Quote of the Day
"The only recipe for too much inventory is even lower prices, and more pain for the homebuilders." - Gimme Credit analyst Vicki Bryan.
Homebuilders, Housing Stocks and Housing-Related Stocks
Pulte Exits Wiregrass Ranch Project Florida: The developers of Wiregrass Ranch confirmed Monday that Pulte Home Corp. (NYSE:PHM) has pulled out as the massive project's master builder... Pulte still owns more than 900 acres of the ranch, but is no longer responsible for the long-term development of roads and other infrastructure, said Scott Campbell, president of Pulte's Tampa division. Pulte's pullout casts doubt on the future of the grid of public roads across Wiregrass that county officials saw as a way to improve traffic in the region. Those roads were to have been built by Pulte."
Local Market Seeing Movement Florida: "In the Manatee-Sarasota market, builders are finding that low interest rates and bargain pricing is stirring buyer interest... Jerry Blumberg, co-owner of Gibraltar Homes: "December didn't do much for us but January is going well." Among local builders who have lowered their prices or offered buyers incentives are Neal Communities, Bruce Williams Homes, Gibralter Homes, and Lee Wetherington Companies. National builders doing business in Manatee County, including WCI Communities (WCI) and Lennar (NYSE:LEN), announced layoffs in 2007, and Levitt & Sons filed for bankruptcy."
Ryland Homes (NYSE:RYL) Poised to Trade Higher Post-Earnings "From a technical perspective, Ryland Homes is pointed toward an extended run higher over the intermediate term. After having dropped more than 44% during the prior 52 weeks, RYL is currently breaking out of a sideways basing pattern that was bound between support at the 20 level and resistance in the 29-30 region. Last week's earnings-related rally boosted the stock above round-number resistance at the 30 level, which had held since August 2007. Minus Friday's panic-induced sell-off, RYL would have held this region... Furthermore, this rally amid poor fundamental news is viewed bullishly from a contrarian perspective, as it could be a sign that smart money is now flowing back into the shares."
Lennar "Market Outperform," Target Price Reduced "Analysts at JMP Securities reiterate their "market outperform" rating on Lennar Corporation, while reducing their... target price from $31 to $24... The company has reported its F4Q'07 losses per share significantly higher than the estimates on account of higher-than-expected charges. Lennar’s backlog is now 65% lower on a y/y basis, the analysts say. In the event of the housing market bottoming out, significant changes to the company’s operating cost structure, along with huge write-downs, would help improve Lennar’s profitability in 2H08, JMP Securities adds. The EPS estimate for 2008 has been reduced from $0.25 to -$1.00."
Lennar Corporation Declares Quarterly Dividends "Lennar Corporation, one of the nation's largest homebuilders, announced that its Board of Directors has declared a quarterly cash dividend of $0.16/share for both Class A and Class B common stock payable on February 19, 2008 to holders of record at the close of business on February 8, 2008."
Fired VP Files Suit Against Lender "A former VP in Houston for Countrywide KB Home Loans was fired because he complained about its lending practices, according to a lawsuit he has filed against the lender. Countrywide KB Home Loans, a joint venture between Countrywide Financial Corp. (CFC) and KB Home (NYSE:KBH), approved loans for unqualified borrowers just so KB could continue to build homes, Mark Zachary, who worked for the company between August 2006 and mid-2007, claims in his lawsuit filed in a Houston federal district court."
Credit Experts: More Pain For Homebuilders "Homebuilder stocks may have broken their fall last week, but analysts attributed the bounce to short-sellers' cashing in on bets last year that the stocks would tumble. Bloomberg L.P.'s U.S. Home Builders stock index rose 10% to 186, its first weekly gain since early December... Lennar Corp. said Thursday that revenue fell by half, to $2.2 billion, during Q4'07, compared with a year earlier. The company cut more than half its workforce and reduced the number of homes under construction in Q4 to 5,500, from 17,000 a year earlier."
Meritage Homes Swings To 4Q Loss, Sees 'Challenging' 2008 "Meritage Homes Corp. (NYSE:MTH) said Monday it swung to a fourth-quarter net loss of $128.8 million, or $4.91/share, from net earnings of $9M, or $0.34/share, a year earlier. The latest results included $130M of pretax real estate-related and joint venture valuation adjustments and $58M of pretax goodwill write-offs. The company also recorded an $11M non-cash pretax charge for the acceleration of expenses... Analysts [on average expected] a loss of $3.52/share for Q4... Home closing revenue fell 25% to $615.6M from [last year's] $819.3M on an 18% decline in homes closed and a 9% decline in average closing price. Analysts were expecting Q4 revenue of $610M."
Institutional Investor Magazine Names Toll Brothers' Robert I. Toll Best CEO in Homebuilders/Building Products Industry "Toll Brothers, Inc. (NYSE:TOL), the nation's leading builder of luxury homes, today announced that the magazine Institutional Investor has named Toll Brothers' chairman and chief executive officer Robert I. Toll as the Best CEO in the Homebuilders & Building Products industry."
Analyst's Comments Boost KBH "Banc of America analyst Daniel Oppenheim: Lower home prices resulting from two years of decline in the housing market "will likely help to spur sales activity in coming months." Technical indicators for KBH are neutral and improving, while S&P gives the stock a bearish 2 Stars (out of 5) Sell rating. If you’re looking for a hedged play on this stock, consider a March bull-put credit spread below the $15 range. KBH hasn't been below 15 at all in the past year, and could lose up to 39.3% before this trade runs into trouble."
CTX Rises On Analyst's Comments "Analysts are speculating that the housing market may have bottomed out last year, and that lower prices might lead to a sales rebound... Technical indicators for Centex are bullish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating. If you’re looking for a hedged play on this stock, consider a March bull-put credit spread below the $15 range. CTX hasn't been below 15 at all in the past year. The stock could lose up to 45.1% before this trade runs into trouble."
Jim Cramer's Stop Trading! 1/25/08: Headline Overreaction "Cramer on Thornburg Mortgage (TMA), Toll Brothers (TOL), Fannie Mae (FNM), Freddie Mac (FRE): Cramer prefers TMA and TOL to FNM and FRE, concerning which he said, "I just think that they're not investible. ... I didn't like them ... yesterday."
Builders Unloading Lots North Carolina: "Last month, Orleans Homebuilders (OHB) walked away from 17 undeveloped lots, selling them for an average of $35,000 each -- roughly 20% less than what it paid in a handful of transactions spanning the past several years, county property records show. The sale, which represents a smidgen of the 1,400 lots the Pennsylvania company unloaded across the country last month, illustrates how the national housing bust is shifting demand for dirt -- real estate's most basic commodity -- even in relatively robust regions such as the Triangle."
Pennsauken Mart Flap Settled New Jersey: "A legal spat over a 35-acre parcel slated for redevelopment in Pennsauken was settled out of court last week... said Christy Kass, region manager of public relations for K. Hovnanian Enterprises Inc. (NYSE:HOV). Hovnanian and D’Anastasio Corp. claimed their proposals to redevelop the shuttered Pennsauken Mart were not reviewed fairly. The Camden County improvement authority chose a plan proposed by... developer Scarborough Properties' partnership that plans to build an apartment complex with up to 612 units on 31 acres. The settlement gives Hovnanian and D’Anastasio first crack at completing the project if Scarborough fails to do so."
Housing Boom Loses Volume Florida: "Across Pasco, builders mustered fewer than 2,000 permits for single-family homes in 2007, the lowest tally for home construction in more than a decade [and] a 73% drop from 2005... Companies that were formerly among the busiest builders - Lennar and Standard Pacific among them - have dramatically scaled back their interests here... Centex Homes, for example, is offering its last unclaimed house - a 1,927-square-foot model in Wesley Chapel's Ashley Pines development - for just under $190,000. A similarly sized home a few lots away on the same street sold for $63,000 more in early 2006."
Additional Homes Released At Villagewalk Florida: "The rate of sales has prompted the release of more homes at VillageWalk, a Bonita Springs community built and developed by DiVosta Homes, a Pulte Homes Inc. company. A total of 939 homes have been released, said Jill Hoffman, VP of sales and marketing for the Southwest Florida market of Pulte Homes. VillageWalk is on the south side of Bonita Beach Road, four miles east of Interstate 75."
Permits May Fall, But Rebound On Horizon Arizona: "Housing analyst RL Brown: There's plenty of opportunity for builders who construct houses that home buyers can afford in places they want to live now. He cited DR Horton's (NYSE:DHI) 5,861 home sales in 2007, a stat that bucked the slowdown. DR Horton was the top builder last year, but Pulte was right behind it, with 4,276 sales."
Battered Builders Retrench Indiana: "Davis Homes LLC has shed 150 employees since 2001, now has a staff of 50... is trying to sublease 10,000-sf of empty office space and [possibly] another 5,000-sf... Local builder C.P. Morgan Communities... with about 400 employees, also is hoping to sublease about 20,000-sf of office space.. Beazer Homes has cut its local staff 50% [since 2006] to 120 [and] is trying to sublease 20,000-sf... Ryland Homes has cut about 20% of its local work force to 75 since 2006... M/I Homes (NYSE:MHO) cut its staff about 30% since 2006 [to] 45 local employees. KB Homes, one of the market’s largest builders, pulled out entirely in July, displacing dozens of employees."
Housing Sales Slow At Tony Development Arizona: "Scottsdale's last major planned community is continuing to build and sell new homes, although the pace is slower than what might have been expected a few years ago. In the past year, Toll Brothers has sold 176 homes at Windgate Ranch... That is nearly 30% of the roughly 600 homes planned for the community that borders the McDowell Sonoran Preserve... Toll has indefinitely suspended construction of its 62-unit townhouse project downtown. But the company continues work on its 6-story condominium there and is still building at Windgate Ranch."
New Home Permits Slide By 60% "DataTraq report: Permits for the construction of new homes in the Albuquerque, New Mexico metro area declined nearly 60% in December 2007 vs. December 2006 (390 permits). The 161 permits issued this past December were down by just nine permits from the previous month... The decline in the number of permits issued is significantly lower year-to-year. DR Horton Homes was issued the most permits in 2007, with 586. Following Horton... were: Pulte Homes, Centex Homes and KB Home, each of which had more than 300 permits issued for the construction of new homes."
Custom Homebuilder Files Bankruptcy "A Florida custom homebuilder... has filed for bankruptcy...J. Cherry & Sons attorney Jon Martin filed notice that the company has filed for Chapter 11 bankruptcy in the U.S. Court for the Southern District of Florida... The company since August 2007 has been sued by American Express Bank and John's Tile & Marble, which has a Fort Pierce location, according to the Treasure Coast Builders Association and Better Business Bureau. More recently, 84 Lumber Company Limited, a building materials and services supplier with statewide stores including one in Jensen Beach, has sued the homebuilder."
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