Housing Market Tracker - Some Homebuilders Tackle CEO Pay

Quotes of the Day

“Performance wasn’t achieved.” – A Lennar spokesperson, on why CEO Stuart Miller didn’t receive his nearly $10 million bonus this year. Lennar has a pay-for-performance compensation and bonus program. (CNBC, Apr. 8th)

The Foreclosure Prevention Bill “would help homeowners, homebuyers and homebuilders." – Montana Democratic Sen. Max Baucus, a supporter of the bill, which easily passed a test vote in the Senate Tuesday by garnering a majority of bipartisan votes. (Reuters, Apr. 8th)

Homebuilder Stocks

Chances of Homeowner Relief Losing Momentum in Senate. “A bipartisan effort in the Senate on tax breaks to stabilize the housing market and other aid for homeowners at risk of foreclosure began to crumble on Tuesday, as the White House threatened a veto, saying the bill would only make things worse… House Democrats, meanwhile, said they would pursue their own, more expansive homeowner assistance bill, and would support only a few provisions in the Senate measure.” (NY Times, Apr. 9th)

A C.E.O. Feels His Shareholders' Pain. “Lennar (LEN) reported a $1.9 billion loss for 2007… In February, Lennar Corp.’s board granted CEO Stuart Miller a restricted stock bonus worth $9.95 million — in addition to his salary (and perks). But company filings… show that Miller received no cash bonus "as a result of the company's failure to earn a profit for the fiscal year." Also, Lennar's proxy said three top officers "forfeited significant equity grants as a result of the company's failure to achieve certain financial performance goals." Miller still owns 68% of Lennar and did receive his $1M salary… and assorted other benefits.” (Conde Nast’s Portfolio.com, Apr. 8th)

Pulte CEO's Pay Takes 38% Hit. “Pulte Homes Inc. (PHM) cut CEO Richard Dugas' 2007 compensation by 38%, to $9.79 million, in a year when the company's shares plunged 68%. Dugas got a $1M salary and was awarded stock and options worth about $8.7M, the Bloomfield Hills-based company said Monday in a U.S. SEC filing. Dugas received total compensation of $15.7M in 2006.” (Detroit Free Press, Apr. 8th)

Centex Starts Presales On Apopka Townhomes. “Centex Homes (CTX) last week announced it has 177 3-4BR townhomes open for presales in Emerson Park. The new townhomes in Apopka, which range from 1,650-2,241-sf, are priced from the $170,000s. Three model townhomes currently are under construction and are expected to open in late summer. Centex also is building 322 three-, four- and five-bedroom single-family homes at Emerson Park priced from $200,000.” (Orlando Business Journal, Apr. 8th)

Elgin Council To Vote On Villa Olivia Plan. “Chicago, Illinois: City Manager Olufemi Folarin said Monday the ongoing lawsuit between Villa Olivia club owners and the city of Bartlett over an agreement prohibiting the development of a golf course has no bearing on whether the project should be assessed… Club owners, along with area developer Ryland Homes, have proposed turning the land into a 126-acre subdivision, with 279 townhomes and 96 single-family houses while leaving 41 acres for common open space. Bartlett rejected a request in 2005 from Villa Olivia owners to release them from a 1987 covenant that prohibits the land's development until 2022.” (Courier News, Apr. 8th)

A Tax Break for Bubble Heads. “Homebuilders argue that they need relief [provided by the Senate’s Foreclosure Prevention Bill] because their sector, which provides a great deal of domestic employment, is on the ropes, and they're finding it more difficult to raise capital. Which is as it should be. After bubbles pop, those who screwed up really badly fail and get taken over by creditors or opportunistic investors. Those who have sound underlying franchises but merely got a little carried away can survive if they take painful restructuring moves. This is what is known as market capitalism.” (Slate.com, Apr. 8th)

Remodeling Continues During Housing Slump. “National Association of Home Builders: Remodeling activity showed pressure from the housing downturn during Q4’07… Nevertheless, while housing starts have fallen sharply from their peak in early 2006, the remodeling market has exhibited a much smaller decline… [Some] 43% of surveyed remodelers reported an increase in billing in 2007, while 25% reported that billing stayed at the same level as in 2006. [In] 2008, 51% predicted a dollar-volume increase and 27% forecasted maintaining the same volume for the entire year… Kitchen Cabinet Manufacturers Association: Sales of kitchen cabinets and bath vanities declined in January compared to January 2008.” (Kitchen & Bath Design, Apr. 8th)

Lennar Corporation, Leading National Builder of Quality Homes Appoints New Charlotte Division President. “Lennar Homes announced today the appointment of Ric Rojas to the position of President for the Charlotte Division. In his new position, Mr. Rojas will place special focus on strategic planning, product research and development, optimization of operations and quality, sales and marketing, company budgeting, financial forecasting and an overall increase in efficiencies across the organization.” (Press Release, Apr. 8th)

CTX Falls on Home Resale Data. “Existing home sales are considered a good indicator of upcoming construction, which means more trouble could be ahead for CTX. Technical indicators for CTX 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 an April bear-call credit spread above the $30 range. CTX hasn't closed above 30 since August, and could gain up to 17.7% before this trade loses money.” (Market Intelligence Center, Apr. 8th)

Boomers Loom in D.C. Housing Market. Washington D.C.: “Dan Fulton, president of Fulton Research and Consulting: By 2010, there will be more than 100,000 households formed in the 55-74 age range [estimating that] 45% of the housing demand from empty nesters will be for new homes… Many of these people will have to sell their existing homes, flooding the existing home market with inventory, which will create a competitive pricing environment [and] exert downward pressure on pricing, improving affordability… [Fulton] expected to see an increase in lower-income households. By 2012, there would be roughly 492,114 households making less that $35,000/year in the metro D.C. market.” (Big Builder Online, Apr. 8th)

Homebuilders Emerge From the Penalty Box. “Homebuilders [are] up ~28% on average YTD... If the Dow is indeed bottoming out, we would feel comfortable saying that homebuilders will have telegraphed a recovery in the major index… Investors should take the grim headlines with a grain of salt and remember that homebuilders are taking actions to weather the industry blowup: reducing inventories, amending covenants, and maximizing cash flow as they shift to a supply rather than demand driven model. We’re incrementally more positive going into the spring selling season, where there is arguably room for consensus to be surprised.” (Daniel Jacome in Seeking Alpha, Apr. 7th)

Updated Short Interest Data. “The stocks with the second and third highest short interest as a percentage of float are homebuilders Lennar and KB Homes (KBH). Over the last month, however, short interest has decreased as these stocks have risen. This adds to the general consensus that short covering has been prevalent in the homebuilder sector.” (Bespoke Investment Group in Seeking Alpha, Apr. 7th)

Developer Floats 'Inland Port' Plan For Indiantown. Palm Beach: “At the height of the housing boom, Ascot Development LLC followed Centex Homes to rural Indiantown with plans to build 2,250 houses. But Centex backed out of its biggest project there in May, and Ascot is now trying to reposition more than half of its 555-acre tract as an "inland port." [for Palm Beach] If [not,] Ascot and [its partners in] Indiantown Holdings - would proceed with the 2,250 houses as planned… The owners paid $58.5 million for the property in July 2006. Unlike Centex, Ascot doesn't have the option of walking away.” (Palm Beach Post, Apr. 7th)

Transcona Makeover. “Developers from NVR Holdings (NVR) could break ground as early as next week on a multi-million condominium undertaking in Transcona — temporarily called "The Bond Project" — which will be built on the former Dominion Yards at Bond Street and Melrose Avenue. The first phase — estimated to cost $4 million — contains 18 units.” (Winnipeg Sun, Apr. 7th)

Real Estate Briefs. “Florida: Ryland Homes (RYL) will unveil a new homebuyer incentive offer April 4-13 at 20 communities in the Tampa and Fort Myers regions. Ryland said the incentive offer includes closing cost contributions of up to 6% for select model homes, free fees for buyers who use Ryland Mortgage Co. and Ryland Title Co…. designer kitchen upgrades [and] $5,000 worth of “flex cash” that can be applied toward the down payment, closing costs or upgrades in their new homes.” (News Press, Apr. 6th)

Dear Readers: Read anything you liked on this subject and didn't see it here? Why not post a link or a quote from the article in our comments section. Share the wealth! - Ed.

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

Comments

[Bomb Squad]

Another good round up... don't worry about executive managment - they are still going to make bank. They are very clever as to how they hide it... take it from an insider.