Quote of the Day
“Someone has to be the first to leave Florida.” – Financial blogger Michael Steinberg, referring to national homebuilders. Steinberg says homebuilders will soon be forced to start shrinking their footprint or face bankruptcy.
Developer Challenges Sprinkler Regulation. Florida: “One of the nation's largest homebuilders is gearing up to fight the new [Zephyr Hills sprinkler] rules, claiming it shouldn't be required to install the fire safety devices in a town home development… Lennar Homes (NYSE:LEN) - the developer of the 250-unit Eiland Park Townhome project - argues they should be grandfathered in under the new policy because the project was approved before the law was passed. City Manager Steve Spina says the project, a gated community going up off Eiland Boulevard, is only partially built and most of the town homes haven't been permitted yet.”
Home Builders Reluctant to Shrink Footprint. “The nature of construction is that it is too locally tailored and once the local talent is lost, the national builder cannot easily return. While some large builders manufacture components such as trusses, purchase some supplies under large national contracts, and run national mortgage operations, the vast majority of their operations are project management and marketing… Builders cannot shut one “plant” and serve the entire country from another. Builders need local knowledge of building codes, land values and trends, suppliers, subcontractors and realtors. [Despite] how costly it would be to return… the large national builders will soon become super-regionals or go bust.”
Cambridge Crossing Celebrates Grand Opening Next Sunday. New Jersey: “Ryan Homes is celebrating the grand opening of Cambridge Crossing [in Egg Harbor] next Sunday. Buyers can also take advantage of pre-construction pricing and, as a special grand-opening incentive, qualifying buyers will receive a finished basement included when financing through NVR Mortgage (NYSE:NVR), a Ryan subsidiary. Priced from the $230,000s.”
Home Is Where The Bark Is. "We have to please the entire family," says Dean Luce, VP of sales and marketing for KB Home (NYSE:KBH), a primary home builder in Avalon Park, "and dogs are part of that family." No one keeps definitive numbers, but Rhona Sutter, founder and owner of Naples-based PetRealtyNetwork .com, sees more and more home buyers looking for creature comforts for their companion animals.”
Hovnanian Fall Leads N.J. Index. “The Asbury Park Press/Bloomberg 75 Index, made of 75 New Jersey companies… closed at 137.53 Friday, down 2.84, or 2%... The index has fallen 12.28% so far this year. The top decliner by percentage was [homebuilder] Hovnanian Enterprises (NYSE:HOV), which closed at $9, down $2.67, or 22.9%. Last week, the market reacted poorly to Hovnanian's decision to sell new stock to fund general corporate spending. On Thursday, the company raised $133 million selling new shares to fund general corporate spending. The offer of 14 million Class A shares was sold at $9.50 each.”
A Changing Landscape: Springs Companies Left To Deal With Effects Of Big Builders' Shifting Focus. “The Springs, Colorado: Lennar hasn't pulled any single-family building permits this year, and local builders say the company has stopped constructing homes [here]. Five years ago, its market share was 6.1%, compared with just under 1% in 2007... D.R. Horton (NYSE:DHI) has pulled 16 single-family home permits [year-to-date] in 2008, compared with nearly 300 five years ago. Pulte Homes (NYSE:PHM) [which] had 12% of the Springs' single-family market in 2003, fell to 2% in 2007. Pikes Peak Regional Building Department: In 2008, Pulte… has pulled four single-family building permits… Pulte is one of the Springs' most active townhome builders… Townhomes are more affordable for many people.”
Grand Opening For New Estrella Community. “A new William Ryan Homes community in the Estrella development is planning a grand opening Saturday. The housing project, called Greenspointe, is being built by William Ryan Homes. Four spec homes, at varying stages of construction, will be viewable Saturday. Greenspointe will have 60 sites, and homes will range from 1,900 to more than 2,815-sf."
Homebuilder ETF Rises Despite More Bad Housing News. “Investors have taken recent signs of a firming economy as good news for housing stocks, which trade at rock-bottom prices. ITB has rallied as a result, which has led to rising momentum. The fund jumped 26 spots on the ETF Momentum Tracker Table between March 11 and last week, leaving it ranked 18th. Moreover, only one of ITB’s top 20 holdings showed a year-to-date loss through May 2, and 10 generated gains of more than 20%. Eventually, the housing market will boom again... But with so much uncertainty still plaguing the homebuilding industry, investors interested in this fund would be wise to take a cautious approach.”
Land Auction Raises Concerns. Arizona: “Scottsdale is coming off a controversial condemnation case involving 383 acres of state trust land that the city acquired from Toll Brothers (NYSE:TOL) for the McDowell Sonoran Preserve. A jury in January ordered the city to pay the home builder $213,838/acre or $81.9 million for the land. Toll Brothers paid $32.5M or $85,000/acre for it in 2002. Scottsdale had offered the builder $34M or $88,772/acre.”
Centex Declares 4 Cent Dividend. “Centex Corp.s (CTX) (Current Market Cap: US$ 2.68 Bil.) board has declared a regular quarterly cash dividend of $0.04/share of the company's common stock. The dividends will be payable on June 19 to shareholders of record at the close of business on May 29. Centex is a homebuilding company whose leading brands include Centex Homes, Fox & Jacobs Homes and CityHomes. In addition to its home building operations, Centex also offers mortgage, title and insurance services.”
High-End Housing Community Awaits Grand Blanc. “The slow housing market hasn't thwarted plans to make Del Webb's Grand Reserve development on Baldwin Road east of Saginaw Road a premier community… The single-family home and condominium community is under construction… Part of Pulte Homes, Grand Reserve is an active lifestyle community for residents 55 and older… When it's complete, Grand Reserve it will have 478 homes. Sales counselor Jim Christian said 70 homes have been sold to date and 45 are occupied.”
WCI Communities Faces Bankruptcy Risk - Raymond James. “Raymond James analyst Paul Puryear: Homebuilder WCI Communities Inc (WCI) faces the risk of bankruptcy. [Puryear] downgraded the stock to "underperform" from "market perform,” [saying] there is little value left for equity holders given WCI's outstanding debt of $1.7 billion. WCI's liquidity position continues to deteriorate and stood at only $110 million in March. "Moreover... lenders are completing appraisals of assets secured under the borrowing base, and management acknowledged many of those new property values are likely to come back below current book value.” The difference in values would reduce borrowing base availability further and could trigger mandatory prepayments, Puryear added.”
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