Housing Market Tracker - Investors Bullish While Homebuilders Themselves are Bearish

Homebuilder Stocks

Looking Way, Way Over The Valley With Housing Stocks. “Surprise: Builders were some of the best-performing stocks in the dismal Q1. KB Home (KBH) was up 14.5% to $24.73 on Monday. Pulte Homes (PHM) jumped 38% to $14.55. Ryland Group was up 19.4% to $32.89… Some of the first-quarter strength in builders’ stocks probably reflects “short covering” by bearish traders who had expected the stocks to slide and have been buying to close out their positions. But the short position in KB Home, for example, was the same in mid-March as it was at the end of November. Not much covering going on there -- yet.” (LA Times, Apr. 1st)

Pulte Cuts Jobs; Cites Struggling Real Estate Market. “The South Carolina Coastal Division of Pulte Homes cut 10 employees last week, citing less need for the workers because of the sluggish housing market. Eight of the jobs were in Pulte's two local Del Webb Communities: Sun City Hilton Head and The Haven at New Riverside, said Jon Cherry, division president. The other two positions were at Sun City Charleston, Cherry said. The job cuts were primarily construction superintendents and project managers… All three developments are age-restricted.” (Island Packet, Apr. 1st)

Beazer Survey Indicates Consumers More Bullish on Homeownership. “Beazer Homes (BZH) survey: Recognizing that the current market favors buyers, 77% of respondents said that with good credit and a down payment, the time is right to buy a home, a 20% upswing from a similar January survey… Nearly three of four surveyed (74%) agreed that the availability of homes for sale combined with special incentives make this a true "buyer's market." And, more appear poised for action. Sixteen percent of survey respondents report that they plan to purchase a new home as their primary residence in the next 12 months -- a 45% increase over the January survey results.” (Building Online, Apr. 1st)

The Grossest Executive Perk of All? “Corporate Library study: J. Chad Dreier, CEO of the Ryland Group (RYL)… who earned almost $49 million in fiscal 2006, received a total of $5,822,177 in tax gross-ups the same year. That included more than $5.75M in "tax assistance" on the vesting of $6.5M in restricted stock… Dreier also received tax gross-ups of $23,202 on life insurance, $10,641 on term life insurance premiums, $3,564 for tax assistance and health and fitness costs, and $32,720 for aircraft usage taxes for spousal and family… travel. [The report] said Ryland's filings for 2007 are expected to yield similar results for Dreier.” (Portfolio.com, Apr. 1st)

No Regulatory Overhaul for 2008. “Treasury Secretary Henry Paulson's [regulatory] proposal for financials is a good starting point, but nothing more. There are simply too many vested interests to allow any real change to occur in the midst of a presidential election... Looking out into 2009 and beyond, any changes could have a significant impact on many companies, especially those that are reliant on mortgages. Bluntly put, the long-term projected rates for the likes of Washington Mutual (WM) and D.R. Horton (DHI) are now even more questionable than before.” (Fox Business, Apr. 1st)

Centex Downsizes Footprint For Cheap. “Centex (CTX) Homes will sell 8,500 lots… 10% of its total lot holdings… to a joint venture called Corona Land Company which is led by RSF Partners and includes Farallon Capital Management and Greenfield Partners. Corona will pay an expected $161 million for the portfolio of… properties in 27 neighborhoods across 11 states, with a high concentration in California and Nevada. Centex anticipates a tax refund related to the sale of $294M, totaling $455M in aggregate cash… Centex said the book value of the properties sold was approximately $528M... The original cost basis of the land was an estimated $935M.” (Forbes, Apr. 1st)

Rollins To Buy Centex's Pest Control Biz For $137 Mln. “Consumer services company Rollins Inc (ROL) said it agreed to buy the pest control business of U.S. homebuilder Centex Corp. for about $137 million in cash… The deal is expected to close in early April, the companies said. Rollins said it plans to operate the pest control business, HomeTeam Pest Defense, separately, along with its other wholly owned pest management subsidiaries… Dallas-based Centex, whose brands include Centex Homes, Fox & Jacobs Homes and CityHomes, said the deal would sharpen its focus on its primary business of homebuilding.” (Reuters, Mar. 31st)

Builder 100: Sneak Peak. “D.R. Horton retained its title [in 2007] as the biggest builder in America, closing 37,717 homes, a 29% decline from 2006… The big unanswered question is whether the combined market share of the industry’s 100 biggest companies will drop because of their exposure to some of the hardest hit markets last year... Last year’s list showed that the top 10 builders accounted for 25.71% of housing sales, up from 20.97% in 2005.” (Builder Online, Mar. 31st)

Gilbert Hospital Inks Deal To Buy Land In Florence. Arizona: “Gilbert Hospital has signed a deal to purchase land for a new 50,000-square-foot hospital in Florence. The health-care group is in escrow to buy 10 acres from Pulte Homes at the southwestern corner of Franklin Road and Hunt Highway. Plans call for closing the land purchase later this year, pending zoning approval.” (Arizona Central, Mar. 31st)

Builder Finds Success In Lower-Priced Houses. “Homebuilder Centex is forging ahead with a strategy that takes aim at the Tennessee market for homes priced at $250,000 and below… Now Centex is the area's third-biggest homebuilder by one measure, and one of the few big builders to post an increase in volume last year… Centex is wagering on the lower and middle segments of the Middle Tennessee real estate market. Often ignored during the housing boom, these lower-priced homes could now become a potential life buoy for the struggling construction industry... MarketGraphics: The strategy resulted last year in combined sales of $83.2 million, up 7% from 2006.” (Tennessean.com, Mar. 31st)

New Report Exposes Multi-Billion Dollar Handout for Corporate Homebuilders Who Helped Cause the Housing Crash and Mortgage Crisis. “Laborers’ International Union of North America report: LIUNA supports many provisions of The Foreclosure Prevention Act... But under the bill’s little publicized “carry-back” provision homebuilders [could] apply losses from 2006 and 2007 as far back as five years against taxes paid on profits – a three-year extension of the current carry-back allowance... The 15 largest corporate homebuilders would receive a third of the benefit of the carry-back provision… The carry-back provision could further decimate the housing market by providing an incentive for builders to dump existing inventory at any price, knowing they could carry back the loss.” (Press Release, Mar. 31st)

Institutional Investor Magazine Names Toll Brothers' Joel H. Rassman Top CFO and Company 'Most Shareholder Friendly' in Homebuilding Sector. “Toll Brothers (TOL), Inc. today announced that in separate surveys, Institutional Investor Magazine has ranked Joel H. Rassman as the top CFO, and Toll Brothers, Inc. as the Most Shareholder Friendly Company, within the Homebuilding/Building Products Sector for 2008. This follows Institutional Investors' ranking of Robert I. Toll as the top CEO in the sector in January 2008. According to Institutional Investor, more than 600 analysts and portfolio managers at some 360 money management firms responsible for investing more than $8 trillion in U.S. stocks participated in selecting Institutional Investor's 2008 list of Top CFOs and America's Most Shareholder-Friendly Companies.” (Press Release, Mar. 31st)

DR Horton Shares Climb on ‘Un-Auction’. “Homebuilder DR Horton tried… this past weekend: unloading inventory and cleaning up the image of the housing market -- at least in a few towns in Southern California. The company held what it called an “Un-Auction”: first-come, first-served home sales, with would-be bidders lining up overnight and for days on end... These patient consumers toughed it out on line to get a shot at 30% discounts on new houses. One shopper was able to save some $130,000 on a new condominium. And DR Horton was able to sidestep the “messy fallout” of a standard auction.” (CNBC, Mar. 31st)

Top Court Reject Circuit City Appeal. “Supreme Court justices refused to rule on an appeal by two executives who sued homebuilder D.R. Horton Inc. for allegedly committing fraud and breach of contract. The dispute was referred to arbitration, and the arbitrator ruled against the executives on some of their claims. Meanwhile, a court ruled in favor of a third executive who had also sued D.R. Horton on similar claims. The case centered on whether the arbitrator should have deferred to the court and ruled the same way. The 9th Circuit Court of Appeals ruled that they do not.” (Thomson Financial via CNN Money, Mar. 31st)

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