Housing Market Tracker - Homebuilder Review

by: Judy Weil

Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks. Like all other topics and stock coverage from Seeking Alpha, you can have this sent to your Blackberry or desktop email by signing up for our no-spam free email subscription service.

Quotes of the Day

"We're not selling shelter. We're selling extreme-ego, look-at-me types of homes." – Robert Toll, president and CEO of upscale homebuilder Toll Brothers, on American's "house lust." (Washington Post, Jan. 2nd)

“By the time the clubhouse is up, I don’t even know if I’ll be alive.” – Jim Blake, 70, who bought a home in a Levitt & Sons development in South Carolina, before the homebuilder went bankrupt in 2007. Although creditors are helping finish off some of the homes, the buyers aren't certain which homes will be finished, and whether any of the amenities promised—like the 29,000-sf clubhouse-- will be built. (NY Times, Jan. 3rd)

Homebuilders, Housing Stocks and Housing-Related Stocks

  • With Builder in Bankruptcy, Buyers Are Left Out (NY Times, Jan. 3rd): "The collapse of Levitt & Sons, a unit of the Levitt Corporation... illustrates how the turmoil in real estate is spreading far beyond subprime borrowers who cannot pay their mortgages. Levitt had a fabled brand, decades of experience and enthusiastic customers with good credit, but none of that was enough to save it.... About 90 buyers [of] the Levitt development Seasons... paid a total of $3.48 million in deposits for houses... Another 90 houses are occupied... At a court hearing in Fort Lauderdale just before Christmas, Wachovia Bank, which is Levitt’s largest creditor, agreed to provide $10 million to finish at least 80 homes in Georgia, Florida and South Carolina."

  • Creekside Builder Faces Lawsuit (Beacon News, Jan. 2nd) Illinois: "A construction lender has filed a foreclosure lawsuit against the developer of Creekside Crossing, a Plainfield subdivision designed for more than 500 homes. Only 49 building permits have been issued so far for Creekside Crossing, which is being developed by one of the largest home builders in the country, Lennar Corp. (NYSE:LEN). RBC Centura Bank says it's owed more than $14.7 million for construction loans on Creekside Crossing. And, the North Carolina-based bank has filed a foreclosure lawsuit in Will County to try to get its money back."

  • Orleans Homebuilders Sells Off 1,400 Lots (Builder Online, Jan. 2nd): "Orleans Homebuilders (OHB) announced Wednesday that it sold off nearly 1,400 lots in five states [with] a book value of about $86 million. Based on the sale, the company expects to receive between $20M-$25M worth of federal tax refunds by September 2008. Roughly 94% of the lots sold are in Arizona, Florida, and Illinois, while the other lots are located in North Carolina and Virginia... The transactions reduced the company's owned lot position as of Sept. 30, 2007, by about 18%, and lowered its total owned and controlled lot position by 10% as of the same date."

  • Building Is Down 32% For 2007 (Pahrump Valley Times, Jan. 2nd) Nevada: "Permits issued for construction of single-family residences dropped 42%, from 717 permits to 416, a sign of the slump in the construction industry... Total valuations of new construction sank 22% from $101.8 million in 2006 to $79.5M for almost all of 2007... We're down quite a bit," Pahrump Senior Building Inspector Brent Steed said. He said builders constructing projects for Concordia Homes of Southern Nevada, Beazer Homes (NYSE:BZH) and other major builders had laid off workers. Beazer removed its sales trailer from Highway 160 and Manse Road."

  • Construction Spending in the U.S. Unexpectedly Rose (Bloomberg, Jan. 2nd): "Commerce Department: Spending on U.S. construction projects unexpectedly rose in November as work on schools, power plants and factories helped overcome cutbacks in homebuilding. The 0.1% increase followed a 0.4% drop the prior month that was smaller than previously reported... Private homebuilding fell by the most in more than five years, a sign the glut of unsold properties will delay a housing recovery until at least mid-2008. Commercial and government projects showed gains that help ease concern that economic growth stalled last quarter, economists said. Omair Sharif, an economist at RBS Greenwich Capital: "The outlook for spending on single-family homes [is] abysmal.''

  • Legg's Miller Lags Benchmark For 2nd Year (Washington Post, Jan. 2nd): "Money manager Bill Miller's performance in a key fund fell short of its benchmark index for the second straight year in 2007... The $17.3 billion Legg Mason Value Trust fund, which Miller guided to 15 straight years of outperformance against the S&P 500 index until 2006, returned a negative 6.66% last year against a positive 5.50% return for the S&P index... The fund's holdings of Citigroup Inc (NYSE:C), Countrywide Financial Corp (CFC), Centex Corp (CTX-OLD), KB Home (NYSE:KBH) and Pulte Homes Inc (NYSE:PHM) bled due to the impact of the subprime mortgage and credit crises."

  • M/I Leaves West Palm Beach Market (Builder Online, Jan. 2nd): "M/I Homes (NYSE:MHO) ended 2007 by announcing it was leaving the West Palm Beach, Fla., market and had sold off 3,700 lots worth $82 million. The company wouldn't release details of the land sale except to say that more than 500 lots were in four West Palm Peach communities... M/I Homes said the land sale would allow the company to record pre-tax land impairment charges of about $80M in Q4'07. The company also expects to receive a $50M cash tax refund in Q2'08."

  • MSO CEO Susan Lyne Heading To Hollywood? (Silicon Alley Insider, Jan. 2nd): "NY Post's Keith Kelly says "speculation is swirling" over the future of Martha Stewart Living (MSO) CEO Susan Lyne, whose long-term contract expired Dec. 31... Kelly wonders why [Lyne] hasn't signed another long-term deal... She collected $4.4 million in total compensation last year running MSO; could she make more elsewhere? Kelly says yes... MSO, meanwhile, is under pressure, in part because of the housing crisis: The company cut Q4 guidance due to a shortfall in expected revenue from its deal with KB Homes (KBH), and MSO shares drop 58% in the last year."

  • McWhinney Reaches Into Broomfield (Greeley Tribune, Jan. 2nd) Colorado: "McWhinney has reached beyond its borders and acquired 915 acres of land in Broomfield from Pulte Homes, Inc. (PHM) The land is part of the existing Anthem master-planned development and is located at the northwest corner of the intersection of Interstate 25 and the Northwest Parkway. The property, which has been referred to as "Anthem Commercial," was purchased by McWhinney in late December... The property is zoned for commercial development."

  • Lennar VP Sells Shares (South Florida Business Journal, Jan. 2nd): "A VP of Lennar Corp. sold 30,000 shares of common stock Thursday... According to an SEC Form 4 filed Friday, Marshall H. Ames sold the shares for $18.01 apiece. Miami-based Lennar has seen its stock price decline more than $33 since the beginning of the year. Shares were down $0.12 to $17.77 in morning trading. The 52-week high was $56.54 on Feb. 2. The 52-week low was $14 on Nov. 27."

  • In DeLand, Construction Slowdown Hits Victoria Park (DeLand Deltona Beacon, Jan. 2nd) Florida: "DeLand's upscale Victoria Park, begun in the late 1990s... was expected to add about 4,000 homes... [There's] concern that [homebuilder] St. Joe (NYSE:JOE) may pull out of Victoria Park before the Orange Camp [road] widening is finished... Beazer Homes... owns 177 parcels in the section... Victoria Gardens, north of Orange Camp [is] offering "active adult living," catering to people of retirement age... Shea Construction, one of the country's biggest builders... has taken an active role in developing Victoria Gardens... Area VP Jeff Gersh: Shea bought the Victoria Gardens section from St. Joe, and will add another 700 homes to the existing 360."

  • 'House Lust' Hits Home (Washington Post, Jan. 2nd): "Everyone knows the direct causes of the present housing collapse: low interest rates, lax mortgage lending, rampant speculation. But the larger force lies in Americans' devotion to homeownership... The homeownership rate was approaching 70% in 2005, up from 64% in 1990... Ordinary Americans [were lulled] into paying ever-rising home prices... In Sweden, Britain and Italy, new homes average under 1,000-sf. By 2005, the average newly built U.S. home measured 2,434-sf, and there were many that were double, triple or quadruple that... In 2000, Toll Brothers' most popular home was 3,200-sf; by 2005, it had grown 50%, to 4,800-sf."

  • Is it Time to Start Looking for a Bottom in the Housing Market? (Toro in Seeking Alpha, Jan. 1st): "I do believe we are near a bottom in the homebuilder stocks. About a year ago, when looking back at where the homebuilders bottomed at in 1991, I calculated that the homebuilder ETF (NYSEARCA:XHB) would bottom in the $15-$18 range. I think we still have one more cathartic sell-off to come in the new year, perhaps triggered by the news of a major bankruptcy. However, a move from $19 to $15 is still a 20% decline but most of the pain is done for the homebuilder stocks. For an investor, one should be looking to buy rather than sell."

  • Homebuilders To Face Most Distress In 2008 (Louisville Business First, Dec. 31st): "Sixty-two percent of respondents to the Turnaround Management Association's annual Trend Watch Poll said that homebuilders will face the "greatest financial and/or operational difficulties" next year... That sector replaces the automotive industry, which earned the dubious distinction last year. With fewer homes being sold and rising foreclosures, businesses that lend to homebuyers might also take a hit. More than a third of professionals polled said that mortgage lenders will incur the most distress, while 32% said residential loan origination and servicing firms will."

  • Asif Suria's End-Of-Year Portfolio Changes (Asif Suria in Seeking Alpha, Dec. 31st): "I am selling our $50 LEAP puts on ex-homebuilder St Joe (JOE) for a gain of approximately 122%... These puts were posting a gain of over 220% just a few days ago and given all the bad news about double digit home price declines in Florida, I expected JOE, which owns vast tracts of land in Florida, to decline further. However Fortune magazine's... feature of St Joe as one of its best stocks for 2008... helped it post a gain of over 24% in just two weeks. While I still believe in the bearish case for St Joe... our options expire on January 18th and I am going to book the 122% gain now."

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