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.
Quotes of the Day
"They have all this land that they need to turn over, so they keep building. We would recover so much quicker if you could just turn it off, but you can't turn it off." - Paul Puryear, an analyst at Raymond James & Associates, talks about the homebuilders dilemma over whether to build homes on land they own, which are unlikely to sell, or just sell off land at 70-80% discounts. (Wall St. Journal, Nov. 13th)
The industry is "going to be a shadow of itself once we get through this downturn. Everyone was too optimistic." - Mark Zandi, chief economist at Moody's Economy.com, who predicts home prices won't rebound until late 2009 or early 2010. (Daily Breeze, Nov. 15th)
Homebuilders, Housing Stocks and Housing-Related Stocks
- Sink or Swim (In Business Las Vegas, Nov. 16th) Nevada: "The developer of Lake Las Vegas in Henderson is in default on a $560 million loan and has until the end of the year to find buyers for its remaining undeveloped land or the development could face foreclosure, a Lake Las Vegas official said. A group headed by investment banker Credit Suisse has, for now, waived any default obligations... David Cox, CFO of Lake Las Vegas: The group of lenders has loaned Lake Las Vegas additional money to cover its operational expenses... Builders at Lake Las Vegas include Pardee Homes, Toll Brothers, Innovative Resort Communities, Woodside Homes, Amland Development and Centex Homes."
- Bankruptcy Looms for Some Builders (Daily Breeze, Nov. 15th): "Builders constructed more than 2 million housing units nationwide in 2005, the year the boom peaked. So far this year, housing starts have fallen to an annual rate of 1.2 million units through September, and economists expect the number to drop to an annual rate of 1 million by mid-2008. Some analysts foresee a shakeout similar to that of the early 1990s, when numerous builders went through bankruptcy, including NVR Inc. (NYSE:NVR) and U.S. Home Corp. of Houston, now part of Miami's Lennar Corp. (NYSE:LEN). A consolidation of weaker players may also be on the horizon."
- Newhall Land and Farming Lays Off Workers (Santa Clarita Valley Business, Nov. 15th) California: "Newhall Land and Farming Co. has terminated employees at its Valencia offices. Company spokeswoman Marlee Lauffer: Newhall Land, which is partly owned by Lennar Corp. (LEN), does not plan to replace the positions because of current economic conditions. Lauffer referred to the current housing market as the reason that Newhall Land, and many other companies involved in real estate have been forced to eliminate positions... The company’s last large project is Newhall Ranch, a Valencia-sized community slated for development southwest of the intersection of Interstate 5 and Highway 126."
- 3 Myths About the Turbulent Market (Motley Fool, Nov. 15th): "Myth No. 2: Fallen stocks must rise again. What goes down by no means has to come back up. Many of the homebuilding stocks, such as Beazer Homes (NYSE:BZH) , D.R. Horton (NYSE:DHI), and Pulte Homes (NYSE:PHM), have taken gut-wrenching hits in the past year, but that doesn't necessarily mean they're cheap. The past several years were a boon to the homebuilding industry, and it could be many, many years before we see construction return to those levels -- if ever."
- ACPT Reports Results for Quarter Ended September 30, 2007 (CNN Money, Nov. 14th): "American Community Properties Trust (ACPT) year-to-date [September] reports a net loss of $1,259,000 or $0.24/share, on revenue of $61,457,000, [vs.] net income of $3,002,000, or $0.58/share, on revenue of $70,113,000 for Jan.-Sept., 2006... Q3 [saw a] net loss of $1,098,000 or $0.21/share, on revenues of $19,043,000, [vs.] net income of $2,044,000 or $0.39/share, on revenues of $24,421,000 for Q3'06... Michael Wilson, Chairman/CEO: "Homebuilding sales were down 78% in terms of volume and 70% in revenue compared to Q3'06... In St. Charles, prices of new single-family homes have decreased by 17% since Dec. 2006. Condominium sales in Puerto Rico decreased 85% in Q3'07, compared to Q3'06."
- D.R. Horton Sells Legends Project for $70 Million (Tri-Valley Central.com, Nov. 14th): "D.R. Horton (DHI) has sold The Legends, a 6,884-acre Casa Grande project... [Also], during the Nov. 5 City Council meeting, a resident of the Avalon subdivision complained that the builder had walked away from what was to be The Buttes subdivision, west of Pinal Avenue and south of Val Vista Boulevard and surrounded the empty property with a chain-link and barbed-wire fence. The announcement Monday said D.R. Horton had sold The Legends acreage to two groups from Scottsdale and Gilbert for $70 million, or a little more than $10,000/acre."
- Beazer Homes Reportedly to Pay Subs Late (Contractor Mag, Nov. 14 th): "The Charlotte (N.C.) Observer newspaper reported in early November that Beazer Homes USA is delaying payments to subcontractors in Nashville, Tenn., as a way to weather one of recent history's most turbulent housing declines. The Observer reported that it had obtained a letter dated Nov. 5 and signed by Beazer's Nashville division President David Hughes, who said, "It is unfortunate, but we cannot continue the prompt payments you have received in past years." The letter is addressed to Beazer "trade partners."
- Home Builders Opt for Mothballing (Wall St. Journal, Nov. 13th): "Lennar Corp. [won't] sell any homes at its Orange County development... until the housing/mortgage market improves... [Builders are increasingly] deciding that the losses from selling homes at huge discounts are greater than the costs of carrying properties on their books... Some of... the more highly leveraged builders [must] move inventory to generate cash and pay down debt. This fall, builder Hovnanian Enterprises Inc. (NYSE:HOV) [and] Standard Pacific Corp. (SPF), have been offering discounts and incentives of as much as 30% [and] 25% respectively... Lennar (LEN) was one of the first large builders to discount homes through much of 2006... Lennar ended Q3 with a net debt-to-capital ratio of 36% compared with an industry average of 43%."
- Dunmore Homes Files Chapter 11 (Builder Online, Nov. 12th) California: "Faced with a lawsuit from an aggressive creditor, Dunmore Homes filed for bankruptcy protection last week. Sacramento-based Dunmore, which is now roughly one-fourth the size from its 2003 peak of 835 closings, stopped building in August. Michael Kane, who purchased Dunmore Homes in September: "This was an action we did not want to take, but the success of our restructuring progress must remain the primary focus of the company in order to protect the best interests of our contractors, employees, homeowners, and business partners." John Slaughter, Dunmore's vice president of construction and operations: Dunmore hopes to start building again during Q1'08."
- Builders Look Back, Prepare to Move Forward (Builder Online, Nov. 12th): "KB Home CEO Jeffrey T. Mezger says his company is refocusing on the fundamentals. Beazer Homes plans to dedicate more marketing money to the Internet... Chad Dreier, CEO of Ryland Group, is diversifying his assets, investing no more than 10% in one market... Centex is withdrawing from Columbus, Ohio and North Carolina's Triad region... Centex [is] cutting its floor plan count by half and offering massive discounts... Beazer expects to save $30 million annually from a 25% reduction in staff (650 people) in October. Since March 2006, Beazer has trimmed its payroll by 50%... WCI Communities Inc. recently pink-slipped 575 workers... expected to generate annual savings of $46 million in salaries and benefits."
- Levitt and Sons Files for Chapter 11 (Builder Online, Nov. 11th): "Citing "unprecedented conditions" in the homebuilding industry, particularly in Florida and the Southeast, Levitt and Sons announced Friday that the company and 37 of its subsidiaries filed for bankruptcy in Fort Lauderdale, Fla. The move comes after the builder halted all projects, pink-slipped nearly 90% of its staff, and failed to successfully negotiate with its bank lenders to restructure its debt."
Tracking the Housing Market and Homebuilder Stocks
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