Beazer Defaults, Reassures Investors - Housing Tracker

Quote of the Day

"To take a $60,000 hit on a house that I bought three-years ago – it just isn't right.” – Indiana homeowner Kevin Bardsley, complaining that homebuilder Ryland Homes was reducing home prices too much in Mr. Bardsley’s Indiana development. (WCPO TV, May 5th)

Homebuilder Stocks

Beazer Says It Got Default Notice, Will Resolve Issue Soon. “Beazer Homes USA (BZH) said late Tuesday that it got a default notice on some of its debt… from The Bank of New York Trust Company National Association, a trustee for a $103.1 million unsecured junior subordinated note Beazer has to pay off on July 2036. The trustee said Beazer hasn't provided required information, including audited annual and quarterly results, the company explained in a regulatory filing. If that's not remedied within 30 days, Beazer will have defaulted on the debt. Still, Beazer said it will be able to resolve the issue on or before May 15.” (Dow Jones via CNN Money, May 7th)

Calvert: None of America's Largest Homebuilders is Fully Green in Environmental and Sustainable Practices, But KB Home Ranks Highest. “Calvert Group underwriter and distributor of mutual funds specializing in "sustainable and responsible investing" [and] Boston College Institute for Responsible Investment report: KB Home (KBH) is "clearly leading the homebuilding industry in terms of environmental sustainability," while four other homebuilders -- K. Hovnanian (HOV); MDC Holdings (MDC); Standard Pacific (SPF); and last-place finisher NVR Inc. (NVR)-- are on what the report terms the "sustainability bottom rung." For best-to-worst rated, the balance of the top 13 U.S. homebuilders are: tied for #2 D.R. Horton (DHI), and Pulte (PHM); #4 Centex (CTX); #5 Lennar (LEN); #6 Ryland (RYL); #7 Beazer; #8 Meritage (MTH); and #9 Toll Brothers (TOL).” (Press Release, May 6th)

Big Home Builders Not So Green, Study Finds. “According to the investment company Calvert Group and Boston College Institute for Responsible Investment study, houses account for 21% of the nation's energy use, 33% of timber use and 45% of all new land development. They consume nearly 11% of the nation's fresh water.” (Palm Beach Post, May 6th)

D.R. Horton Posts $1.3 Bln Loss; Cuts Dividend. “D.R. Horton halved its dividend and posted a quarterly loss of $1.3 billion… after cutting prices and sweetening incentives to boost sales… Home sales fell by a third, and orders declined by nearly 25%. The loss amounted to $4.14/share for FQ2 ended March 31, compared with a year-earlier profit of $51.7M, or $0.16/share. Home-building revenue fell 40% to $1.62B. [Closings] were down 31.4% from a year earlier. The average selling price fell 7.7% to $237,803… Horton took a FQ2 income tax expense of $714.3M for the value of deferred tax assets it may not be able to use in full to offset taxes on future earnings.” (Guardian UK, May 6th)

Tomnitz Rejects Bulk Land Sales. “D.R. Horton FQ2 conference call: CEO Don Tomnitz dismissed… chief competitors’… "land light" model, [saying] Horton is the "most flexible" of the "top five or six" public homebuilders. Tomnitz rejected the possibility of a bulk land sale to decrease the company's existing 5.2-year supply to reach the stated goal closer to a high three-year or lower four-year supply. "We are building through our existing land and lot supply, and as we work through it, we are deriving a 50% return. We'll continue to use impairments if needed, but we can get a better return than if we did a bulk sale to an investor." (Big Builder Online, May 6th)

Land Advisors Acquires Prominent Broker. Arizona:“Land Advisors Organization on Monday announced the acquisition of Weinstein & Harris, a brokerage firm specializing in residential master-planned land and lot sales in the Phoenix metro area. Weinstein & Harris CEO Greg Vogel: "Increasingly, we believe the path to better serve clients will be based on focused industry expertise, strengthening our positioning the marketplace as the leader in land brokerage and broadening our service for clients.” On its website, Weinstein & Harris lists Shea Homes, Lennar, Standard Pacific, and Pulte among its clients.” (Big Builder Online, May 6th)

Pulte Homes Organizes Bosque Spruce Up. “Pulte Homes is spearheading cleanup projects near the Willow Creek area of the Bosque in Rio Rancho. The company partnered with Rio Rancho's Parks, Recreation and Community Services Department and Friends of Rio Rancho Open Space for various projects, which include minimizing potential fire hazards, removing non-native species and tumbleweeds, and grooming trails. Pulte Homes of New Mexico is the developer of Loma Colorado, a 433-acre master planned community in Rio Rancho.” (New Mexico Business Weekly, May 6th)

Builders Hope To Hook Home Buyers With Price Guarantees. “While other builders like KB Homes and Taylor Morrison will lower the price of a home if it sells for less to someone else before the close of escrow… Signature Properties, based in Pleasanton, has a few communities with the Live Secure program, or a two-year price guarantee… There are some restrictions to the deal. The price guarantee only works with a home sale within two years, if the local office is still open and offering the same home plan and provided the seller can supply original paperwork which has the resale price.” (Mercury News, May 6th)

Fishkill, Builder And Scouts Join In Arbor Day Ceremony. “The Town of Fishkill, NY [planted] four maple trees on Arbor Day, April 25. Toll Brothers donated the trees, which were placed at Shepheard Memorial Park by members of Cub Scout Pack 54 and the Town of Fishkill Parks Department... “Toll Brothers, which already has assisted the town, and our residents, by providing less-than-market cost condominiums through our Housing program, has shown its sense of community once again by contributing these lovely maple trees,” said Fishkill Supervisor Joan Pagones.” (Mid-Hudson News, May 6th)

Cash Picture Rosier for Hovnanian. “Hovnanian Enterprises Inc. on Monday raised its cash flow forecast to more than $300 million for the year from an earlier target of more than $100M. Vicki Bryan, senior high-yielding bond analyst for Gimme Credit LLC: "That is a significant improvement and should be enough to relieve some of the liquidity concerns." Bryan rates Hovnanian "outperform." Hovnanian said it reduced net debt by $30M. Net contracts for FQ1 fell 29% from a year earlier to 2,226 homes. The company said it will report additional costs of as much as $275M for the FQ2 related to the decreasing value of land.” (Asbury Park Press, May 6th)

Hovnanian Feels Impact of Housing Slowdown. “Hovnanian Enterprises, Inc., says its FQ2’08 finished with 2,494 homes delivered during the period, a decrease of 21% when compared to FQ2’07. Hovnanian: “As a result of the continued deterioration in sales pace, pricing and gross margin since the end of the company's Q1, the company expects to incur $225M-$275 million of non-cash pretax charges related to land impairments and write-offs of predevelopment costs and land deposits in Q2.” (Default Servicing News, May 5th)

Homebuilders’ Group Reactivates PAC Giving. “The National Association of Home Builders [will] reactivate its political action committee and once again give political contributions to federal candidates. The board of trustees for BUILD-PAC unanimously voted Friday to resume making contributions. The trade association had shut down the political action committee on Feb. 12 after complaining that Congress was paying little attention to the suffering of their industry [and] after lawmakers did not include tax incentives to benefit homebuilders in the economic stimulus package signed into law earlier this year. Since then, the Senate has passed legislation that includes a tax break for homebuilders, and the House is considering a bill.” (The Hill, May 5th)

Boomer Retirees Are Loving What Texas Hill Country Affords Them. “Texas Hill Country: Prices have escalated in pockets of the Hill Country – some lakefront property at Horseshoe Bay went for $1 million last year. But much of the area is still seen as a bargain, especially among retirees from pricey housing markets. Del Webb (PHM), the nation's largest builder of active-adult communities, is developing its second project in the region, Hill Country Retreat, [in] San Antonio. And it's expanding its first project, Sun City Texas in Georgetown. Hill Country Retreat will have 2,000 homes when complete. Sun City Texas has 5,100 homes and will get 2,400 more.” (Dallas News, May 5th)

Proxy Firm Urges Pulte Homes Holders Split Board Nominee Votes. “Proxy Governance, the proxy advisory and voting company, split its recommendation to shareholders of Pulte Homes Inc. regarding the election of certain Pulte Homes board nominees. Proxy Governance recommended shareholders withhold votes from incumbent nominees Brian Anderson, Patrick O'Leary and William Smith, citing the board's "lack of response" to a shareholder proposal to declassify the board, which has received majority support for the last two years… Proxy Governance also said it has additional concern regarding the recent practices of Pulte's compensation committee.” (Dow Jones via CNN Money, May 5th)

Credit Tightening On Builder Loans Threatens To Prolong Housing Downturn. “NAHB member and president of the Illinois Home Builders Association, Scott Eckstein: “The mortgage credit crunch will continue to be the most significant factor impacting the home building industry into the foreseeable future. There is deep concern that the dislocations in the financing markets will increase the depth and length of the housing downturn.” Eckstein said that the credit crunch appears to be actually worsening. “Tighter mortgage lending terms have made it difficult for home buyers to obtain financing to purchase new homes. Likewise, builders are reporting an adverse shift in terms and availability on loans for land acquisition, land development and home construction.” (Originator Times, May 5th)

Anaverde Project In Limbo. “Empire Land, master developer of the Anaverde master-planned community in southwest Palmdale has filed for bankruptcy, leaving the future of the 5,000-home development up in the air. About 1,000 homes have been built, but residents have had to do without [contract-based] amenities… including a neighborhood school and a fire station… KB Home: KB has built several hundred homes in Anaverde, all occupied, and has roughly 93 lots left… Empire Land agreed to turn over its interest in Anaverde to the secured lender on the project, Cadim Note Inc… City and school officials said hedge fund Farallon Capital Management, owns 49% of the project.” (Los Angeles Daily News, May 5th)

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Comments

[Nigelnyc:]

As for the quote "to take a $60,000 hit on a house three years ago-it just isn't right", why isn't it? That is one of the dumbest quotes I have ever heard. Buying a house to live in is one thing. You have a place to lay your head and have peace of mind. If you are expecting it to increase in value then your treating it like an investment and investments go up and down. I am sure it is disappointing to have bought at the wrong time but as a home owner you bought when it was convient for you. The same way people put money into their mutual funds month in and month out; when they have the money! I am sure market conditions are never a factor when investing unless you work in the industry. The lesson learned is become more knowledgable about where you put your money and down the road you will not have to whine and cry about it!

2008 May 07 03:16 PM

[misterg:]

Welcome to the real world of "investing"! Where is it written the price of housing only goes up in value. Did your RE Agent tell you this. A house is really a liability until it is paid for. People take losses in the stock market all the time.

G

2008 May 08 12:46 AM