Bulls Laud NVR and St. Joe - Housing Tracker

Quote of the Day

“Banks [are] not going to put new liquidity back into the real estate lending for some period of time which is a normal cycle… If another builder has commented that they expect their market share to increase I think that is probably reasonable because [for] a substantial amount of the private builders and maybe even some of the public builders it will be a complete adjustment period that will substantially, especially at the beginning of the turn, reduce the availability of competition to be in the marketplace and that will be something special for those that have been able to navigate through these difficult times.” - MDC Chairman and CEO Larry A. Mizel on MDC Holdings Q1’08 conference call. (Seeking Alpha Conference Call Transcripts, Apr. 27th)

Homebuilder Trends

Hanging On To The Boom. “Industry analysts: Homebuilder NVR (NVR) has remained profitable by offering a variety of prices, focusing on locations where it can have high market share and taking a conservative approach to land acquisitions… NVR [was under] bankruptcy protection [between] 1992-1993. [Since then,] instead of buying raw land, it [made] down payments -- often 10% or less -- with an option to buy land that already had infrastructure... And it exercised its options to buy lots only when consumers signed contracts… In the past year, NVR sold 2,456 units in the [northeast]… Zelman & Associates analysts: NVR will come out of the housing slump even stronger… and will probably expand geographically.” (Washington Post, Apr. 28th)

St. Joe Should Climb 25% - Barron’s. “St. Joe (JOE) recently paid off all its outstanding debt and eliminated its dividend… An upcoming airport should boost tourism to the Gulf Coast of Florida, where JOE owns 700,000 acres. St. Joe is exiting its building business in order to focus on its specialty -- entitled land (construction-ready property sold to developers). It already has almost 39,000 residential units in various stages of development, and 12.3M square-feet of commercial land, all of which sit on its balance sheet at below-market-value prices… Prominent value investors have recently taken big stakes in St. Joe… Barron's thinks shares could rise 25% over the coming 12 months.” (Eli Hoffmann in Seeking Alpha, Apr. 27th)

Homeowners Near Bomb Range File Suit Against Builder. Florida: “Some homeowners who live near the old Pinecastle Jeep Range in Orange County are taking legal action against their neighborhood's builder. The Army Corps of Engineers found old army munitions on the land in 2007... and [has] destroyed more than 100 buried military explosives in the area. Residents said their property values have plummeted since the discovery and they fear the land they live on is unsafe… Homeowner Tom Beard filed a class action lawsuit against the builder of his neighborhood, K. Hovnanian (HOV): "Some builders have already… hired people to come in and clear, and our builder didn’t.” (WESH TV, Apr. 27th)

Barclays North: The Decline Of A Real Estate Powerhouse. “Barclays North CEO Patrick McCourt: At the company's height in 2006, it owned about 2,000 lots in the county and 7,000 more spread across Arizona, Nevada, Idaho and South Carolina. BN had ventured into major commercial projects, too, including a 275-unit condominium building in downtown Las Vegas... More than 90% of the land the company acquired was for national builders such as Quadrant Homes and Centex (CTX)… [Then] the mortgage mess hit… McCourt tells of builders who put down $500,000 in earnest money to buy development-ready lots, then decided to forfeit the money rather than build. Suddenly, the last thing most builders needed was more land.” (Washington Herald Net, Apr. 27th)

To Win, You Must Keep Fighting. “[Homebuilders were] one of the best-performing groups of stocks in 2008… They are each still significantly below their highs of 2007, but in Q1’08, you would have made money being invested in [homebuilders]. The big money clearly thought that the housing stocks were way too cheap in December last year. After those stocks had already declined 50%-70%, it didn't make sense to panic. Investors needed to evaluate those companies based on their future prospects, compared to the then-current prices. The home builders were among the first stocks to begin to decline last year. Perhaps they will also lead the market when it ultimately recovers.” (Knoxville Biz, Apr. 27th)

Building Smaller, Selling Smarter. “Some homebuilders are cutting back on square footage, downgrading fixtures or offering fewer luxuries to keep costs down… Beazer Homes: "Square-footage reduction has been about 5% between 2007-2008." A 2007 national NAHB survey… found that 42% preferred a bigger house with fewer amenities, compared with 58% who preferred a smaller house with "high-quality products and amenities." [In] 2000, 51% wanted a bigger home with fewer amenities… Bill Gilligan, Toll Brothers (TOL) Washington area regional manager: "We have introduced slightly smaller homes in some of our communities to attract a greater number of prospective buyers." In its 2007 annual report, homebuilder NVR noted that its smaller home offerings had helped the bottom line.” (Washington Post, Apr. 26th)

Controversial Elgin Subdivision On Hold. “While Campton Hills residents [might] hope Ryland Homes (RYL) is abandoning the Stony Creek subdivision project, company officials say they do not intend to sell the land and leave… Bob Meyn, Ryland's VP of sales and marketing: Ryland has bought about a third of the site and has contracts to buy the rest… Stony Creek is [considered] the impetus behind [the] 2007 referendum to incorporate Campton Hills [so residents] could have more control when it came to preserving the area… Ryland is still building and selling homes at Cedar Grove, a single-family and townhome development just north of the Stony Creek site.” (Chicago Daily Herald, Apr. 26th)

Auctions Aim To Sell Slow-Moving Inventory. California: “Two auctions in the East Bay next week show that developers and builders are eager to sell off their slow-moving homes… [In] William Lyon Homes' Vista Del Mar, a master-planned community in Pittsburg… thirty-seven single-family, detached homes will be auctioned off… Minimum bids start at $265,000 for… homes [that] were priced previously from $470,990 to $836,044… In downtown Oakland, Meritage (MTH) Metropolitan Living will be auctioning off its remaining 34 homes.” (Contra Costa Times, Apr. 25th)

Diversified Property Buys 2 Centex Residential Developments. “Diversified Property Group has purchased two of 19 Metro Detroit Centex Homes properties, coinciding with the Dallas builder's decision to exit the Michigan market. [Leaving] only two national builders - Pulte Homes and Toll Brothers -- still working in Southeast Michigan, Diversified principal Howard Fingeroot said. Diversified bought out theCountry Club Village of Rochester at the end of March. There were 275 lots, with 85 left undeveloped. Diversified builds homes under the name Pinnacle Homes. The company also bought 100 acres of vacant land in Ypsilanti Township, where Centex had a 107-parcel, site plan-approved undeveloped property.” (Michigan Business, Apr. 24th)

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.

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Comments

[User 184486]

All the "good news" is vague and fabricated - the bad news on the other hand is solid and rooted in facts and numbers. The homebuilders are mostly screwed except one or two. LEN and others like it (PHM HOV) are drowning in debt and are illiquid. That is the real deal.