Homebuilder Trends: Consolidation Continues [Housing Tracker]

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New-Home Sales Down At Least 58% In East Bay. “California Building Industry Association/ Hanley Wood Market Intelligence: Builders reported 190 sales in the Oakland-Fremont-Hayward metropolitan statistical area in July, down from 455 sales in the area for July 2007, and a 10% drop from 211 reported in June… from subdivisions of 10 or more units. Twenty-six unit sales were reported in the Vallejo-Fairfield MSA, down from 80 a year ago and representing a 13.3% dip from 30 in June. Statewide, builders reported 2,348 new home sales in July, down 56.8% from 5,437 a year ago and 13.4% from 2,712 in June. That was similar to the June report, which had a 58% sales decline statewide y/o/y.” (East Bay Business Times, Sept. 15) 

Big Builders Starting To Buy Land. “Some metro Atlanta builders are on the hunt for more land. Chuck Fuhr, Ryland’s Atlanta division president: Many of the large, publicly traded home builders, such as Ryland Homes (RYL), got rid of land holdings 18 months to two years ago, meaning their pipeline for future development is nearly dry. Fuhr: “A lot of the larger builders are going to be land buyers in 2009.” Pulte Homes, Centex Homes and KB Home are other top publicly traded builders in the Atlanta market seeking land, Fuhr said. Atlanta Business Chronicle’s list of top 25 homebuilders: Ryland is Atlanta’s No. 10 homebuilder. Pulte (PHM) ranks first, KB Home (KBH) seventh, and Centex Corp. (CTX) 14^th.” (Atlanta Business Chronicle, Sept. 12) 

McStain CEO Steps Down to Cut Costs. Colorado: “Eric A. Wittenberg, president and CEO of Denver-based McStain Neighborhoods, has stepped aside to cut costs. Tom Hoyt, the company's founder and chairman, has taken over Wittenberg's responsibilities… Wittenberg is the second builder CEO in the last month who stepped down to cut company costs. Tom Eggleston, former CEO of C.P. Morgan, also recently left his position. Wittenberg, who was at McStain for seven years, said his departure came after the company decided to take an even more pessimistic view of its already pessimistic market projections and it became clear that another round of cuts would be necessary.” (Builder Online, Sept. 10) 

Restructuring Firm Sees More Pain For Home Builders. “Residential builders will experience more distress and consolidation the next six months as they try to weather the storm in mortgage and housing markets. In an analysis of the estimated $700 billion home-construction business, Grant Thornton Corporate Advisory and Restructuring Services forecast small- and mid- sized builders are most at risk as a result of market and economic woes. It also predicted large, national builders will keep gobbling up local and regional builders, which often face higher borrowing costs.” (Dow Jones via CNN Money, Sept. 10) 

Algon Group Predicts 'Perfect Storm' in Homebuilding Industry Will Lead to Significant Bank Failures in Next 24-36 Months. “Citing excess inventory and the substantial erosion of housing asset value - particularly in certain Southeastern areas - Algon Group founder and president Troy Taylor predicts that the inability of homebuilders to satisfy loans will lead to increasing bank failures in these markets over the next 24-36 months… Based on what Algon Group clients and other homebuilders were experiencing in Florida and Georgia, he expects banks to suffer substantial losses as builders default on loans…Taylor predicts 25-50% of Atlanta-based banks will fail or merge by 2011 [and] that the ongoing problems Algon Group has seen over the past two months have only furthered his belief that the worst is yet to come.” (MarketWatch, Sept. 9)

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