Analysts, Ratings Agencies Still Forecast Trouble For Homebuilders [Housing Tracker]

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Homebuilder Trends

More Troubles For City In The Hills Developer. California: “More financial and legal troubles have hit the master developer of northeast Bakersfield’s City in the Hills community, Los Angeles-based Mountain View Bravo LLC, records show. The developer, through several subsidiaries, has already defaulted on four loans borrowed against Kern County properties since July. A new default was filed last month against subsidiary Baker’s Hill LLC.” (Bakersfield California, Sept. 7) 

Default Rate Hits Five-Year High—And Could Go Higher. “The corporate default rate reached a five-year high in August. And that mark could well be surpassed in the coming months, as troubled companies join the default line. S&P Leveraged Commentary & Data: The 12-month default rate rose to 3.27% in August, up from 2.92% in July. Three more companies defaulted in August: Star Tribune, WCI Communities and Intermet… S&P recently identified 52 companies that are rated B- or lower on which it has a negative outlook in five of the most troubled industries: automotive, finance, transportation, media and pulp/building products.” (Financial Week, Sept. 5)

As Losses Continue, Builders Blame Foreclosure Competition. “Lehman Brothers: Foreclosures are unlikely to peak until the beginning of next year… Existing sales may recover more quickly than new homes because of increasing foreclosure transactions as millions of homes flood the market this year and next. With each home costing banks at least $30,000-$60,000 in standard expenses… banks aim to sell the houses [asap]…  NAR: Foreclosures or short sales have made up about a third of recent housing sales. That's causing pain for homebuilders, which have already tried everything from deep discounts to paying closing costs to shedding inventory during a slump that has forced public and private builders into bankruptcy.” (CNN Money, Sept. 4)

S&P Could Further Cut Home-Builder Ratings. “Standard & Poor’s analysts: “Homebuilder ratings cuts [are] likely to continue... [However,] the large drop in housing starts — down 65% from a high two years ago — [is positive]… The current supply of new unsold homes would be “significantly larger if homebuilders, and more recently construction lenders, had not pulled back to the extent that they have.” Large homebuilders — like D.R. Horton (DHI), Lennar Corp. (LEN) and Pulte Homes (PHM) — have cut back production to levels last seen in 2000 and 2001, while others have retreated as far as 1994. The drops have caused earnings to fall for the builders, but may spell relief in the future as the market works to correct itself.” (WSJ, Sept. 4)

Slow Sales Dropping A Hammer On Builders. “These are desperate times for San Diego County's once-high-flying homebuilders, who ramped up production of ever-more-expensive homes during the 1997-2005 boom. Today, virtually no one is showing up at model-home complexes. Local market research firm: More than 40% of buyers canceled their purchases in July… Builders and developers have cut their staffs by as much as 90%... Steve Doyle, president of the San Diego division of Brookfield Homes. “[July] was the worst month I've ever seen.”  At his six projects in three communities in the county, he said only one home out of 30 offered was sold last month… He has cut his staff from 150 to 72.” (Sign on San Diego, Sept. 4)

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Comments

[mrresponsible:]

chrismartenson.com

2008 Sep 09 08:20 AM