Housing Market Tracker - Homebuilder 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.

Quotes of the Day

"There's no profit left. Surviving the downturn ... that's the business model right now." - Martin Kolkey, president of Cameo Development in California, a small homebuilder. Kolkey says that if business doesn't improve, his family's 50 year-old business will fold within eight months. (North County Times, Jan. 5th)

"When you can raise prices every Monday morning, like it was during the boom time, it's hard to get the organization's attention on something as mundane as lowering cost." - Pulte Homes CEO Richard J. Dugas Jr. (CNN Money, Jan. 3rd)

Homebuilders, Housing Stocks and Housing-Related Stocks

• Braselton Mixed-Use Project Planned (Atlanta Journal Constitution, Jan. 8th) Georgia: "[Vintage Communities] plans to build a major mixed-use complex next to the Del Webb retirement community... in Braselton. The 60-acre project would include more than 600 homes, 350,000-sf of office space and 450,000-sf of upscale retail... The project would draw customers from the 1,200 planned homes at the retirement community and [could] include medical offices to serve the Northeast Georgia Medical Center campus planned for [neighboring] land... Most of the Del Webb complex is made up of single-family detached homes. Builder Pulte Homes (PHM) has built about 400 of the planned 1,200 homes, said Eric Masaschi, VP of Vintage Communities."

• Home Builders Upbeat About Market (Tampa Bay Online, Jan. 8th) Florida: "Even with the subprime mortgage crisis and record-high foreclosure rates, area builders have faith in New Tampa's new home market. Construction is bustling in Easton Park, a 600-home community off Morris Bridge Road. M/I Homes (MHO) is the lead developer, and it is building a community swimming pool and cabana. Tampa-based Mobley Homes also has dozens of houses completed in the neighborhood, and new builder Bering Homes has joined the project. Bering president Chad O'Brien said the company purchased 16 lots in Easton Park and has an option to buy more."

• Kleiner Outlines Goals, Touts Progress In State Of Town Speech (Lower Hudson Online, Jan. 8th) NY state: "Development at the Rockland Psychiatric Center has been a key part of Supervisor Thom Kleiner's State of the Town address for years... Kleiner was finally able to name a developer for the project: Orangetown is continuing to work with K. Hovnanian Homes (HOV) on its proposal to build 550 homes on 80 acres of town land at RPC, despite a slump in the real estate market, Kleiner said. Hovnanian was named the preferred developer in August. "The current challenges in the housing market are well-known, and we will work with the developer to expedite this project," Kleiner said."

• Toll Brothers Director Sells Shares Near Year Low (Reuters, Jan. 7th): "A director at luxury home building Toll Brothers Inc (TOL) recently sold 48,000 shares near the stock's year low, reducing his stake by about 18.4 percent, according to a filing with the U.S. SEC on Monday. Roger Hillas sold the shares on Jan. 3 and Jan. 4 at prices ranging from $17.60 to $19.45. The transactions reduced his direct holdings in the company to 213,433 shares, the filing said."

• Earnings Preview: KB Home (CNN Money, Jan. 7th): "Thomson Financial: Analysts [on average] expect KB to report a loss of $1.08/share. [Forecasts range] from a loss of $1.70/share to a profit of $0.48/share-- which indicates some analysts do not include expected impairment charges in their forecasts. While most homebuilders have reported quarterly losses in recent periods, few have booked losses from operations, which exclude charges. Banc of America's Daniel Oppenheim expects a loss of $1.09/share, with $0.97 cents in impairment charges. That means he expects a loss of $0.12/share from operations, on a projected 14% decline in orders. Oppenheim: "KB Home's build-to-order model faces stiff competition from the industry's large glut of unsold homes."

• RealtyBid.com Sells 16 Phoenix Area New Homes for Lennar (Fox Business, Jan. 7th): "RealtyBid.com, the national... online home auction[eer], has announced the sale of 16 new Lennar homes (LEN) in the Phoenix, Ariz., area. Competitive bidding on 17 Lennar-built new homes in the community of Laureates at Savannah in Litchfield Park, Ariz., took place during a two-week online event in late 2007. Sixteen of the 17 properties were purchased and have already closed... In May 2007, Lennar Homes... auctioned numerous new homes in Indio and Rancho Mirage, Calif., through RealtyBid.com... The homes sold during the RealtyBid.com auction event sold at a 15-20% discount off the properties' list prices of $524,990-$648,990."

• HRI: KB Home Violates Contract (New Orleans City Business, Jan. 7th): "National homebuilder KB Home (KBH) has scrapped 35 planned market rate homes in River Garden, the mixed-income development that replaced the St. Thomas housing project in New Orleans. The decision raises questions about the future of a planned community HRI Properties owner Pres Kabacoff touted as a redevelopment model for city housing projects... [Kabacoff] said HRI would consider buying back the lots and building homes there, but stopped short of promising the lots wouldn’t remain vacant for a time. KB Home was the first national homebuilder to invest in Louisiana following Hurricane Katrina."

• New Year, New Hope For Real Estate In '08 (Naples News, Jan. 5th): "In 2007, a new word, “mothballed,” entered the vocabulary in real estate, said Ross McIntosh, a Naples land broker... The term “mothballed” is used to describe projects that have been delayed and may not happen at all. He said those projects include Intermezzo, a luxury waterfront community once planned by developer Phil McCabe in Naples; Renaissance Village, a mixed-use project that developer Jack Antaramian postponed in May, saying he’d wait until the market returns, and Lennar Homes’ Tern Bay Golf and Country Club on Burnt Store Road, which passes through Lee and Charlotte counties."

• Kolter Land Partners Acquired Southeast Florida Portfolio from M/I Homes (Press Release, Jan. 5th): "Kolter Land Partners announced today that it has closed on the sale of MI Homes (MHO) entire portfolio of residential lots and inventory homes in Southeast Florida. The portfolio consisted of approximately 500 developed residential lots and inventory homes immediately available for sale across four communities in Palm Beach and Martin Counties, Florida. Kolter Land Partners completed this all cash transaction in less than three weeks. The total purchase price exceeded $45 million."

• Ryland Builder Unveils Traditional Homes At Moderate Costs In New Wescott Plantation Neighborhood (Charleston Post & Courier, Jan. 5th) South Carolina: "For a relatively small neighborhood, Sandpines at Wescott Plantation is attracting a variety of homeowner types. That's the way builder Ryland Homes (RYL) crafted the 94-home community in lower Dorchester County. Brent J. Campbell, sales counselor with Ryland [says] sales started in the spring; "We have a couple of first-time homebuyers..." and a number of families and some retirees... Homes are as small as 1,381-sf and as large as 3,075-sf. Base prices go from $167,000 to $260,000."

• Kimball Hill Delays 10K Filing (Big Builder Online, Jan. 4th): "Kimball Hill Homes in Illinois SEC filing: Kimball will be unable to file its 10-K on time for the fiscal year ending September 30, 2007, [and] it is not in compliance with one or more of the covenants of its senior credit facility. Kimball specifically mentioned that it could be in violation of the covenant requiring it to maintain a minimum tangible net worth: "We have begun discussions with our bank group regarding amending our senior credit facility. The bank group has not provided formal assurance that we will be able to amend our senior credit facility upon reasonable terms, or at all."

• TOUSA Misses Interest Payment (South Florida Business Journal, Jan. 4th): "TOUSA SEC filing: Homebuilder Technical Olympic USA said it missed its Jan. 1 interest payments on $485 million in debt. Debt holders may accelerate payment of the notes outstanding if the company doesn't pay the interest in 30 days... TOUSA (TOA) amended its first-lien term loan and revolving credit agreements in December. The amendments included a cash flow budget that did not provide for payments on its long-term indebtedness, including the notes with interest due Jan. 1. S&P has said it would lower TOUSA's corporate credit rating to CC if the payments are missed. TOUSA has said it is considering restructuring options, including a bankruptcy filing."

• Dominion Homes Announces Receipt of NASDAQ Deficiency Notice (Fox Business, Jan. 4th): "Dominion Homes, Inc. (DHOM) announced Friday that on December 31, 2007, the Company received notification from The Nasdaq Stock Market indicating that Dominion is not in compliance with the continued listing requirement of Nasdaq Marketplace Rule 4450(a)(5) because for the last 30 consecutive days, the bid price for the Company's common stock had closed below the minimum $1.00/share requirement... The Company was provided 180 calendar days, until June 30, 2008, to regain compliance with the minimum bid requirement. If, at any time before June 30, 2008... the stock closes at $1.00/share or more for a minimum of 10 consecutive business days, NASDAQ will provide written notification that it has achieved compliance."

• A 'Realistic' View of Lennar's Solvency (Reggie Middleton in Seeking Alpha, Jan. 3rd): "Taking the 60% discount Lennar gave Morgan Stanley (MS) [on its land sale]... and the fact that the discount given on two other [recent] sales weren't disclosed (if it was less than that given MS... Lennar [would have] disclosed it)... The full consolidation of all of Lennar's assets and full recourse liabilities leaves them more than 33% underwater. That is, for every $1 of Lennar stock, Lennar owes $1.33 in debt... It is forecast to get much worse this year, increasing to about $1.72 of debt for every $1 of equity, and trend even worse for the following two years - assuming Lennar is still a going concern at that time."

• Lowly Faucet Gets A Whack As Home Builders Take Ax To Costs (CNN Money, Jan. 3rd): "Lennar Corp is whittling down options and moving toward a one-faucet-fits-similar-price-points model, seeing standardization and simplification as tools in a cost-cutting drive aimed at saving millions of dollars and surviving the housing crash... Beazer Homes (BZH) says it reduced its carpet offerings by 85%. Pulte Homes (PHM) cut back to 400 floor plans from more than 2,000, and Centex Corp. (CTX) cut its roughly 4,500 plans in half with more reductions under way. Variety, builders have realized, costs money... KB Home (KBH)... doesn't plan to abandon its nationwide design studios, which, in Q3, boosted revenue by about $31,000/unit. In Orlando, one of the company's largest studios, the thousands of choices include 270 carpets and 166 countertops. There are even exclusive Disney-themed products and Martha Stewart doors."

• Fitch Downgrades $46.8MM from Meritage Mortgage Corp. 2004-1 (Press Release, Jan. 3rd): "Fitch Ratings has [downgraded] approximately $46.8 million [of] Meritage Mortgage Corporation asset-backed certificates... The negative rating actions reflect continued deterioration in the relationship between credit enhancement (CE) and future loss expectations. The transaction is experiencing monthly losses that exceed the available excess spread (XS). As of the November 2007 distribution, the transaction has exhausted its overcollateralization (OC) and the most subordinate bond has begun to experience write-downs due to losses. Non-performing loans (i.e. loans in 60+ delinquency, including foreclosure, bankruptcy, and real estate owned) comprise 35.18% of the pool. The mortgage pool consists of conventional, first and second lien, adjustable- and fixed-rate residential mortgages."

Video of the Day

Homebuilders listen up: Forget boring incentives like marble countertops and swimming pools. Hannah Montana will save you. Yahoo! Finance features this video about a family who is trying to sell their home by offering free, apparently hard-to-come-by Hannah Montana tickets. Maybe KB Homes was on to something when they partnered with Disney Co. to make Disney-themed homes.

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