Housing Market Tracker - Small Homebuilders Whipsawed by Credit Crunch

Quotes of the Day

The bonus plan “pays him simply for existing.” - Jennifer O'Dell, an official of the Laborers' International Union of North America, speaking about CEO Robert Toll of Toll Brothers Inc. The company’s board recently approved a compensation plan for Toll that will award him bonuses this year and onwards-- almost regardless of the company’s performance. (Philly Burbs, Mar. 23rd)

“We have no more loan denials today than we did five years ago.” - Pulte Homes VP Jill Hoffman, who says the problem of lenders refusing to make loans after contracts to buy homes have been signed is not that pervasive. (Naples News, Mar. 22nd)

"Lennar has fallen off a cliff. It could cut home prices, offer a flat screen TV and a pony - and they still wouldn't sell." - Vicki Bryan, a homebuilder analyst at Gimme Credit. (Financial Times, Mar. 24th)

Homebuilder Stocks

Lennar Faces Another Tough Quarter. “Lennar (LEN), the second largest US homebuilder… is expected to [announce] a fourth consecutive quarter of losses. Last year Lennar lost $1.9 billion… Its stock price is down by about two-thirds in the past 12 months. Lennar has performed worse than competitors such as KB Homes (KBH) and Hovnanian (HOV)… Home sales have been falling over the past few quarters in spite of slashing the prices of its homes... The company sells low-end properties, often to first-time buyers, [an area] likely to suffer most in a recession. Analysts will [also] be watching the company's exposure to joint ventures closely.” (Financial Times, Mar. 24th)

Dust Control No. 1 In Air-Quality Abuses. Arizona: “Dust control was the most common air-quality violation in February in Maricopa County, with 45 settlements ranging from $1,464 to $20,326. In February, Pulte Homes Corp. (PHM) in Scottsdale agreed to pay $160,000 to resolve 44 reported air-quality violations that occurred from 2004 through mid-2007, including failure to obtain an earthmoving permit and failure to cover haul trucks.” (Arizona Republic, Mar. 24th)

Homebuilders ETF Approaching Resistance. “Heads up on the Homebuilders ETF (XHB), which is nearing a confrontation with major resistance between 22.7 and 23.30. Let's notice that the sharply declining 200 DMA at 23.09 is right in the middle of that range and presents a major test of the bottoming/recovery process in the sector. However, based on my near AND intermediate-term technical work, the XHB will hurdle the above-mentioned resistance zone on the way to 25.00.” (FX Street, Mar. 24th)

Beazer Homes USA Inc. Gains 15.26% On Higher Volume. “Beazer Homes USA Inc. (BZH) gained 15.26% Friday on volume of 3,578,808, which was higher than its three-month average 2,229,720, to end the day at $9.97.” (Trading Markets, Mar. 24th)

Award-Winning Builders Take Over Incomplete Subdivisions In Tough Market. Michigan: “Livonia Builders and Pinnacle Homes, a homebuilding firm run by a former Pulte executive, has picked up four half-done subdivision projects throughout metro Detroit after workout deals with banks. The projects are unfinished subdivisions in Lyon Township, Commerce Township, Lake Orion and Novi… Howard Fingeroot, managing partner of Pinnacle Homes and the former president of Pulte Land Development Co., said some of the projects were purchased from the banks. In other deals, Pinnacle agreed to finish building the homes and handling marketing and sales for the banks.” (Chicago Free Press, Mar. 23rd)

Culpeper Hopes Plant Will Resolve Sewer Issues. Virginia: “Culpeper Utility Partners/Angler Development proposes to build a 2.5 million-gallon sewage-treatment plant… Three years ago, the county entered into a similar [public/private] agreement with Centex Corp. (CTX), which proffered a $20 million 250,000-gallons-per-day sewage-treatment plant during a major rezoning for Clevenger's Village... It’s [now] owned by the county, which had hoped to make it a source of revenue through tap fees from [new] developments. The completion of that plant was supposed to be timed so that Centex could start building homes… when it was ready, but the construction slowdown has resulted in a new plant with no new customers.” (Fredericksburg.com, Mar. 23rd)

High Pointe Has Buyers Seeing Double With Two Incentives. “New Jersey: “High Pointe, Ryan Homes' single-family home community in Barnegat, is offering two incentives. Now, qualifying buyers who finance through NVR Mortgage, a Ryan Homes subsidiary (NVR), will receive an included finished basement plus options at 50% off to personalize the home. With homes priced from the $370,000s, High Pointe offers floor plans of up to 3,500-sf.” (Asbury Park Press, Mar. 23rd)

Market Conditions Don't Slow Pace Of Big BWI Resort. Maryland: “A weakening national economy won't affect development of the $600 million Crosswinds Resort project in Linthicum… A project similar in scale, the $400M Annapolis Towne Centre at Parole, recently encountered a setback with a national homebuilder. Hovnanian Land Investment Group LLC, backed out of plans to build a $23M condo project at the 33-acre mix of office, retail and residential space.” (Hometown Annapolis, Mar. 23rd)

Northeast’s Trend-Setting Development Slow Going. California: “The City in the Hills’ development first envisioned in the late 1990s inaugurated growth in northeast Bakersfield. Plans to house 11,500 people… opened doors for a batch of developments now sprouting nearby. So far, however, permits for just 439 single-family homes have been pulled at City in the Hills, said Phil Burns, Bakersfield’s building director. Construction has largely slowed… So far, D.R. Horton (DHI) has pulled 180 permits, city figures show. Last month, DHI included homes in its two City in the Hills neighborhoods in a sale of some Southern California holdings with discounts of up to 50%.” (Bakersfield Californian, Mar. 22nd)

Martha Stewart's Style Dresses Up Home Plan In Florida. “In November, KB Home unveiled its ninth co-branded Martha Stewart community in Ormond Beach... And it has quickly taken off. To date, all but nine of its 40 home sites… have been snapped up. Sales have been so good that the 87 lots planned for Phase II… will open for sale in the next couple of months… Sales of existing single-family homes fell 29% statewide in 2007 (Florida Association of Realtors.) That Deer Creek at Hunter's Ridge has proved such a runaway hit, then, is largely attributed to Ms. Stewart's star power.” (Pittsburgh Post Gazette, Mar. 22nd)

DEMOGRAPHICS: Single Women Praise Lennar's Designs. “National Association of Realtors: Single women now make up more than 22% of the new home buyers market and are increasing in numbers every day. Second only to traditional two-income families and nearly triple the rate of single men, single women now have more options than ever in new home designs tailored for their lives. "When I decided to buy a home [I wanted] low maintenance and manageable payments I could afford on one income," said Paula Alexander, a new homeowner at Lennar's Barrington at Providence community.” (Las Vegas Review Journal, Mar. 22nd)

Suburban Woman Faces 8 Years In Prison For Embezzling From Employers. Illinois: “Authorities say Sonia Velazquez forged checks and deposited nearly $180,000 from two companies in Chicago suburbs... into her personal account… The companies are Wiseman-Hughes Enterprises in Wheaton and the Lennar Homes Corporation in Hoffman Estates.” (Morris Daily Herald, Mar. 22nd)

Meritage Promotes Volunteerism At Canoa Ranch Fair. Arizona: “Meritage Active, a division of Meritage Homes Corporation (MTH), hosted its first Annual Volunteer Fair at Canoa Ranch's model center park on Saturday. Among the six organizations taking part were the Community Food Bank of Green Valley, Community Performing Arts Center Foundation, Country Fair White Elephant, Green Valley Assistance Services, Green Valley Recreation and Paws Patrol. Meritage spokesperson Ashley Engler said the purpose of the fair was to raise awareness about the needs of local non-profit organizations and encourage local residents to get involved.” (Green Valley News, Mar. 22nd)

Union Accuses Horton Of Illegal Hiring Ploy. “A class-action lawsuit [was] filed Wednesday in Middlesex County Superior Court center[ing] on work at D.R. Horton's Plaza Grande at Garden State Park in Cherry Hill. The New Jersey Regional Council of Carpenters, with 17,000 members, said Horton fired a union contractor and replaced it with a nonunion subcontractor who hired undocumented workers. Those workers were [allegedly] "misclassified" as independent contractors and paid in cash, allowing Horton to avoid paying benefits and taxes. That practice would violate the state's racketeering acts, as well as a 2007 law designed to protect vulnerable workers and punish employers who try to avoid taxes.” (Philadelphia Inquirer, Mar. 21st)

Mortgage Mess Hits Home For Nation's Small Builders. “Plummeting home sales across the U.S. have left many builders with unsold inventory and land. Some are falling behind on interest payments [and] beginning to face foreclosures on developments… Builders' problems are now threatening losses for small and medium-size regional banks. Muscled out of the mortgage business by large national lenders, many of these banks flocked to construction lending as the housing market boomed... Real estate research firm Foresight Analytics: Delinquencies on loans to build single-family houses reached 7.5% of the value of all such loans in Q4, up from 2.1% a year earlier… The NAHB’s Atlanta affiliate estimates that as many as 20% of local builders are behind on interest payments.” (Wall St. Journal, Mar. 21st)

Valley Urban-Retirement Communities On The Rise. “The latest breed of retirement community departs from the master-planned, golf-course and recreation-center variety made popular across Arizona and California by the entrepreneur Del Webb (Pulte Homes). Seeking to lure a surge of affluent baby boomers accustomed to the hustle and bustle of city life, urban-retirement high-rises began sprouting near cultural and retail cores in metro areas like Chicago and Seattle. The units, which often mirror luxury hotels, typically cost around $3,000 a month and include meal plans, shuttle buses and cleaning services.” (Arizona Republic, Mar. 21st)

Only Four Homes Remain At K. Hovnanian's Tides At Seaboard Point. New Jersey: “K. Hovnanian's Tides at Seaboard Point is nearing sellout — just four homes remain. According to the developer, the Tides at Seaboard Point offers waterfront homes in a Jersey Shore location with an amenities package... The community, which is bounded by the Atlantic Ocean and Hereford Inlet, features 96 condominiums, with prices starting in the mid-$500,000s.” (Asbury Park Press, Mar. 21st)

Grand Rapids Homebuilders To Try And Sell Their Own Building. Michigan: “The Grand Rapids Homebuilders Association… are trying to sell their East Beltline headquarters… The association built the current building themselves and have been in the location for three years. Judy Barnes, CEO of the association says that due to the economic climate, some of the earlier pledges to pay for the construction of their building have gone unfulfilled.” (WZZM 13, Mar. 21st) Orlando-Area Builders Stay Step Ahead. “Charles Wayne Consulting Inc. report: Production builders in the Orlando area built and sold more than $2.5 billion worth of single-family homes in 2007, averaging $373,000/home. The 20 busiest builders closed on 5,962 new homes in Orange, Seminole and Osceola counties during 2007, or 87% of the 6,833 subdivision homes sold [there]. The 20 largest builders grossed about $2.2B. In 2006, production builders locally sold almost twice as many homes -- 11,436 – [for] more than $4B and [at] an average price of $375,300. KB Home was the top builder for the year locally, closing on 649 single-family homes in 15 subdivisions.” (Orlando Sentinel, Mar. 20th)

D.R. Horton-Schuler, Hoku Offer Solar Power. “Two companies are offering solar power at a new Oahu community. D.R. Horton-Schuler Division, a subsidiary of D.R. Horton Inc., and Hoku Solar, subsidiary of Hoku Scientific, have joined a marketing program to offer two-kilowatt photovoltaic systems to home buyers at the Kahiwelo at Makakilo community. Homes also will be offered solar water heating systems and features that qualify them as "HECO Bronze" under Hawaiian Electric Industries' sustainable housing programs. The bronze standards require Energy Star ceiling fans, compact fluorescent lamps and energy-efficient air conditioners.” (Pacific Business News, Mar. 20th)

Get Seeking Alpha's housing market coverage by email -- it's free and takes only seconds to sign up.

Comments

[proseadvocate:]

I don't consider it an article but more of a digest of newsblurbs which is fine as they appear to relate to the title which is deceptive since, it buys into the corporate apologists who suggest that nobody saw it coming and that it is because of a "credit crunch" or "liquidity" crisis. It's predicated on a pretext that 40-1 leverage is acceptable and lending to folks who could never pay the loan is not predatory loan sharking. I hope every bank that did it goes down suing the bosses who caused it. Then we'd have a really free market economy. It won't happen as long as the billionaires at the top own the Republican's that incouraged the pillage.

2008 Mar 25 02:05 AM