Homebuilder Stocks
Iconic Downtown Project Scrapped in Scandal's Midst. “The Centre City Development Corp.'s board voted unanimously Wednesday to terminate a proposed $409-million, 41-story downtown hotel and condominium project, citing the need to restore public trust in the beleaguered redevelopment agency… Former CCDC President Nancy Graham… resigned [over allegations she] received money from a company affiliated with the project's developer... The project was supposed to be built on city-owned land and benefit from an $8.7M city subsidy for including affordable housing… The agency has launched a review of every project proposed during Graham's almost three-year tenure [including] the massive Ballpark Village development… Homebuilder Lennar (LEN) is part owner of the underlying 7.1 acres for the mixed-use Ballpark Village project.” (Voice of San Diego, Sept. 11)
Turnaround For Housing Stocks: Not Just Yet. “Goldman Sachs, which is neutral on the sector's prospects, says that while the Fannie/Freddie deal does reduce its near-term negative bias against home builders, it won't go bullish until buyer sentiment recovers. Goldman lays out two problems left to solve: (1) Home buyers have less money to put down on their next house; and (2) reduced expectations for future home price appreciation - with home prices falling, many potential home buyers likely believe they can get a better deal in the future.” (U.S. News & World Report, Sept. 10)
Toll Brothers’ Gowanus Plan Certified by DCP. New York City: “Toll Brothers’ application for a zoning change to allow housing on its Gowanus Canal property has been certified by the City Planning Commission, and now the public approval process known as ULURP (Uniform Land Use Review Process) begins. The first step is a hearing at the Community Board level.” (Brooklyn Eagle, Sept. 10)
J.D. Power Ranks Home Builders. “J.D. Power and Associates New-Home Builder Customer Satisfaction Study: Overall customer satisfaction increased in 28 of 29 markets that were surveyed in both 2007 and 2008… Pulte brands (PHM)… ranked highest in customer satisfaction among new-home builders in 11 markets. Cambridge Homes, a part of builder D.R. Horton (DHI); Centex Homes (CTX)… M/I Homes… (MHO)… Standard Pacific Homes (SPF)… and Trendmaker Homes, a part of Weyerhaeuser Real Estate Co. (WY), were also among the builders that received top rankings in individual market areas.” (Inman News, Sept. 10)
Pulte Mortgage To Close Charlotte Processing Unit. “Pulte Homes Inc. will close its mortgage-processing unit in Charlotte by mid-December, eliminating nearly 90 jobs. The company cites the continued downturn in the U.S. housing market. Pulte Mortgage Co., which lends solely to customers of Pulte Homes, will consolidate its mortgage-processing operations at the unit’s headquarters in Colorado. The Charlotte operation handles lending to Pulte Homes’ customers in the Southeast.” (Charlotte Business Journal, Sept. 9)
Mizel Sells 300,000 Shares Of MDC Stock. “Larry Mizel, chairman and CEO of Denver homebuilder MDC Inc., on Monday sold 300,000 shares of stock at an average price of $42.68. SEC: Mizel owned the shares indirectly through ARI Capital Partners LLLP, which still holds 5.15 million shares of MDC. The sole general partner of ARI Capital is CVentures Inc., of which Mizel is president. Mizel is the beneficiary of various trusts that own a majority of the stock in CVentures.” (Denver Business Journal, Sept. 9)
Real Estate By Christie Smythe: KB Here For Long Haul, Says New Chief. “Mark Rodocker, KB Home's (KBH) new division president for Tucson: “We still feel real bullish about Tucson as well as Phoenix for the long term. It lends itself well here in Arizona and specifically in Tucson toward our target market of first-time home buyers… Right now, we're focusing on producing smaller floor plans, which will help drive affordability. . . A lot of our homes are already environmentally friendly… Today, (in Tucson) we offer home prices starting from the high $120,000s-mid-$200,000s… Traditionally, Tucson has represented one of the highest market shares in the country for KB Home.” (AZ Starnet, Sept. 9)
Analyst Downgrades Homebuilders. “Credit Suisse's Daniel Oppenheim lowered his rating on the homebuilder sector to "Market Weight" from "Overweight". He also cut four individual stocks to "Neutral" from "Overweight": DR Horton Inc., KB Home, Toll Brothers Inc. and Pulte Homes Inc. An in-house survey of real estate agents indicated declines in buyer traffic in August due to fears of falling home prices, concerns about the economy and difficulties finding, or qualifying for, an affordable mortgage. Meanwhile, shares of homebuilders have appreciated during this time and have since reached a fair price, Oppenheim said.” (AP via Forbes, Sept. 9)
Housing Leaders – Meritage Homes Corp., KB Home, Beazer Homes USA Inc., Pulte Homes Inc., DR Horton Inc., Lennar Corp. “If we are seeing a turnaround in the housing group, I think the stocks with skepticism in their sentiment profile offer the most interesting proposition. In other words, they are the ones with a pool of potential sideline money. The first (of many) technical hurdles now facing the SPDR Homebuilders (XHB) is the early-April peak near 25. A successful push above that would be the first step in a technical turnaround.” (Schaeffer’s Research, Sept. 9)
THE RATINGS GAME: Analysts Divided On Home-Builder Stocks After GSE Bombshell. “Stephen East and Paul Przybylski at Pali Research in a report this week upgraded shares of residential-building giants D.R. Horton, Lennar and Toll Brothers to buy from neutral. The analysts said Fannie's and Freddie's being placed in conservatorship " removes a significant amount of uncertainty surrounding the housing market from the table." (Dow Jones via CNN Money, Sept. 9)
Fitch Rates NVR's $325MM Convertible Senior Notes 'BBB'. “Fitch Ratings has assigned a 'BBB' rating to NVR, Inc.'s (NVR) proposed $325 million convertible senior notes due Sept. 15, 2038. Fitch has also affirmed NVR's 'BBB' Issuer Default Rating and senior unsecured rating. The Rating Outlook is Stable. The ratings reflect the strong credit protection measures, solid free cash flow generation and balance sheet liquidity... The transaction further enhances the company's liquidity position and provides the company the flexibility to meet upcoming debt maturities ($200M in June 2010) and handle the possibility of a reduced revolver commitment to fund working capital needs. NVR has a $600 million revolving credit facility that matures in December 2010.” (MarketWatch, Sept. 9)
Villa Olivia Developers Make Changes To Meet Neighbors' Concerns. Chicago, Illinois: “An attorney for developer Ryland Homes (RYL) announced Monday that the company is willing to make a deal with the city of Elgin when it comes to addressing resident concerns that originated from the Castle Creek and Tuscan Woods subdivisions.Some Castle Creek residents, for example, had objected to seven "tall and ugly" proposed townhouse buildings blocking their view. Ryland Homes is now offering to take them out of the blueprints entirely, which would mean more than $7.7 million in lost revenue, said Ryland attorney Peter Bazos.” (Daily Herald, Sept. 9)
Toll Brothers Offers $1 Options For Homes.“Toll Brothers, the nation's leading builder of luxury homes, will offer home buyers $1 options during its New Home Expo on Saturday and Sunday, Sept. 27 and 28, at the Company's four Colorado communities. Options will vary at each community but could include sunrooms, conservatories, bonus rooms, and upgraded carpeting, tile, or cabinets. Prospective home buyers should inquire with sales managers at each community for details on this limited-time promotion.” (Your Hub, Sept. 8)
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