Homebuilder Update [Housing Tracker]

by: Judy Weil

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.

Homebuilder Stocks

With New Homes, Less Is More. “KB Home (NYSE:KBH), which builds homes to order, began downsizing some of its floor plans last year. "That worked for a time, but the market continued to move away from us," CEO Jeffrey Mezger said recently. The company initially pared down 3,400-sf homes that sold for around $450,000 to smaller, 2,400-sf homes selling for around $300,000. Now, the builder is shrinking floor plans again. It recently launched a new line of homes in foreclosure-ravaged Southern California that start at 1,230-sf, priced a little over $200,000. Other builders, including Warmington Homes and John Laing Homes, have taken similar steps.” (Boston.com, Oct. 12)

Bank, Owner Both Lose In Failed Short Sale Of Palm City Home. “D.R. Horton Inc. (NYSE:DHI) has unloaded about 205 lots in its upscale Highlands Reserve development in Palm City, at a big discount. Horton sold the property to an affiliate of the private investment firm Starwood Capital Group, for $8.7 million, according to property records filed last week in Martin County. That's about $42,500 per lot - roughly 60% less than what the Martin County Property Appraiser estimates most of them are worth. Builders around the country [have] been selling land at a loss in an apparent effort to reap tax benefits. In August, Horton executives estimated they had $300 million worth of land they were looking to sell within 12 months.” (Palm Beach Post, Oct. 12)

ProBuild Buys Centex's Lumberyards. “ProBuild Holdings, Denver, Co., has purchased the assets of component manufacturer/lumber distributor CTX Builders Supply from Centex Homes (CTX). CTX Builders Supply operates six distribution and manufacturing plants producing wall panels, roof and floor trusses, primarily serving Centex's operations. The plants are in Albermarle, N.C.; Plant City, Fl.; Buda and Carrollton, Tx.; Phoenix, Az., and Visalia, Ca.” (Building Products.com, Oct. 11)

Anthem's Plumbing Sparks Lawsuit By Residents. “A group of Anthem residents wants developer Del Webb to swallow the cost of their rising water bills, claiming they were never told about a future obligation to pay for the community's plumbing infrastructure. Four homeowners are suing Pulte Homes (NYSE:PHM) and the Communities of Del Webb and seeking class-action status. They say Del Webb, which opened the 10,000-home master-planned community north of Phoenix in 1999 and later merged with Pulte, had a public duty to tell prospective home buyers that the water system's cost wasn't included in the sale price.” (AZ Central, Oct. 11)

Icahn Takes Another $20.8 Million Loss From WCI. “SEC: Billionaire activist investor Carl Icahn disclosed a payment of $20.8 million to resolve a swap in which another party bought about 5.4 million WCI Communities (WCIMQ.PK) shares with the agreement that Icahn would later buy them himself. InsiderScore.com: When the other party bought the shares, they cost $3.83/share but they were ultimately worthless... Icahn also likely paid interest on the stock before he bought it. As of June 30, Icahn, who was elected chairman of WCI's board in 2007, owned about 14.5% of the company, or 6.1 million shares. He bought his original stake in the company in early 2007 for about $19/share.” (Reuters, Oct. 10)

KB Home Offering 10 New Floor Plans. Texas:"KB Home announced it is offering new floor plans at its Mesa Creek community. There are 10 new home designs as part of the Wildflower Collection at Mesa Creek, off U.S. 90 west past Loop 410. The floor plans range from 1,265-sf-2,312-sf … The community has a recreation center with swimming pool, a sports court, picnic pavilions and a pool house. Homes start in the low $100,000s.” (My San Antonio, Oct. 10)

Sprint Execs Named "Most Overpaid" In 2007. “Sprint-Nextel (NYSE:S) executives are the most "overpaid" in corporate America, according to a study by investor advisory firm, Glass Lewis & Company… The mobile communications provider was tapped for the dishonor by having the worst 2007 pay-for-performance rating among the Standard & Poor's 500 index of large companies… Other companies named in the list include homebuilder KB Home, Ford Motor Company, General Motors, and CBS.” (The Register UK, Oct. 10)

When Homeownership Joy Turns Into Homeownership Hardship. Spring, Texas: Consumers in a Lennar (NYSE:LEN) homes subdivision… are complaining of faulty home foundations that are shifting their homes and causing all sorts of problems. Lennar [says] it’ll begin testing [homeowners’] soil and foundation to determine if homes really sit on shaky ground.” (KHOU, Oct. 10)

M/I Orders, Deliveries Fall in 3rd QTR. M/I Homes (NYSE:MHO) Q3 preliminary report: Orders were down 19% to 456, and deliveries were off 29% to 555. Year-to-date, new contracts are down 30% to 1,540 and deliveries down 33% to 1,507. The cancellation rate improved to 32% compared with 38% for Q3’07. Backlog was down 46.8% in units to 781; sales value of homes in backlog was down 56% to $212 million. The average sales price of homes in backlog fell 11.4% to $272,000, down from $327,000 in Q3’07. M/I cut its community count from 159 at the end of Q3’07 to138 at the end of Q3’08. The company ended the quarter with no borrowings against its $250M unsecured credit facility.” (Builder Online, Oct. 9)

Options Update: Is DR Horton's Unusual Put Volume a Play on Earnings?  “DR Horton is slated to release its fourth-quarter earnings figures on November 25. Currently, analysts are looking for a loss of $0.69/share, down sharply from last year's loss of $0.16/share. Historically, DHI has struggled in the earnings confessional, matching Wall Street's expectations twice and missing twice for an average miss of 116% for the past 4 reporting periods. Despite the report being more than a month away, it would seem that options traders are already positioning themselves ahead of the event. Before midday, more than 8,000 puts had changed hands at DHI's November 7.50 put, while another 10,000 had traded at the stock's January 2009 7.50 put.” (Schaeffer’s Research, Oct. 9)

After Lennar Slashes Dividend 75%, Other Builders May Follow. “Homebuilder Lennar declared a quarterly dividend of $0.4/share, down from $0.16/share, payable this fall. In August, D.R. Horton Inc. declared a quarterly dividend of $0.07.5/share. No. 5 KB Home paid $0.25/share in late July... In Lennar's case, the smaller dividend came as the company ended its Q3 with $857 million in cash and a 30.2% net debt-to-capital ratio. The move will save $77.4M annually… M.D.C. Holdings Inc. and D.R. Horton's dividend yields [are] above 3%...  The annual payouts are $46M and $95M, respectively. D.R. Horton has already cut, slicing its dividend in half to the current level in May. Centex Corp., meanwhile, has a dividend yield of 1.4%... But the company has said it is examining its dividend.” (Dow Jones via CNN Money, Oct. 8)                                                                                     

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