Credit Crisis Will Continue For Homebuilders [Housing Tracker]

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Homebuilders

Wall Street Woes Threaten Main Street. Massachusetts: “The sluggish housing market and a credit crunch have stalled several projects around the Merrimack Valley, particularly in Lawrence. Those working on rehabilitating old mills have had to put their plans on hold as financing has dried up… Forest City Enterprises (FCE), a national development company, had planned to convert the Newark Paper property along the Merrimack in Lawrence into a 291-unit apartment complex. That plan is now on hold… The developer… had [also] considered buying the adjacent Pemberton Mill and rehabbing it into a 110-room hotel. Forget about that for now.” (The Eagle Tribune, Sept. 23) 

Home Is Where The Hurt Is. “Vicki Bryan, a senior yield analyst for corporate bond research firm, Gimme Credit: "As long as the economy founders, there can be no recovery in the housing market. This makes homebuilders a risky bet for banks.” Since banks aren't in a position to make risky bets, credit will be harder for homebuilders to obtain… Bryan forecast that the amount homebuilders will be allowed to borrow will fall in relation to declining property and home values. In such an environment, the ability to generate cash is a key strength. Bryan singled out Lennar (LEN), Centex (CTX), Hovnanian Enterprises (HOV) and Pulte Homes (PHM)… as companies she expects to outperform the beleaguered housing sector.” (Forbes, Sept. 23) 

Bay Area Builder Lennar Reports $89M Loss.  “Lennar Corp., one of the Tampa Bay area's biggest home builders, lost $89-million in its third quarter that ended Aug. 31. Sales were off by about half between last year and this year. But all failure is relative. Lennar lost more than five times as much — $513.9-million — in Q3’07. Lennar president Stuart Miller reported that the company's East division, which comprises Florida, Virginia, Maryland and New Jersey, outperformed the rest of its divisions earlier this year. But Miller emphasized that "the housing market continues to search for a bottom" (St. Petersburg Times, Sept. 23)

Lennar Narrows Net Loss as Write-Downs Drop.  “Standard & Poor's earlier this month said it foresees the trouble in the housing market continuing. The ratings firm last month cut its grades on Lennar one notch further into junk territory, citing the weak housing market and "growing concern that Lennar's sizeable off-balance-sheet investments may require additional capital, which could weaken the homebuilder's currently adequate liquidity position." (WSJ, Sept. 23)

KB Home Provides Monthly Home Payment Information For Its New Home Communities On Kbhome.Com. “KB Home (KBH) is now featuring monthly home payments calculated for its new home communities across the country. By highlighting monthly home payments, a key indicator of affordability, KB Home new home shoppers can now quickly compare the monthly cost of owning a new home with their current monthly rent. The monthly home payments are listed in addition to the base prices of the homes, and include principal and interest on a 30-year fixed rate mortgage, property taxes and insurance. The payment figures… are updated daily based on current interest rates and loan programs available in a particular market from Countrywide KB Home Loans, LLC.” (Press Release, Sept. 23)

Developer: Hackettstown Community Bucking National Real Estate Trends. NJ: “A new residential development in Hackettstown say their project is bucking the national trend by offering affordable single family homes in a "traditional" community that feature optimum home energy efficiency and personalized furnishings. K. Hovnanian Companies' (HOV) Hunter's Brook community, located off Willow Grove Street, has been selling at quick pace, with 60 of the 101 planned homes being sold within the past year, according to Randy Simat, community manager of K. Hovnanian's Hudson Valley Division/North Central Area.” (NJ.com, Sept. 23)

Forest City Closes on $250 Million in Financing for Waterfront Project in Southwest D.C. “Forest City Enterprises, Inc. announced today that it has closed on $250 million in construction financing for the initial phase of its Waterfront Station project in Southwest Washington, D.C… A mixed-use redevelopment that will include office, residential and retail components… The financing includes the project's first two buildings, totaling 628,000-sf of office and ground-level retail space… Institutions participating in the financing included Bank of New York Mellon (BN), which will serve as administrative agent for the lenders, Bank of Ireland, Wachovia (WB), PB Capital and Landesbank Baden-Wurttemberg, New York Branch.” (MarketWatch, Sept. 23)

Construction Industry Employed 11 Million People in 2007.  “In F2007, Lennar Corp. dropped its head count by 46.7% to 6,934 employees. D.R. Horton (DHI) took similar steps, lowering its workforce by nearly 29% to 6,231. the Joint Center for Housing Studies at Harvard University’s 2008 “State of the Nation’s Housing” report: Overall, the country had 232,000 fewer construction jobs at the end of 2007 than it did at the end of 2006. That trend has continued in 2008, as builders have continued to reduce manpower. The U.S. Department of Labor estimates that 290,000 construction jobs have been lost in the first seven months of 2008.” (Builder Online, Sept. 23)

Builders Push Positives at Deutsche Bank Confab. “Meritage Homes (MTH) has shifted its focus… toward the entry-level buyer and first-time move-up buyer, [has] purchased… three new land positions and was actively seeking [small] parcels in Orlando, Northern California, and even Phoenix, [all] at significant discounts. By [2009] Pulte expects to have $1.9 billion in cash... allowing Pulte to comfortably hold on to its land… Pulte has pared down its number of floor plans across the U.S. from 2,500 a couple of years ago to 400. Beazer has been busy divesting itself of lots under option, moving out of markets where it doesn't see a future, value-engineering its products to give consumers more for less, and renegotiating its revolving line of credit… By [instituting] a regimented set of plans and processes, Centex [says it can] build more profitability… moving away from a spec-builder model toward dirt sales, which have historically yielded better margins.” (Big Builder Online, Sept. 22)

Engle, Pulte, Lennar Are 1-2-3 In Home Sales In First Half Of 2008. “Charles Wayne Consulting survey: From January-June, the busiest homebuilder in the Orlando area was Engle Homes, which closed on 210 single-family properties to lead all production builders in Orange, Seminole and Osceola counties... The company's homes sold for an average of $393,700, giving Engle $82.7 million in sales for the period. Pulte Homes/Del Webb/DiVosta ranked second with 148 closings, or 9.1% of the three-county market, and $55.6M in sales. Lennar/U.S. Home was third with a 6.5% share consisting of 105 homes that sold for a combined $27.5M. M/I Homes sold 99 homes, or 6.1%, for $38M… Rounding out the top 10: KB Home, Ryland Group (RYL), Park Square Homes, Centex/Fox & Jacobs Homes and Meritage Homes.”

                                                   

Get Seeking Alpha's housing market coverage by email -- it's free and takes only seconds to sign up.