money/30320856/detail.html
Lawsuit: HearthStone Homes Owes $17.5M
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Post by Brad »

Omahan set to buy HearthStone

http://www.omaha.com/article/20120131/N ... earthstone
Cindy Gonzalez WORLD-HERALD STAFF WRITER wrote:A local entrepreneur said Monday that he is poised to buy the financially troubled HearthStone Homes and keep the 41-year-old homebuilding company operating in the Omaha area under the same name.

The potential buyer, Omahan John Wanninger, owns real estate-related companies, including Handyman Joes and Pest Solutions 365.
Cindy Gonzalez WORLD-HERALD STAFF WRITER wrote:"I am extremely excited," Wanninger told The World-Herald on Monday after signing a letter of intent with HearthStone owner John Smith. "The staff here is loyally committed and wants to help move HearthStone Homes to another level."

Attorneys will be reviewing details and, if all goes as planned, the sale would close in mid-February. Wanninger and Smith both declined to disclose the purchase price.
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Harthstone Homes Files for Bankruptcy

Post by jessep28 »

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Post by StreetsOfOmaha »

The owners of Hearthstone are severely deluded. It's not coming back.
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Post by bbinks »

Someone needs to follow the money trail.      If this has happened to owners over the last several decades under various names, then there is some serious monetary mismanagement or fraud occurring.
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Post by TechnicalDisaster »

StreetsOfOmaha wrote:The owners of Hearthstone are severely deluded. It's not coming back.
They'll reorganize under a new name, or someone new will come to Omaha and fill the void.
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Post by StreetsOfOmaha »

Ha. What void?
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Post by TechnicalDisaster »

StreetsOfOmaha wrote:Ha. What void?
They were still building 300 homes per year.  Demand for cookie cutter homes hasn't disappeared completely.
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Post by Brad »

TechnicalDisaster wrote:
StreetsOfOmaha wrote:Ha. What void?
They were still building 300 homes per year.  Demand for cookie cutter homes hasn't disappeared completely.
But streets is blind to reality... If he doesn't like something, there is no demand.
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Post by Linkin5 »

Brad wrote:
TechnicalDisaster wrote:
StreetsOfOmaha wrote:Ha. What void?
They were still building 300 homes per year.  Demand for cookie cutter homes hasn't disappeared completely.
But streets is blind to reality... If he doesn't like something, there is no demand.
Maybe if they put some bicycle racks on the roofs of their new homes he would jump on board?
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Post by TechnicalDisaster »

Linkin5 wrote:
Brad wrote:
TechnicalDisaster wrote:
StreetsOfOmaha wrote:Ha. What void?
They were still building 300 homes per year.  Demand for cookie cutter homes hasn't disappeared completely.
But streets is blind to reality... If he doesn't like something, there is no demand.
Maybe if they put some bicycle racks on the roofs of their new homes he would jump on board?
Streets is never satisfied.  He would just find a way to move the goal posts and complain some more.
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Post by StreetsOfOmaha »

Oh my gosh. Those lame jokes aside, what does it matter that they were building 300 homes a year? They are bankrupt and hugely in debt to all the contractors who built those homes.

Anyway, it's not as big of a deal as you guys are reading into it. For a plethora of reasons, I don't believe they are coming back, and I don't believe they will be leaving a "void" in the home-building market.
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Post by l-dude »

I'm not interested in asserting the age-card, streetsofomaha, but as a parent of young adults starting their own families (three grand children to date), I'm acutely aware that this is mostly an economic question...so many of our citizens (in my case, my adult children) are holding on to the "dream" of home ownership...(me included, since I'm not a home owner either), but the more urban possibilities/examples (which includes the European model you like to hold up, for example: condos, duplexes, mixed, higher density multi-use, etc.) especially if they're adjacent to/within walking distance of publicly provided mass transit, are priced outside their even "remotely acceptable" price range.  They crave a "New Home" that they can personalize, that's as close to their employer as possible (which now is typically not in the metro CBD).  In hindsight, mistakes were made, especially in light of the fact that we don't live in a state planned (read "utopian") society, but this country is less than 300 years old, where as the cultures you're lately holding us up to may be 1000 plus years "young".  Those cultures didn't develope to their current  status without massive cultural, social-economic changes (in Europe, for example, two World Wars).  We've most all heard the code words "Paradigm Shift", but let's be realistic, short of our own North American "World War", the changes you desire, while logical, are not going to occur at a much faster rate than they did anywhere else.  Most of world history points this out.
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Post by joeglow »

l-dude wrote:...this is mostly an economic question...so many of our citizens (in my case, my adult children) are holding on to the "dream" of home ownership...(me included, since I'm not a home owner either), but the more urban possibilities/examples (which includes the European model you like to hold up, for example: condos, duplexes, mixed, higher density multi-use, etc.) especially if they're adjacent to/within walking distance of publicly provided mass transit, are priced outside their even "remotely acceptable" price range.
And, we have a winner.
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Post by Big E »

Since it is mostly an economic question, people do realize that, historically speaking, buying a home is probably the worst investment, financially speaking, they'll make in their lifetimes, right?
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Post by S33 »

Big E wrote:Since it is mostly an economic question, people do realize that, historically speaking, buying a home is probably the worst investment, financially speaking, they'll make in their lifetimes, right?
Interesting story, I would like to know more about this interesting story.

Seriously, though. What kind of historical timeline are we talking, regional market (Omaha or nationally?), and other cool stuff that makes it a bad investment.
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Post by Big E »

Historic national trends, call it roughly post WW2.  It's actually worse for the home buyer if you shorten it to the last thirty years (being the typical long term loan).  The recent real estate and stock market boom-bust cycle being an obvious anomaly.  Of course, you look like a genius if you bought in 2000 and sold in 2007.

Most of the increase in average home values over the last half century or so are due to the average house size going from sub-1000 sqft to north of 2000 sqft.  Even taking that out of the equation, home values are still appreciating slower than inflation.  And you're paying somewhere near 5% (also near a historic low) on your loan to buy something that is appreciating at less than 4%.  You'd literally get better value for your money by renting and throwing one penny of every dollar you make at a hobo.

Take all that cash you're borrowing each month plus your down payment, invest it in the stock market during the same historic period and you're looking at 10% annual return.  Compounded, even.

There's really only two financial scenarios I see that make sense:  you have enough cash to simply not give a |expletive|, or you're betting you can beat the market and buying during a down cycle.  Right now, you might come out on the good side of that bet, but I'm not going to be making it with $4+ gas on the horizon.  And again, that's on the right side of a wild market ride.
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Post by S33 »

I'm certainly not going to dispute anything you're saying, and you could have also thrown into the repair/improvement/upkeep costs of owning, too.

I am curious how the math works when taking into account none equity-generating monthly rent payments versus equity-building mortgage payments - even in the face of inflation outpacing appreciation.

Either way, I would agree. Recent years were an anomaly, and there is no single rule-of-thumb on which is better, owning or renting, it all depends on your situation/location.
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Post by TechnicalDisaster »

The only thing that really matters to 99% of home owners is whether or not they can make the house payment.  Get the most house for the least monthly payment.  No different than how consumers approach car payments.  They've always been told that it is a good investment, and that is what they believe.  

I don't expect my house to fund my retirement, I just want a comfortable place to stay with a lot of amenities.  So I guess I'm in the group that just doesn't give a |expletive|.
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Post by Big E »

You get killed because of the 20% down needed for equity up front instead of that money returning 10% right away.  I ran some webbernetz calculators (which I'm not sure I trust) and based on my assumptions above, you actually only come out a little bit behind on a full 30 yr fixed 5% loan, but that doesn't calculate anything for long term maintenance (ie, replace a roof a couple times and you're effed).  The intangibles aren't in there and would obviously be valued differently by different people.  I also emphatically refuse to accept that homes are going to appreciate at anything near historical levels (4%) over the next 30 years.

It's probably not enough to convince someone that wants to buy a house not to buy a house, but it certainly illustrates how financially stupid it is to buy a 2000+ sqft box that you really only use half of.  And I include myself in that group of dumb.
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Post by joeglow »

Big E wrote:You get killed because of the 20% down needed for equity up front instead of that money returning 10% right away.  I ran some webbernetz calculators (which I'm not sure I trust) and based on my assumptions above, you actually only come out a little bit behind on a full 30 yr fixed 5% loan, but that doesn't calculate anything for long term maintenance (ie, replace a roof a couple times and you're effed).  The intangibles aren't in there and would obviously be valued differently by different people.  I also emphatically refuse to accept that homes are going to appreciate at anything near historical levels (4%) over the next 30 years.

It's probably not enough to convince someone that wants to buy a house not to buy a house, but it certainly illustrates how financially stupid it is to buy a 2000+ sqft box that you really only use half of.  And I include myself in that group of dumb.
How do you return 10% right away?  If renting is cheaper, are you claiming all landlords are losing money on their investments?  I would love to see the calculations you ran.  Personally, my house costs me $800 a month for payment and escrow.  This same sized house is renting for $1,200 a month in my neighborhood.  Please show me the model where renting is a better deal.
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Post by Big E »

How do you return 10% right away?
I'm making the assumption if you have the $40K to put down on a $200K house, you have the same $40K to put in the stock market.
Personally, my house costs me $800 a month for payment and escrow.  This same sized house is renting for $1,200 a month in my neighborhood.  Please show me the model where renting is a better deal.
I pulled averages off cbshome.com and craigslist based on $200K homes in the low 2000 sqft neighborhood.  I think every other number I used is in the posts already.

Obviously, if you have a recently refinanced loan in a terrible housing market vs a high rental market, the model breaks down - particularly if you're only looking at the most beneficial 3 yr window for your argument, or if you're in a hot market, or yadda yadda a hundred other variables.  I think anyone can find specific examples that don't hold up to the overall model, so I'm not going to play that game.

Why haven't ALL of my stocks gone from $12 to $550 like Apple did? I got lucky and made 20% on a house in Minneapolis and 40% on a house in Baltimore, both of which I lived in less than 2 years.  I'm not making that bet again.

Like Disco Stu says...  "Did you know that disco record sales were up 400% for the year ending 1976? If these trends continue... AAY!"

And like I said, the numbers I used ended up being nowhere near as bad as I thought they were.

* - I just realized my previous post is missing a paragraph I typed outlining my numbers, but apparently I deleted it.  Ill go back and do that crunching later so you can see what numbers I used.
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Post by joeglow »

I agree we won't see housing increase like the past, but the same is also said of the stock market.

That said, the biggest drive is going to be interest rates.  However, if interest rates jump and more people rent, landlords will be able to charge more, shifting the analysis back towards buying being better.  Like anything, I would bet the analysis is ever-changing and there are always going to be times when one is better than the other.  That said, buying is not a better deal in the first 5 years of living in a house, but will pay off later.

My house payment was similar to renting 12 years ago when we bought it.  In 10 years, my house payment will be about $850 a month and rent payments will will probably be around $1,500 a month.  10 years after that and my house payment will be $350 a month (taxes and insurance), while rent will probably be around $2,000 a month.

Granted, I pulled these numbers out of my |expletive|.  However, I had a lot of real estate clients in my public accounting days (many small, but many big, well known developers here in Omaha) and this trend held true for all of them - cash flow negative early on, with huge gains as principal is paid off over time and your payment stays flat.
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Post by Big E »

I used 10% annual return on stocks, 4% annual return on a house, 4% inflation, 5% interest (an EXTREMELY favorable historic number), a $200K house with $40K down (20%), and rent or own payments of roughly $1200 based on listed numbers I found in abundance on craigslist and cbshome.com.  

Obviously, your numbers beat my numbers handily (and I can find as many counterpoints to your numbers as you would like), but I would argue they neither the historic nor national norm, and are taking place in that window where I readily admit the model falls apart.  Again, I'm only talking about national historic trends.  I made a crapload on two homes, but I'm down 20% on the current one.

Most people would have told you you were insane to buy a dot com stock after the crash in 2001, but if you bought Amazon you'd have a tidy 1200% return by now.  Pets.com, notsomuch.
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Post by joeglow »

Big E wrote:I used 10% annual return on stocks, 4% annual return on a house, 4% inflation, 5% interest (an EXTREMELY favorable historic number), a $200K house with $40K down (20%), and rent or own payments of roughly $1200 based on listed numbers I found in abundance on craigslist and cbshome.com.  

Obviously, your numbers beat my numbers handily (and I can find as many counterpoints to your numbers as you would like), but I would argue they neither the historic nor national norm, and are taking place in that window where I readily admit the model falls apart.  Again, I'm only talking about national historic trends.  I made a crapload on two homes, but I'm down 20% on the current one.

Most people would have told you you were insane to buy a dot com stock after the crash in 2001, but if you bought Amazon you'd have a tidy 1200% return by now.  Pets.com, notsomuch.
Yeah, a 10% will beat the |expletive| out of that all day, every day.  Unfortunately, most experts are expecting around 7% as the new average, going forward.  I would also argue a house worth $200,000 would garner a bit more than $1,200 a month in rent.  We are hoping to sell our house for $130,000 this summer and similar houses here are renting north of $1,000 a month.
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Post by Garrett »

So... hearthstone....
OMA-->CHI-->NYC
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Post by joeglow »

Axel wrote:So... hearthstone....
What's a "hearthstone?"
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Post by cdub »

I would also suggest that I would not subject my family to the uncertainty of renting.  It seems like more often than not homes that are being rented are non necessarily intended to be so permanently.  I have been in my house 6 years now and may well be there 6-10 more.  I would not want to have to even think for a moment about whether or not I will be able to renew my lease every year or what the rent might increase to.  Moving can be a huge expense, without regard to the non financial aspect.  

That said, its definitely a bummer that my purchase has turned into only a place to live and not any kind of investment because the value has not increased one cent in 6 years.
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Post by Brad »

Not sure about the "Rate of Return" on my investment, but my main goal in owning a house is to not have a house payment when I retire.
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Post by Zilla »

Someone already seems to be stepping into the "void," at least in some of the Hearthstone neighborhoods.  There are several signs up in the vacant lots for http://thehomecompanyomaha.com in the Meridian Park subdivision.  Looks like they even have one spot they've already started digging to put in the foundation.
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Post by BRoss »

Bankrupt HearthStone to be sold in pieces
Cindy Gonzalez, World-Herald staff writer wrote:From 600 land lots to a Spider-Man bedroom set, HearthStone Homes — once Omaha's top builder of new houses — is to be sold off in pieces.

Proceeds from all sales ultimately would be distributed to entities owed money by HearthStone, including Wells Fargo Bank and multiple subcontractors and suppliers.

Discussions continue with at least one party interested in buying the most valuable chunks of the bankrupt homebuilder: the lots and 40 houses under construction. If that happens, there is a chance the HearthStone business model could resurrect in some smaller fashion.
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