Homebuilders Face Their Own Foreclosed Homes [Housing Tracker]

Quote of the Day 

"Mortgage foreclosures were never viewed as being competition for a new construction. Now you do have this first-time phenomenon of massive foreclosures that are coming through on new construction." - Lawrence Angelilli, SVP, finance for Centex Corp. (DJ via CNN Money, June 28^th)

Homebuilder Trends 

Arizona Corporate Executives' Pay Dips For 2nd Straight Year. “Pressures exerted by a slow economy and soft stock market increasingly are being felt in corner offices, underscored by a drop in pay for top executives at Arizona public firms for a second straight year… Executives experiencing multimillion-dollar pay drops included... Steven J. Hilton at Meritage Homes (MTH)… Hilton, chairman and CEO of Meritage Homes, last year earned less than $1.3 million, well below his $12.6M package in 2006, reflecting a reduction in non-equity incentive-plan compensation and reduced option exercises.”  (Arizona Republic, June 29^th) 

The Futures Exchange.  “I think the biggest difference coming out of this downturn into the recovery that will propel surviving big builders to their next heights won't be solely, nor most importantly, economic. It will be that you've learned to develop and build neighborhoods that don't depend on brand new schools, brand new police forces, and brand new infrastructure to reach so far from business, education, and health centers already in place. It'll be reigniting the value of new--but closer in to the downtown core. Sustainability and technological advances will be your value proposition vs. homebuyers choosing a resale.”  (John McManus in Big Builder Online, June 29^th) 

Ailing Home Builders Battling New Foreclosures.  “In the housing debacle's latest twist, some builders are competing with new homes - even of their own construction - that are being foreclosed on and resold for a song. New home buyers haven't traditionally been big defaulters, and the shift is another blow for a sector crippled by the worst downturn in decades. To compete with the already bloated housing inventory, builders are cutting prices and offering freebies and financing specials, stressing weakened margins. Foreclosures, meanwhile, typically command below-market prices, grabbing attention from what few buyers remain in the marketplace.”  (DJ via CNN Money, June 28^th) 

Lennar Corp. F2Q08 (Qtr End 05/31/08) Earnings Call Transcript. “Stuart Miller, CEO Lennar Corp: “The number of foreclosures actually in our communities are fairly low… It has been a smaller percentage than we thought it would be. Generally in the 20% range.  We are also finding that the clearing price for foreclosed home has not taken as big as a dip as we thought they might and in fact they are selling at least in our communities selling somewhat close to the sales price we are offering for new homes.”  (Seeking Alpha, June 26^th) 

Palm Harbor Homes And Mitchell Co. Win FEMA Contract. “Palm Harbor Homes Inc. (PHHM) and the Mitchell Co. have won the Federal Emergency Management Agency’s first pilot project to provide permanent housing in response to natural disasters. The $9 million contract will provide 100-110 single-family replacement homes for displaced Hurricane Katrina victims in the City of Bayou La Batre, Ala. The "Safe Harbor" project … will [feature] Energy Star-rated homes in a neighborhood environment… [with] storm-resistant construction.”  (Dallas Business Journal, June 27^th) 

Construction Materials Costs Go Through Roof.  “A combination of soaring global demand and high energy prices has caused construction material prices to explode for both commercial and residential builders. Construction costs have been increasing at more than twice the level of overall consumer prices, according to statistics from the Associated General Contractors of America. And prices for many building components -- including steel, roofing materials and concrete -- have grown even faster… Steel prices for construction projects have jumped by more than 20 percent in the last year, said Karl F. Almstead, a VP with Turner Construction Co. who tracks building costs.”  (Big Builder Online, June 27^th) 

Home Builders Hire Some Jumbo Lobbying Help.  “The National Association of Home Builders… has hired former Republican Rep. Michael Oxley of Ohio and his lobbying firm, Baker and Hostetler, according to recently filed lobbying reports. It also has contracted with two other lobbying firms over the past month... for its lobbying battle on the housing bill… In signing on with three new firms, the association doubled its roster of outside lobbying representatives to six. The association also has a stable of in-house lobbyists representing its agenda on Capitol Hill.”  (CQ Politics, June 27^th)

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Comments

[Polabair:]

Simon:
Amen brother!

2008 Jun 30 10:20 AM

[von Murgenthal:]

I have faced the same situation in 1981 in Houston Texas , except
it was called something else !
Houses I built and sold in 76 ; 77 ; 78 ;79 competed with my houses
built in 81 with an average 40% price advantage !
Prime Rate : 20% (courtesy of the Nobel-Price winning pres.)
How does a homebuilder pay his bills and feed his family: I opened a
restaurant in Florida !

2008 Jun 30 07:52 PM

[ReallyEstate:]

But at least the negative media is starting to change its tune. Check out the report on Good Morning America from 7/1/08.

2008 Jul 01 06:45 PM