Barron's: Public, Not Private Homebuilders Will Prevail [Housing Tracker]

Homebuilder Stocks 

Engineer Redesigns Storm Water System. “Orleans Home Builders (OHB) is proposing to construct 168 age-restricted, single-family detached homes and two three-story buildings containing a total of 50 non-age restricted apartments. The apartments will be rented to people under New Jersey's affordable housing guidelines.”  (News Transcript, June 25^th) 

U.S.-Backed Mortgage Program Fuels Risks.  “Mortgages that allow consumers to put little if any money down when buying a home… are still available -- and growing more popular -- through a government-backed program [with down-payment assistance from non-profit groups.] Homebuilders are promoting the programs to move unsold inventory… D.R. Horton Inc. is touting "100% financing" for its two- and three-bedroom condominiums near the beach in Maui, Hawaii, which start at $498,000… A flier promoting D.R. Horton's Maui development, for example, says that funds for the down payment would be provided by Nehemiah Corp. of America, the largest private down-payment assistance provider.”  (Wall St. Journal, June 24^th) 

U.S. Housing Prices Fall 15.3% in April.  “Credit Suisse analyst Daniel Oppenheim initiated coverage of the homebuilders Tuesday with an overweight rating. Oppenheim has outperform ratings on Centex (CTX), DR Horton (DHI), KB Home (KBH), Pulte Homes (PHM), Ryland (RYL) and Toll Brothers (TOL); neutral ratings on Lennar (LEN), MDC Holdings (MDC) and NVR (NVR); and underperform ratings on Hovnanian Enterprises (HOV) and Meritage Homes (MTH). Oppenheim, who formerly covered the homebuilder stocks at Bank of America, said tough conditions will continue for the homebuilding industry, "but an inflection point in housing is likely in spring 2009 as inventory levels will likely start to decline."  (The Street, June 24^th) 

On The Path To A Housing Rebound.  “The news that housing starts have fallen to their lowest level in 17 years [indicates] a housing recovery is finally in sight… First-time homebuyers… are coming back. Why? For the first time in years, entry-level homes are affordable. Builders have slashed prices, and what they're building tends to be far smaller than [before]. KB Home's average selling price dropped to $248,000 in its February quarter, versus $267,000 a year earlier. In 2006, KB's basic model in Victorville, Calif. took up as much as 3,800-sf and sold for $328,000. Today, its stripped down offering goes for $220,000, at less than half the size.”  (Fortune via CNN Money, June 24^th) 

Big Housewarming for Home Building.  “Credit Suisse: Publicly traded home builders will likely take market share, as privately held builders struggle with lenders. Banks are now aggressively reducing exposure to homebuilding, causing significant trouble for privately held builders. We estimate the publicly traded builders had a 23% market share in 2005, which fell to 22% in 2007. We expect this to reverse over the coming years as banks restrict the capital available to privately held builders. We do not expect lenders to relax lending conditions [until] 2010... We expect the publicly traded builders to reach a market share exceeding 30%.”  (Barron’s, June 24^th) 

'Unauction' Lures Home Buyers. “The buyers were out… Some camped out days in advance to get first crack at the price… [at] developer D.R. Horton’s "unauction.” D.R. Horton used the "unauction" to unload backed-up inventory advertises a price "40% below market value." Interested buyers pre-qualify for loans by phone and show up at the "unauction" with a $2,500 cashier's check in hand… Tim Adams, a San Bernardino real estate agent, said the rumblings in the industry are that buyers are growing more aggressive as prices continue to sag.”  (San Bernardino Sun, June 24^th) 

Is D R Horton Leaving This Market? If So Why?  “Seattle, Wash.: I was just told that D R Horton is leaving this market. I know that for some time they have been discounting their very nice Issaquah Highlands project. Now it seems they are bailing on Fife, all of the market. Supposedly the explanation to why is that they can sell at a reasonable discount and still recover a sizable profit. This profit could offset serious losses in other parts of the country… They [probably] have an opinion we are going to take a bigger drop and they want out while the getting out is good.”  (Seattle Post Intelligencer Letters to the Editor, June 23^rd) 

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Comments

[Georealist]

It's difficult to construct a scenario in which any but custom home builders...or very low cost urban rennovation builders have work amounting to anything. Craftsmen would do well to go start small remodeling businesses..homeowners won't be moving up..and many..as in MANY...will come to the realization that the home they are in will be their last.
The worm has turned and the large tract developers left may prosper in the future building very self sustained communities relying little on expensive transportation or long range provision..this might well include private electrical generation facilities and self sufficient water supplies.
Homes may well be much cheaper but people are not going to have the money to buy...or make sustained payments in a very iffy economic future.

[notsosmart]

energy & liquidity will change the landscape of homebuilding & placing.at the moment very murky.

[nukldrager]

Roofs and decks...