Housing Market Tracker - Homebuilders Still Doing Incentives and Writeoffs

Quote of the Day

"It's a market thing."- Centex Division sales manager Brian Martin, about the company’s decision to pull out of the North Florida housing market altogether. (Jacksonville.com, Feb. 2nd)

Homebuilder Stocks

3 Homebuilders Stocks Heating Up. "KB Homes (KBH) is not the strongest homebuilder... it is a little more risky than say, Ryland (RYL) or Centex (CTX), but that risk gives it more upside... Lennar (LEN) has a strong balance sheet now... and it has a substantial amount of cash to pay off debt with... Pulte (PHM) was able to generate over $1 billion cash in 2007... It can pay off a lot of debt with that... I don’t think homebuilding stocks will go up in a straight line from here on out... If you see a big dip in PHM’s stock price you might consider an investment for the long term." (Wall St. Strategies in Seeking Alpha, Feb. 4th)

Slump Fuels Home-Lot Sell-Off. "Land brokerage and consulting firm Nathan & Associates: In the last few weeks of 2007, as many as 8,000 vacant but finished home lots ready for construction sold in the Phoenix area...N&A: "If it cost a builder $700/foot to finish the lot... then buyers are offering $350-$500/foot." Many deals closed at the year's end because if builders take the loss on the land, it's... an accounting advantage... During Q4, D.R. Horton, Pulte Homes, Lennar, Centex and Toll Brothers lost a combined of $1.47 billion [in] falling land values. The Phoenix Housing Market Letter tallied 61,000 finished lots sitting empty across the Valley." (AZ Central, Feb. 3rd)

As Money Grows Tight, Homes Shrink. Florida: "The average 1,400-sf. house of 35 years ago ballooned to about 2,400-sf by 2006... [The] average price in the Tampa Bay area has long since crossed the $300,000 threshold. Declines in residential construction of 50% last year partly reflect that lack of affordability. So many builders are... shrinking home square footage and cutting amenities for the first time in decades... KB Home is returning to its roots as a [homebuilder] for first-time buyers. After inching up to 2,200-sf in 2006, KB's average home size in Tampa has shrunk to 1,800. The company even reintroduced two-bedroom houses scaled not much larger than apartments at 1,033-sf." (St. Petersburg Times, Feb. 3rd)

Incentives Help To Aid Home Sales. NJ: "J.S. Hovnanian & Sons is responding with deals he hopes shoppers won't be able to refuse. Buyers of three-level townhomes starting in the mid-$200,000s receive packages that include stainless steel appliances, a spa shower in the master bath, another $10,000 in upgrades of the buyer's choice and credit toward closing costs... Stephen Hovnanian, principal, said reducing prices in existing developments isn't fair to the folks who bought at the top of the market. The last thing a homeowner who paid $500,000 wants to see is the house down the street going for $450,000: "Instead, we're holding prices, but giving people more." (Courier Post, Feb. 3rd)

Magazine Cover Indicator: Housing Bottom In Place? "We just got our Business Week in, and the cover is pictured below. We all know the contrarian nature of magazine covers, and with homebuilder stocks already rallying more than 50% off their bottom, it makes the case even stronger that the housing bottom might be in."(Bespoke Investement Group in Seeking Alpha, Feb. 3rd)

55-Plus Housing Boom In Warren. NJ: "At least 400 age-restricted homes are scheduled to open this year in Warren County. There are approvals for another 685, and 158 age-restricted homes opened in Lopatcong Township last year. Mansfield Township officials will consider an 80-home age-restricted complex Monday... Tracking by the county planning department shows a major increase in the last three years. Construction [began] on 98 age-restricted townhouses on Route 57 in Washington... [and should] start soon on 85 townhouses in Washington Township and 226 single-family homes in Mansfield Township. Toll Brothers is building the three complexes that are supposed to open this year." (New Jersey.com, Feb. 3rd)

Lawsuits Rising As Pre-Construction Buyers Want Out In Depressed Market. Florida: "Buyers who signed contracts for pre-construction condos and homes in the booming market are suing developers under a federal statute to avoid closing and to get their deposits back. Others are just walking away from the deposits, usually about 20% of the purchase price... Dozens of lawsuits have been filed in state and federal courts citing the federal Interstate Land Sales Full Disclosure Act. Those suits include more than 40 against... WCI Communities (WCI)developments." (Naples News, Feb. 2nd)

Housing Woes Knock At Nocatee. "Centex Homes, which was building 350 single-family units and 100 townhomes in the Willowcove village, a neighborhood in Ponte Vedra Beach's massive Nocatee development... confirmed rumors Friday that the company is pulling out of Northeast Florida. Division sales manager Brian Martin said all current customers would be cared for, whether they'd like to have their homes finished or get their deposits back. Along with Nocatee, Centex is working on eight projects in Northeast Florida... Martin said he was unsure how many to-be-built units are affected." (Jacksonville.com, Feb. 2nd)

New Floor Plans Debut At Talamore. Illinois: "Ryland Homes has responded to buyer demand at Talamore in Huntley introducing two new floor plans, one of which is priced in the $290,000s and appeals to starter families. The other is a 4 bedroom, 4 bath plan geared toward move-up buyers." (Chicago Daily Herald, Feb. 2nd)

Lennar Taps Into Solar Power. "Homebuilder Lennar announced on Friday that construction has begun on Los Angeles County's first solar home neighborhood in Valencia. So far, five of the eight fully-constructed homes have been sold and the first move-in is planned for the coming week. A total of 96 homes will be built as part of Phase one and two... The homes are being designed with a variety of built-in features that focus on generating solar energy and reducing dependence on traditional power sources... The solar neighborhoods have already been built by Lennar... in parts of Northern California, including the Bay Area and San Francisco." (The Signal, Feb. 2nd)

Beazer To Exit Ohio, Other Home Markets. "Beazer Homes said it is exiting [Charlotte, N.C.; Cincinnati/Dayton and Columbus, Ohio; Columbia, S.C., and Lexington, KY] Like Toll Bros. (TOL) and Centex Homes (CTX) before it, Beazer has decided not to continue competing against local homebuilding leaders M/I Homes (MHO) and Dominion Homes (DHOM), which control more than half of the central Ohio market. The company's Web site indicated it has 13 developments in central Ohio, ranging from half-million-dollar houses in New Albany to starter homes in Canal Winchester. Beazer said it will complete all homes under construction and honor home warranties." (Columbus Dispatch, Feb. 2nd)

Stop Being Greedy and You'll Make More Money. "In recent weeks... recovering mortgage companies and homebuilders such as Impac Mortgage Holdings (IMH), M/I Homes (MHO), and Hovnanian (HOV) posted huge gains thanks to continued interest rate cuts. But these companies are not out of the woods. If you bought them last week and don't know exactly what their potential liabilities are or you don't have an estimate of exactly what they're worth, it may be a sign that your greedy brain is trying to get you to chase some dead-cat bounces." (Motley Fool, Feb. 2nd)

D.R. Horton, Inc., America's Builder, Declares Regular Quarterly Cash Dividend. "D.R. Horton, Inc. (DHI) has declared a regular cash dividend of $0.15/share. The dividend is payable on February 20, 2008 to stockholders of record on February 12, 2008. D.R. Horton is the largest homebuilder in the U.S., delivering more than 41,000 homes in its fiscal year ended September 30, 2007... D.R. Horton also provides mortgage financing and title services for homebuyers through its mortgage and title subsidiaries." (Press Release, Feb. 1st)

Goodbye Frying Pan, Hello Fire! "Beazer Homes USA (BZH) is ending its mortgage origination service and [has chosen] Countrywide Financial (CFC) as its preferred mortgage provider... Beazer CEO Ian McCarthy: Beazer was, effective immediately, discontinuing Beazer Mortgage Corp., and ending its related mortgage services relationship with Homebuilders Financial Network... Beazer home closings declined 24% in Q4'07 from Q4'06. Net new home orders dropped 29% from the prior fiscal year... Beazer will enter the Northwest Florida market together with The St. Joe Company (JOE)." (Conde Nast Portfolio, Feb. 1st)

WCI Returns Deposits On Condo Tower. Maryland: "WCI Communities Inc. has returned deposits to everyone with reservations for its Plaza Residences - the 23-story tower planned near the Columbia lakefront - while keeping the reservations intact... Land for the tower project was... purchased by General Growth Properties Inc. That connection, the proximity to planned downtown development and WCI's financial struggles have fueled speculation that WCI and General Growth might make a deal in connection with the property. Some opponents of the project have asked that GGP buy the property back." (Baltimore Sun, Feb. 1st)

WCI Communities, Inc. Denies Unfounded Lawsuit Claims. "WCI Communities, Inc., a leading builder of traditional and tower residences in highly amenitized lifestyle communities, today announced that the Company, and its subsidiary The Resort at Singer Island Properties, Inc. ["RSI"], have been named as defendants in a purported class action brought on behalf of purchasers of hotel condominium units in RSI. The complaint... alleges that the Company and RSI violated federal securities laws by not registering the offering of these units with the SEC. The Company and RSI believe that the charges are without merit and intend to vigorously defend themselves." (Fox Business, Feb. 1st)

Home Builders Surge, Overbought in Short Term; Top Play NVR. "I [think] NVR is carving out a double bottom base with a long term bottom at 400, with a run to 850 likely by sometime later this year or early next year... All homebuilders though [are] overbought in the short term and need to digest recent gains... A pullback to around 500 with light selling volume might offer a chance to scale into a long term position... I'm waiting [to] scale into a long term position on a pull back of 10 - 20% from current levels... Buying one of the homebuilder ETF's (XHB) or (ITB) is probably the better option for the risk-averse investor." (Tate Dwinnell in Seeking Alpha, Jan. 31st)

Central Ohio Homebuilder to Offer Free Finished Basements on Select Homes. "Dominion Homes, is offering free finished basements when homebuyers choose select Dominion Home models. Serving Columbus, Ohio, Greater Louisville and Lexington, Kentucky and Jeffersonville, Indiana, Dominion Homes has been building new homes since 1952... For a limited time, if a basement is included with a new Dominion Home, the homebuilder will finish it for free. Also, if a new homebuyer purchases a basement upgrade, Dominion will finish it for free as well."(Press Release, Jan. 31st)

6 Reasons to Short Housing Stocks. "Unlike financial institutions plagued by subprime asset woes, I don't see anyone "bailing out" the homebuilders... Unlike subprime securities which are a significant portion of the worldwide economy, homebuilder stocks are barely a blip on the radar screen, and there really is no strong incentive for the government to bail them out. Further, I don't see any incentive for private sector investors to bail out homebuilders anytime soon considering that revenues continue to deteriorate. [Also,] it appears to be time for homebuilders to bounce off the upper resistance level and continue their downward trend." (Mark Hines in Seeking Alpha, Jan. 31st)

Franklin Mutual reports 8 pct stake in Beazer Homes. "Franklin Mutual Advisers disclosed in a regulatory filing on Wednesday that it holds a 8.1 percent stake in home builder Beazer Homes USA Inc (BZH). The fund firm reported in a filing with the U.S. SEC that it owns 3.16 million shares in the company. Franklin Mutual did not reveal additional details such as when it acquired the shares or the purpose behind the acquisition of the stake." (Reuters, Jan. 30th)

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