Quotes of the Day
"When you see that kind of fall, you've got to believe that the industry is getting better." – Gordon Milne, homebuilder Ryland Homes CFO and EVP, encouraged by recent building permit data showing a 61% decline in building permits issued nationwide, since September.
"There is no sign yet that the bottom is near; we look at the rally in homebuilders' stocks in utter bewilderment." - Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd.
Cloud Grove Developers Place St. Lucie Project "On Hold". Florida: "Cloud Grove, a controversial town of about 12,000 homes proposed for a citrus grove near the St. Lucie-Indian River County line, is now "on hold," the developer announced Monday. The Florida Conservancy and Development Group, a partnership between Lennar Homes (NYSE:LEN) and Centex Homes (CTX), asked the county to place the project "on hold" in its current form. Steve Kaufman, executive committee member of FCDG, said the group would try to find someone willing to take over the project, buy the land for development or agricultural use or move forward themselves with a different project."
Toll Investors Asked To Vote No On CEO Cash Bonus. "Two shareholder advisory companies on Monday urged Toll Brothers Inc (TOL) investors to vote "no" to a cash bonus plan for its CEO, saying it would enhance his pay at a time when the company's stock is down because of the U.S. housing market downturn. The Proxy Governance Inc report said: "It appears that the company has introduced this proposal as a way to ensure that (Robert) Toll receives a cash incentive even when company performance is suffering. The bonus plan is limited to Chairman and CEO Robert Toll and capped at $25 million a year."
What’s To Become Of Pointe West Development? "Texas: Centex last week confirmed it was in negotiations to sell some properties in its resort division, including Pointe West, a development that was supposed to eventually include a little more than 2,300 houses and condos. Some condos and homes are built at the resort, including a clubhouse... Sources say Macfarlan Capital Partners, a real estate investment management firm, is the buyer... City officials [said] Centex has permits to build 1,056 residential units and 20,000-sf of commercial, office and retail space... south of FM 3005 [and another] 1,258 units and 208,000-sf of commercial, office and retail space... north of FM 3005."
For Sale: Institutional Investors Snapping Up Residential Land. California: "Institutional investors are buying up heavily discounted land reserved for residential development. Residential land nationwide is now estimated to be worth 25%-33% less than in 2006. Some property [values] have [fallen] 75%, real estate experts say... Large institutions — including the $173.7 billion California State Teachers Retirement System, the $41.3B Los Angeles County Employees' Retirement Association and the $17.1B Stanford University endowment — already have committed capital to residential land funds. CalPERS committed a combined $121 million [while] CalSTRS has set aside $1.5B for residential land... Only $200M has been invested so far, said Sherry Reser, CalSTRS spokeswoman."
Program Blends Real Estate, Green Awareness. South Carolina: "Charleston [homebuilders] are shaving off costs for blue-collar workers including teachers, police officers, military personnel, nurses, firefighters and ambulance workers. Beazer Homes (NYSE:BZH) discounts range between about $3,500-$5,000, said division president Frank Finlaw... Centex Homes offers $3,500 off the base price of a home. And KB Homes (NYSE:KBH) takes a certain percentage off the sale price for emergency workers, military folks and public schoolteachers, said spokesman Tim Pittman. Ryland Homes (NYSE:RYL) also offers a discount, but it can't be combined with other, more generous incentives... said division president Don McDonough... Finlaw: Promotions aren't new, [but] Beazer discounts have gotten more generous in recent months."
Luxury Homes Burn in Apparent Eco-Attack. "Three seven-figure dream homes went up in flames early Monday in a Seattle suburb, apparently set by eco-terrorists who left a sign mocking the builders' claims that the 4,000-plus-square-foot houses were environmentally friendly. The sign... bore the initials ELF, for Earth Liberation Front... radical environmentalists that have claimed responsibility for dozens of attacks since the 1990s. The sheriff's office estimated that Monday's pre-dawn fires did $7 million in damage to the "Street of Dreams," a row of unoccupied, furnished luxury model homes where tens of thousands of visitors last summer eyed the latest in high-end housing, interior design and landscaping."
Texas Case May Mirror Orlando Bombing Range Site At Pinecastle. "About 150 families in the Arlington, Texas neighborhood of Southridge Hills sued homebuilder KB Home in 2001 after they learned that their homes had been built atop a former Navy bombing range... Like the residents in Texas, people in the Orlando neighborhoods of Vista Lakes, Tivoli Woods and Crowntree Lakes found out in the past year their homes and a school were sitting on a powder keg. More than 400 Orlando families have entered into a class-action suit and other litigation, claiming fraud and seeking financial damages."
Price Guarantees Offered To Encourage Buyers. "California's Florsheim Homes offers a price guarantee that covers the rest of the calendar year... Joe Anfuso, Florsheim CEO: [Price guarantees] are largely responsible for doubling sales in recent weeks... KB Home has a similar price-protection offer... from the time a sales contract is signed until the home is completed - about four months... It's [also] offering a guarantee to lock in the mortgage interest rate available at time of purchase if the rate climbs by close of escrow... Ryland Homes' [price guarantees] covers the time of sale to close of escrow... Builder Pacific West Cos. Guarantees... the base price on a home [until] the last home sells in the community."
As Home Builders Rally, Why Aren't Their CEOs Upbeat Yet? "[Though housing stocks are on a tear recently,] Industry insiders [say] the market must work its way through the huge overhang of unsold homes... Centex CEO Tim Eller: Market bottom signals [would] include a foreclosure spike, a slowing economy signaling a likely recession, a further pullback in housing starts, new-home prices correcting much faster than the resale market, a wider softening in land prices, and home builders reinvesting in real estate... [Yet] Donald Tomnitz, CEO D.R. Horton Inc. (NYSE:DHI) says: "We are happier campers today than we were 60 days ago." Stephen Scarborough at Standard Pacific Corp. (SPF): "In [February] we've noticed a little bit of increased enthusiasm in sales activity across the company."
Subdivision Plans East Sacramento Homes Under $400,000. "Alan Newman, Beazer division chief is getting good vibes again, following a one-week sale in which his company sold 81 homes at seven local subdivisions. That compares with about 10/week the company has been selling in recent months. During the Feb. 7-13 sale, prices were marked down as much as 10%... Every home sold at a loss, Newman says. But, the company was able to reduce its inventory. And, Newman says, the sales blitz proved that buyers – especially the first-time homeowners that Beazer targets – are willing to get back into the market... "at the right price."
Hovnanian Weathers Downturn. "Calling the current housing correction as dramatic and rapid as those of the mid-1970s and the early1980s, Hovnanian (NYSE:HOV) CEO Ara K. Hovnanian said those downturns shared an important similarity-a rebound that was as sharp and as fast as the fall-off, with sales and prices rising significantly within 12-24 months. One notable difference between the earlier downturns and the current one, Hovnanian said, is the interest rate. In the early 1980s, they peaked above 18%. Today, they're below 6% and predicted to go even lower. That will work in the industry's favor as the market begins to turn around."
Beazer Homes May Reduce Activity. "Beazer CEO Ian McCarthy: Beazer is working feverishly to rein in costs, reduce its excess inventory of finished homes and meet a May 15 deadline for restating its quarterly financial reports for much of the last decade... This past year, Beazer cut its workforce in half, withdrew from the mortgage business, reduced its land holdings, eliminated some $50 million in materials costs and withdrew from five metro housing markets across the country... McCarthy said Beazer may [further] reduce its activity in its 40 remaining markets scattered across 19 states."
Ryland Stays The Course. "Ryland's operating expenses, at 10% in Q4'07, were second-best among public builders. Ryland cut its workforce from Q3'06 by 32% to around 2,000, (1999 levels.) It consolidated its California [and Florida] operations [and] ended last year with only 823 spec homes valued at $164 million, compared to 1,950 units valued at $360M at the company's peak period. Gordon Milne, Ryland's CFO and EVP: Ryland only had $30M invested [in joint-ventures] and $40M in shared indebtedness at the end of 2007... Ryland repurchased 41.6 million shares for $59.3M last year. It will make a $50M debt payment in 2008, but doesn't have another due until 2012."
Centex's Rancho Cordova Project On Hold. California: "Centex: A new Centex development in Rancho Cordova is in limbo because of a dreary housing market... The 13 homes currently under construction in the Cypress at Kavala Ranch development will be finished, but none of the other lots will be developed for now. Centex's Eric S. Bruner: Cypress is the developer's only neighborhood in Sacramento affected by the decision to stop building. There are 16 other neighborhoods in progress: "We do see some signs of stability in Sacramento's housing market, but our current decision reflects the reality that we don't expect a sufficient recovery in the near term."
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