Housing Market Tracker - Housing Stocks Review

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

"This is my fourth downturn. No question about it, this is the most difficult downturn Horton and I have worked through." - Donald J. Tomnitz, CEO of homebuilder D.R. Horton Inc. (Dallas Morning News, Nov. 28th)

Homebuilders, Housing Stocks and Housing-Related Stocks

• Taking Toll Among Homebuilders (The Street, Nov. 27th): "According to Cramer, the only buy is Toll Brothers, because its balance sheet is totally intact, and people don't have to worry about a cut in the dividend... Cramer said Standard Pacific (SPF) is the worst, then Beazer Homes (BZH): "Those are the two most likely to go belly up." Cramer said he then would put D.R. Horton (DHI), Pulte (PHM) and Lennar (LEN) in the same class. "I don't like them. A little bit above them I would put Centex and KB Home," the latter of which has "a very big cash position." At the top, said Cramer, is Toll."

• Bed Bath & Beyond Below $30: Is the Housing Market to Blame? (Eddy Elfenbein in Seeking Alpha, Nov. 27th): "Shares of Bed Bath & Beyond (BBBY) are now trading at $29.72... [a] five year low. I [don't] believe the housing market is having a severe impact on its business... There's a big difference in a slowdown in earnings growth and losing a lot of money... Homebuilder Lennar (LEN) will see its EPS drop from $8.32 in 2005 to $-4.90 this year. DR Horton's (DHI) will drop from $4.62 to $-2.27. KB Home's (KBH) will drop from $9.53 to $7.61. [In comparison,] BBBY's return-on-equity has fallen from about 24% to around 20%, yet shares have fallen by one-third. Compare 20% ROE to the 10-year T-bond that's now paying about 4%."

• Pulte Homes Backs Q4 Guidance (Judith Levy in Seeking Alpha, Nov. 27th): "Pulte Homes reaffirmed its Q4 guidance Monday despite poor demand and elevated supply levels. A month ago, the homebuilder stood by its earlier forecast of income from continuing operations in the range of $0.10 per share to breakeven. "[W]e remain committed to our previous guidance for fourth quarter pre-impairment earnings and cash position, and we continue to improve our already strong balance sheet," said Pulte CEO Richard J. Dugas, Jr. in a release. "Our teams continue to do an outstanding job selling and closing standing inventory and lowering overall land investment levels, all in an effort to generate cash and give Pulte maximum flexibility entering 2008."

• Pulte Homes Amends Credit Facility (CNN Money, Nov. 27th): "Homebuilder Pulte Homes (PHM) Inc. said Tuesday it has amended its revolving credit facility to decrease the minimum required net worth of the company. Pulte's new net worth minimum to retain the revolving credit facility is $4 billion plus 50% of cumulative net income earned during each quarter. Total borrowing capacity of the revolving credit facility remained unchanged at $1.86B. Borrowing capacity would be limited if Pulte's credit rating from two rating agencies fell below investment grade. The limitation would be based on Pulte's inventory."

• Champion Enterprises to Close Guin, Ala. Facility, Take $4.5M in Charges (CNN Money, Nov. 26th): "Champion Enterprises (CHB) Inc. said late Monday it will close its manufacturing facility in Guin, Ala., and expects to record pretax restructuring charges of up to $4.5 million in Q4. 'This is the seventh manufacturing facility we have idled or closed since mid-2006 in an effort to continue delivering strong segment operating margins despite challenging U.S. housing markets,' said William Griffiths, chairman and CEO. Auburn Hills, Mich.-based Champion Enterprises is a maker of manufactured and modular homes."

• Newell Rubbermaid Lowers Sales Forecasts (Roy Mehta in Seeking Alpha, Nov. 26th): "Newell Rubbermaid (NWL) sees flat fourth-quarter sales growth, down from the 2% increase previously expected, and full-year sales increasing only 3.0-3.5% instead of the previous 4.0% target. However, the company maintained its previous EPS guidance, apparently signaling it will continue to repurchase its shares. Weak North American office product demand and the inventory reductions at key large retailers were the main reasons for the lower sales outlook... Newell Rubbermaid raised the lower-end of their gross-margin expansion guidance to 2-2.25% from 1.75-2.25%, the upside being driven by an improved product mix. Citigroup analyst Wendy Nicholson: "We are... encouraged that NWL is able to offset pressure to their top line through cost savings initiatives."

• Are Any Builders Worth Your Shekels? (Motley Fool, Nov. 26th): "If I were to buy into shares of any homebuilder today -- which I definitely am not inclined to do...[I'd look at] the amount of debt to the value of the equity... The farther below 1.00 the debt/equity number comes out, the generally stronger the company's financial position... Secondly, I like... a meaningful dividend yield while I'm waiting for [a turnaround.] Centex (CTX) and Hovnanian (HOV) [are] too highly leveraged... Hovnanian (HOV) [and] Toll (TOL) [have no] dividend... Pulte's (PHM) dividend doesn't excite me... And D.R. Horton's (DHI) debt-to-equity ratio is a tad too high... That leaves only Lennar (LEN) standing after our admittedly very basic analysis."

• Louisiana-Pacific Drops In Reaction To Weak Homebuilder Sector (Market Intelligence Center, Nov. 26th): "Louisiana-Pacific Corp. (LPX) hit its 52 week high of 23.51 in January and set its 52 week low of 13.85 Monday... The stock [was] weak Monday in reaction to several downgrades that burned the homebuilders by Citigroup. LPX's main business involves providing building products for new home construction, repair and remodeling, and manufactured housing. Technical indicators for the stock are bearish and steady while S&P gives LPX a neutral 3 STARS (out of 5) hold rating. If you’re looking for a hedged trade on this stock, consider a May bear-call credit spread above the $17.50 level."

• Evidence Builds for US Recession in 2008 – 2009 (Right Side Advisors, Nov. 26th): "PHLX Residential Housing Sector Index (HGX) – Set a new multi-year low of 127.27 on Monday, a level not seen since May 2003, before the housing bubble inflated... Street TRACKS DJ Wilshire REIT (RWR): The index is 85% commercial real estate, and shows the contagion spreading. It set a new year to date low of 68.65 on Monday."

• What To Ask Mr. Market (Barron's, Nov. 26th): "For the small-time speculator, here's a way to bet on panic ebbing in this sector. Home builder Pulte Homes (PHM) has an exchange-listed senior note (PHA) that yields almost 11% and is near the top of the company's capital structure. It trades at 16.81, or 67% of its $25 face value. Pulte is among the more financially stable builders and has an unchallenging debt-payback schedule for the next few years. One caveat: The securities are thinly traded, allowing in small-timers only."

Tracking the Housing Market and Homebuilder Stocks You can track developments in the housing market, homebuilder/housing stocks and review subprime news by bookmarking our Housing coverage or subscribing to our free email service. If you have a blog or website of your own, you can track developments in the sector and provide great content for your readers with our Housing Market widget (left). It's simple to add -- just select "Housing Market" from the drop-down menu here.

Comments

[Georealist]

Every time..like yesterday, for instance...I heas a report on home sales my first reaction is "So what!" And that goes double for new home sales. Unloading inventory for debt service hardly compares to selling at pumped up margins to overnight campers waiting for the sales office to open.
The institutional fallout (banks, etc) may be largely accounted for in stock prices for many....However, homebuilders and those unfortunate enough to have an existing home to sell on a glutted market are likely to see coal in their stockings this Christmas...and next.

[Jordan Fogal]

Enter your comment hereConsumers cringe as holidays approach after housing debacle
Some just wish they had a home for Christmas
The “Lemon Lady,” Houston grandmother Jordan Fogal, testifies colorfully against Texas homebuilder mandatory binding arbitration provisions to a congressional subcommittee in Washington:

The first night in our new home, my husband decided to try out his new Jacuzzi tub on the third floor. When he pulled the plug, one hundred gallons of water crashed through our dining room ceiling. . . .

Well, this was not one overlooked plumbing connection, as my husband so desperately wanted to believe. It was a preview of coming attractions. Rainwater, from outside, sprayed us at the kitchen table. – The windows were installed upside down (our builder finally admitted this after three years). Our floors buckled and black spider-webs of mold crawled up our walls; the smell grew worse; then shower wall fell out and little puffballs grew out of the carpet. All the while, we had begged our builder to please fix our house.

We had the mold tested by an accredited laboratory, and they said they had never seen toxic readings that high in an inhabited dwelling.

The story of Fogal’s Hyde Park Crescent home was detailed in Mother Jones magazine two years ago; she also plays a part in this Houston Press report about the lucky owner of another Tremont Homes/Jorge Casimiro opus.

Written Testimony Submitted by Jordan Fogal To The Subcommittee on Commercial and Administrative Law: “Mandatory Binding Arbitration Agreements: Are They Fair For Consumers?” [U.S. House Committee on the Judiciary, via Bay Area Houston]
Home Sour Home [Mother Jones]
Ownership Wrongs [Houston Press]