Quotes of the Day
“The only way we won't make money in these stocks is if the companies don't make it through this cycle.” - Josh Spencer, homebuilding analyst with T. Rowe Price. (Kiplinger via Washington Post, Aug. 28)
"S.A.D. is our acronym for Seller Assisted Down Payment, more commonly known as down payment assistance. It also expresses the way many of us feel about the end of these programs.” - Jeff Ward, D.H. Horton’s director of marketing, promoting this weekend’s “S.A.D. Sale”. (Las Vegas Review Journal, Aug. 30)
Toll Brothers Adds Value Pricing To Luxury-Home Community. Nevada: “With the European-village appeal of its gated neighborhood, Dorado at Damonte Ranch has been the best-selling community that builder Toll Brothers (NYSE:TOL) has in Reno… Even so, Toll has been adjusting its construction methods to bring these carriage-style houses -- regularly priced in the mid-to-high $500,000s… into range for more buyers. Dan Martin, VP Toll’s Nevada division: "We have a Select Series in which we've scaled back some of the standard amenities. That allows us to offer essentially the same floor plans starting in the $400,000s, which the pubic really seems to be open to.” (Reno Gazette Journal, Aug. 31)
With Another Resignation, CCDC's Conflict Cloud Expands. San Diego: “The scope of potential conflicts of interest at the Centre City Development Corp. once again expanded Friday… The downtown redevelopment agency's lead counsel, Helen Holmes Peak, who has received income from Lennar Corp. (NYSE:LEN), resigned after she acknowledged participating in discussions that she shouldn't have about one of the company's projects at CCDC… That development, Ballpark Village, was dealt a separate setback Friday as Marriott International (NASDAQ:MAR) jettisoned its plans for a 1,929-room hotel on the 7.1-acre site east of Petco Park.” (Voice of San Diego, Aug. 30)
Marriott Drops Plan For Big Hotel. “Marriott Corp. has pulled out of its plan to build the West Coast's largest hotel – with 1,929 rooms – at Ballpark Village, just east of Petco Park… The project was set to receive scrutiny because… the city's downtown redevelopment authority is investigating all projects for the past three years, especially ones involving Lennar and Related Cos., after recent revelations that former Centre City Development Corp. President Nancy Graham had an undisclosed business relationship with those two developers.” (Sign on San Diego, Aug. 30)
D.R. Horton Offers Last Chance DPA.“D.R. Horton (NYSE:DHI) has announced its S.A.D. [Seller Assisted Down Payment] Sale to take place on Sept. 6 and 7... Jeff Ward, director of marketing. "Currently many of our homebuyers are taking advantage of Down Payment Assistance." D.R. Horton has recently lowered the sales price of the award-winning 2350 floor plan for the S.A.D. Sale.” (Las Vegas Review Journal, Aug. 30)
Toll Brothers' Latest Marketing Gimmick. “Luxury builder Toll Brothers is trying to drum up interest at its communities in Florida by offering "outdoor living packages" through a two-day sales promotion next month. Buy a single-family home, townhouse or condominium from Toll on Sept. 13-14 and receive a package, which may include an outdoor kitchen, paver patio, swimming pool or landscaping upgrades… The reality is… these things rarely work. Most buyers couldn't care less about the bells and whistles; they just want a home at a good price.” (Sun Sentinel, Aug. 29)
Ryan Homes Grabs Lots From Departed Beazer. Ohio: “Out of the Columbus market for years… Ryan Homes [recently spent] $2.8 million for 139 lots in three suburban developments... Ryan Homes, a division of NVR Inc. (NYSE:NVR)… purchased lots from Beazer Homes (NYSE:BZH) which began packing up its Ohio operations in February… Ryan is the second notable production builder to arrive in Columbus this year. Fischer Group in January bought into Centex Corp. (CTX) developments.” (Business First of Columbus, Aug. 29)
This Builder Could Lead Housing's Recovery. “[Builders to slowly build a position in:] Toll Brothers [because of] its luxury builder status… A recovery will begin at the top and filter down. That directional tendency was perhaps helped by the inclusion of an increase to $625,000 in the conforming limits of Fannie Mae (FNM), Freddie Mac (FRE) loans under the new Housing and Economic Recovery Act of 2008… [Also] KB Home (NYSE:KBH), because it eschews speculative building and therefore doesn't accumulate big housing inventories, and Meritage (NYSE:MTH), given its strong position in the relatively unruffled Texas market.” (Motley Fool, Aug. 29)
Interim CFO Departs WCI. “WCI Communities said Friday that Ernest J. Scheidemann, its interim CFO, VP and treasurer, resigned, effective Aug. 31. Scheidemann held the interim position since December and has been VP since October 2004. Earlier this month, the Bonita Springs-based homebuilder (WCIMQ) filed for Chapter 11 bankruptcy protection.” (South Florida Business Journal, Aug. 29)
Time to Buy Homebuilder Stocks? “The argument for buying building stocks now isn't that home prices are about to stabilize. The case for the stocks is that they have fallen so much -- more than 70% -- since peaking in 2005, additional home-price declines are already reflected in the share prices. If the patterns of previous investing bubbles hold this time, the potential is huge. Justin Walker, co-founder of Bespoke Investment Research, notes that after the Nasdaq Composite Index imploded during the 2000-02 bear market, the index rebounded strongly in 2003, gaining 50% and outpacing all domestic indexes.” (Kiplinger via Washington Post, Aug. 28)
Taylor Wimpey Reports Massive Loss. “Taylor Wimpey, the U.K. parent company of Taylor Morrison in the U.S., booked a £1.5 billion--or $2.7B--loss for H1’08 as the British home market's meltdown accelerated. The majority of that loss was a £816.1 million--or $2.5B--write down of George Wimpey's goodwill and brand because of the weak trading conditions in the company's stock… The other portion of the company's major posted loss--£690M pounds, or $1.3B--was attributed to valuation write downs and reduction of prices to move homes. The U.S. write downs, primarily on Taylor Morrison's California assets, totaled £70.8M pounds, or $129.7M. The company also wrote down £33.3M related to its Spanish business.” (Big Builder Online, Aug. 28)
Three More Major Builders Halt Housing Projects. California: “In the northeast, Centex Homes and KB Home have stopped construction at a pair of contiguous tracts immediately west of City in the Hills… Property records indicate the empty lots are owned by GMAC Model Home Finance LLC (NYSE:GM)... Last month, KB sold a different northeast parcel for $765,000 — about $2.5 million less than it paid for the land in 2005… In Arvin, meanwhile, K. Hovnanian Homes has apparently stopped new construction at its Azul and Brisa neighborhoods… About 128 of the tract’s planned 325 homes have been built… Beazer Homes pulled out of Fresno in June, as well as recently leaving Colorado.” (Bakersfield Californian, Aug. 28)
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