Housing Market Tracker: Housing Stocks

Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks. Like all other topics and stock coverage from Seeking Alpha, you can have this sent to your Blackberry or desktop email by signing up for our no-spam free email subscription service.

Quote of the Day

"Looking at your order pace, 656 orders across 315 communities, obviously that would indicate that a number of your communities, perhaps even your submarkets overall, are going weeks, perhaps even months without seeing a sale." - Nishu Sood, Deutsche Bank analyst, speaking to CEO Robert I. Toll on the Toll Brothers FQ4 conference call. (Toll Brothers F4Q07 (Qtr End 10/31/07) Earnings Call Transcript in Seeking Alpha, Nov. 8th)

Homebuilders, Housing Stocks and Housing-Related Stocks

• Home Depot Has Profit Decline on U.S. Housing Slump (Bloomberg, Nov. 13th): "Home Depot Inc. (HD), the largest home- improvement retailer, reported lower profit and cut its full- year earnings forecast after the U.S. housing slump reduced sales of kitchen cabinets and appliances. Home Depot said it will take a "cautious stance" on completing its $22.5 billion share buyback because of the volatility of credit markets and housing sales. Third-quarter revenue of $19B missed the $19.3B average estimate of analysts. CEO Frank Blake is spending more than $2B this year to improve customer service and the appearance of stores in a bid to reverse market-share losses to Lowe's Cos. Sales have declined for two straight quarters

• Toll Brothers: Ongoing Slow Demand Suggests Hold Off On Investment (10Q Detective in Seeking Alpha, Nov. 12th): "On Toll Brothers' fourth-quarter earnings call, chairman/CEO Robert I. Toll, stated: “We continue to believe that excess supply created by cancellations, speculative buyers, and overly ambitious builders; customer concerns about selling their existing homes; and a general lack of confidence are the primary impediments to our market’s recovery. An inability to obtain mortgages does not appear to be a major factor for our buyers, although it may affect our buyers’ buyers.” A further weakening of demand in key markets and the risk of additional inventory impairment charges reflect our view that new monies should continue to stay on the sidelines."

• Blackstone's Profit Misses Estimates; Shares Decline (Bloomberg, Nov. 12th): "Blackstone Group LP, manager of the world's biggest leveraged buyout fund... missed analysts' Q3 profit estimates... sending its shares down the most since going public in June. Profit excluding some costs dropped to $234 million, or $0.21/share, from $239.1M a year earlier, when Blackstone was private. The average analyst estimate... was $0.30/share. Real estate revenue fell 44% from a year earlier, when results were helped by the $26.6 billion acquisition of CarrAmerica Realty Corp... LBO financing seized up in late June as investors, scared by rising subprime-mortgage defaults, stopped buying the debt used to fund corporate and real estate deals."

• Home Depot: A Buy at Current Levels? (Daniel Carroll in Seeking Alpha, Nov. 12th): "Home Depot (HD) and Lowe's (LOW) experienced a surge in both margins and revenues in the last three years [during the housing boom]... Prior to the boom, HD tended to operate at around 9-11% EBITDA margins. During the boom, those margins moved to 13%+. Now some of that improvement could have resulted from operating improvements... But, the most conservative estimate of margins would be 10%, while the most optimistic would be 13%. Thus, the "sustainable" range is probably somewhere in between. Plugging in 12% put HD's valuation level out of my buy range at the time. And, I think 12% is still pretty optimistic."

• Credit Downgrade Could Endanger Countrywide (Roy Mehta in Seeking Alpha, Nov. 12th): "SEC filing: Countrywide Financial Corp. said that if its credit rating falls below investment grade, it would impair it from raising money in public debt markets; will cause its bank subsidiary to lose bank deposits; and will allow financers to require higher interest rates when the company renegotiates its financing arrangements. Each of three ratings agencies has "placed our ratings on some form of negative outlook," CFC said. Countrywide noted "adequate funding liquidity," but "future developments may require us to... procure additional sources of financing." The company raised $2 billion in August by selling preferred stock to Bank of America. Countrywide also said about 4.9% of the subprime loans in its portfolio were pending foreclosures as of September 30th, up from 2.9% last year."

• Builders Use Promotions To Boost Slow Sales (Pennsylvania Live, Nov. 11th): "This weekend, Charter Homes & Neighborhoods of Lancaster has invited buyers to name their price for new Charter houses. Though [they won't] "take any offer..." Charter's President Rob Bowman: Highly publicized campaigns by other builders have so distorted the market that customers don't know what a new house should be worth." Halbert: Any price cutting here reflects national builders having to reduce inventory nationwide... The best thing we have seen is that national builders have left the [local] market." Homebuilder Hovnanian (HOV): While the pace of some Hovnanian developments has slowed, the company is committed to building in south-central Pennsylvania. "

• Major Builder Files Chapter 11 (Bowling Green Daily News, Nov. 11th) Alabama: "Henson Homes, which was Bowling Green’s largest homebuilder for several years, recently filed for Chapter 11 bankruptcy in order to stay in business and pay its contractual and debt obligations after a lack of buyer interest... Following the reorganization, the business will also focus on custom homes - but only after completing the sale of the remaining 28 or so “spec” houses they have on the market in Warren County, Nashville and parts of Gulf Shores, Ala."

• Homebuilding Company Plans To End Projects In State (KATC3, Nov. 11th): "New Orleans: "KB Home (KBH), the first national homebuilding company to come into the New Orleans-area after Hurricane Katrina, has announced plans to finish its projects in Louisiana in the coming months and to make no further investment in the state. Clint Szubinski, president, KBH Gulf Coast division: KB's business model calls for working in areas with high levels of new home building and permitting, and Louisiana doesn't fit that. Another factor was the slowdown in the national housing market."

• Find Your Treasure at K. Hovnanian's Four Seasons in Palm Springs (Press Release, Nov. 9th): "Saturday, November 10th, K. Hovnanian's Four Seasons open[ed] its doors for a Treasure Hunt Extravaganza. The festivities... are located at 1800 Sand Canyon Way in Palm Springs. The exciting treasure hunt offers visitors a glimpse at the wonderful desert resort lifestyle available at K. Hovnanian's Four Seasons, along with a day filled with fun and prizes... K. Hovnanian's Four Seasons is luxurious living for the 55 and better community... Priced from the low $300,000s."

• Lennar Homes Aims To Combine Offices (Arizona Republic, Nov. 10th): Arizona: " Alan Jones, Lennar Homes regional VP: Lennar (LEN) plans to consolidate its Tempe operations... The publicly traded home builder plans to move out of its 50,000-square-foot leased building in south Tempe and move to a smaller facility... The home builder employs about 250 workers, down from 400 in early 2006. Jay Butler, director of realty studies at Arizona State University's Morrison School: Many home builders, including Shea Homes and Meritage Homes in the Valley, have scaled back their operations."

• S&P Reiterates Sell Opinion On Lennar Corp. Shares (BusinessWeek, Nov. 9th): "S&P: We estimate asset writeoffs and impairment charges of about $300 million for Lennar in November-quarter which would bring our net tangible book value est $1 lower to $30. Our writeoff estimate takes into account a total of $7.8 billion in goodwill, speculative homes owned, construction in progress, land under development, and investment in joint ventures. Our estimate would be in the mid-range of writeoffs booked by Lennar's peers in their recent quarter. With higher exposure to California and Florida markets and applying 0.6X price-to-book value, near large homebuilders, we are lowering our target price to $18 from $21.

• Dominion Homes 3Q Loss Widens As Revenue Falls (CNN Money, Nov. 9th): "Dominion Homes (DHOM) Inc. Friday reported a Q3 net loss of $15.3 million, or $1.86/share, versus a year-ago net loss of $5.94M, or $0.73/share. Revenue fell to $38.1M from $64.9M, while home deliveries dropped to 197 from 338. Dominion [attributed] the loss [to] fewer home deliveries, higher sales discounts to meet competition, non-cash real estate inventory impairment charges and an increase in interest expense... Dominion also said... it was not in compliance with certain financial covenants of its credit facility at June 30 and Sept. 30 [and] continues to be in discussions with the lenders to modify the credit facility."

• Toll Brothers Names New Division President (Orlando Business Journal, Nov. 9th): "Toll Brothers has announced it has appointed William "Bill" Reilly as president of the Central Florida division, which includes 11 communities across Orange, Osceola and Polk counties. The 56-year-old New Jersey native started his career with Toll 15 years ago as community project manager. Before moving to Florida, he was the central New Jersey division president responsible for 16 communities in five counties. Reilly will be responsible for all division operational activities, including land acquisition and development, sales and marketing, production, purchasing, studio operations finance and customer service."

• HNI Increases Buyback Program by $200M (CNN Money, Nov. 9th): "HNI Corp., which manufactures office furniture and fireplaces, said Friday its board has authorized the repurchase of an additional $200 million in shares of common stock. The company has about $27.4M in shares remaining under a previously approved $200M buyback. (HNI) has about 45.7 million shares outstanding, the company said. Shares jumped $1.16, or 3%, to $39.90 in Friday trading."

• Buyer at Home Builder NVR's Doorstep (Barron's, Nov. 8th): "From Monday-Wednesday, homebuilder NVR's founder/Chairman Dwight Schar bought 118,708 shares for $52.4 million, or an average of $442.59/share. He now holds 403,934 shares... or 7.9% of the NVR's shares outstanding. The purchase comes six months after Schar sold 259,193 shares for $211.4M, or an average of $813.19 each, from April-May. InsiderScore.com: Schar was prohibited by SEC short-swing rules from buying stock within six months of his last sale. The restriction expired Nov. 3... Jonathan Moreland, adviser to Ladenburg Thalmann Asset Management: "Everyone wants to know if housing stocks have a bottom. This transaction [seems] meaningful and bullish."

Commercial Real Estate and Real Estate Investment Trusts (REITs)

• Investment Slows Down (Daytona Beach News Journal, Nov. 11th) Florida: "A wide range of real estate developers, brokers and agents as well as bankers, landlords and tenants acknowledge softening in the [Florida] commercial market but agree it is nowhere near the level of distress to which the single-family home market has fallen... The problems in the home-building market have overflowed into the commercial real estate business... Companies take a wait-and-see attitude... An important factor cushioning the commercial market is that it probably never attracted as much speculation -- particularly amateur speculation -- as the single-family housing market did."

• Apartment REITs May Gain (Journal Sentinel Online, Nov. 11th): "A.D. Beadell Investment Counsel: UDR Inc. (UDR) is the fourth-largest apartment REIT in the U.S... UDR has been doing an extensive redevelopment program, and cash flow from redeveloped communities typically increases anywhere from 50%-100%, while market values tend to rise by 20%-50%. UDR has... been repositioning its portfolio to [areas] of strong job growth, high residential home prices and limited housing alternatives... This month, UDR is launching a Spanish language site to reach the rapidly growing Hispanic market... Developers [might have to] compete with apartment managers by renting condos if they're overdeveloped in certain areas... [but] UDR pays a 6.2% dividend."

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