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Quote of the Day 

"At the current stock price of $1.69, he has a bit of a loss, but at least he could have control over the assets until some value could be recovered down the road when the Florida real estate market begins to improve." - Gimme Credit analyst Vicki Bryan on the news that major shareholder Carl Icahn is in talks with homebuilder WCI Communities for some sort of transaction. Bryan estimates that Icahn built his equity stake in WCI at approximately $18-$20/share. (Forbes, June 20th)

Homebuilder Outlook

Motor Home Maker Winnebago's Earnings Fall 73% In Latest Quarter. “Winnebago Industries Inc. said Friday that its fiscal third-quarter profit skidded 73% as high gasoline prices, tighter credit and a soft economy drive motor home sales lower industry-wide. The company earned $3 million, or $0.10/share, in the three months ended May 31, compared with $11.3M, or $0.35/year earlier. Sales fell almost 40% to $139.7M. The profit figure included a tax benefit of $8.9M. The company reported an operating loss of $6.9M, compared with operating income of $14.7M last year. Analysts expected earnings of $0.03/share on sales of $157.6M.”  (LA Times, June 21st) 

Home Builders Group Spent $1.3 Million Lobbying On Housing, Economic Issues In First Quarter.  The National Association of Home Builders spent more than $1.3 million lobbying in Q1 on efforts to jump-start the slumping housing market. The trade group has been asking lawmakers to include a tax credit for home buyers in a housing stimulus package being considered in Congress. Earlier this month, the group withdrew support for a $6 billion emergency tax break that would let companies use losses from 2008 and 2009 to offset profits earned over the previous four years, instead of the usual two-year timeframe. The provision failed to build traction on Capitol Hill amid criticism that it was a gift to homebuilders.”  (Canadian Business, June 20th) 

For US Home Builders, More Pain In 2Q.  “Industry watchers are interested in the cancellation rate. Both Hovnanian Enterprises (NYSE:HOV) and Toll Brothers (NYSE:TOL) recently reported lower rates, meaning fewer signed buyers are walking away. Will Lennar's (NYSE:LEN) number signal a trend? Standard Pacific (NYSE:SPF) already [reported] in April and May, net new home orders fell 12% from a year ago, and the cancellation slipped to 25%. Not everyone is impressed. JPMorgan's Michael Rehaut: The improvement "was achieved through aggressive pricing and discounting, as well as inventory (i.e. spec) liquidation… We believe this lesser decline in orders is not indicative of any improvement in market conditions."  (CNN Money, June 20th) 

D.R. Horton Closes Exchange Offer For Notes.  D.R. Horton Inc., the nation's largest homebuilder, said Friday it closed its exchange offer for its 9.75% senior subordinated notes due 2010. D.R. Horton (NYSE:DHI) said notes worth about $96.8 million, or 85.3%, of the outstanding principal amount of existing notes, had been tendered for exchange. The company accepted all validly tendered existing notes and issued an equal amount of new notes. For each $1,000 principal amount of outstanding existing notes tendered before June 4, holders also received a consent payment of $10.”  (Forbes, June 20th) 

WCI Finally Open To Icahn.  Last year, Carl Icahn was offering $22/share for Florida builder WCI Communities (WCI) [Now] Icahn has taken control of the board, and with shares at less than a tenth of the former value, a special committee of directors is talking about selling him the whole thing…. If Icahn jumps into buy the company it would be a signal to investors that he's confident the Florida real estate market is going to turn around.   SEC filing: On Friday, WCI announced that its chairman, billionaire Carl Icahn, who holds 14.5% of the stock, is in discussions over a possible "transaction" with the company.” (Forbes, June 20th) 

UBS Upgrades Beazer On Valuation.  UBS Investment Research upgraded Beazer Homes USA Inc. (NYSE:BZH), saying the sell-off that has sent its shares tumbling 52% from a recent peak in May has been too extreme. "Given our belief that the company has sufficient liquidity to withstand this downturn, we view the recent pullback as overdone," analyst David Goldberg said.”  (Forbes, June 20th)

Ryland Gains Market Share.  “Ryland Group: [Besides a] short tail in land, low debt levels, and strong balance sheet… Ryland (NYSE:RYL) has gained market share in 13 of its 21 geographic markets. EVP and COO Larry Nicholson attributed some of that growth to smaller, private builders going out of business, but also… sales teams [that] have been converting traffic to sales at higher rates than normal… Generally between 5%-8% [Nicholson]. FTN Midwest analyst Jay McCanless: Foot traffic in May was steady or increased at all the Ryland communities surveyed… Respondents also indicated that they expected future promotions like reduced costs on options or cash toward closing to increase in the future.”  (Big Builder Online, June 19th) 

Ryland begins sales at Somerset Chase.  “Ryland Homes' Orlando division plans to start selling 208 new townhomes Friday in its Somerset Chase community in east Orlando.”  (Orlando Business Journal, June 19th) 

BofA Builders Conference: Toll Brothers On New Sales Numbers.  Bob Toll, CEO of Toll Brothers (TOL) says there's no way new home sales are running as high as the census claims because they don't include cancellations which are still running around 30%. He thinks holding onto land is a good idea because it puts him at a competitive advantage when things finally do turn around… On gas prices: most of the builders so far have downplayed the effects, but Toll says its hitting his subcontractors hard and driving up the prices of petroleum-based materials, like plastic piping.” (CNBC, June 19th) 

Builder Execs Nervous About Jobs And The Economy. “Lawrence Angelilli, SVP, Finance at Centex Corp. (CTX) "Everything that's happened so far has been in what was considered a relatively low interest-rate environment with historic low unemployment, so you've had this massive dislocation in the home-building space, totally independent of any economic fundamentals… If we introduce unemployment, that would be very significant." Despite worries about jobs and the economy, home-builder executives said they're reducing the backlog of new homes for sale on the market by scaling back construction, lowering prices and other measures. Angelilli: "The standing inventory of new construction is declining rapidly, but it's being offset somewhat by existing homes and foreclosure.”  (MarketWatch, June 19th)

Zut Alors! France, Sans KB Home, Catches The Housing Flu.  “KB Home Corp. (NYSE:KBH) may not have seen the U.S. housing crash coming, but it wasn’t going to make the same mistake in Europe. Now the L.A.-based home builder’s decision to jettison its European operations a year ago is looking pretty smart: Kaufman & Broad SA, the Paris-based builder sold by KB Home, on Thursday suffered its biggest-ever share price decline after reporting a 71% drop in fiscal first-half earnings and slashing its sales forecast for the year.”  (LA Times, June 19th)

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Source: Homebuilder Forecasts and Expectations [Housing Tracker]