Quote of the Day
"We definitely think [green building is] a selling point, and we think it's here to stay," - Jeffrey Mezger, president and CEO of KB Home.
Home Builders Begin Offering Discounts. "Stuck with excess inventory, builders throughout California are beginning to offer steep discounts on new homes, sometimes at a loss. Centex Corp. (CTX) is touting the "greatest prices in years" in its ads. [California] builder Van Daele Homes is advertising 35% discounts. Until recently, most builders resisted outright price cuts in California to avoid undermining the value of their holdings. Instead, many offered incentives such as interior upgrades. But the incentives weren't working, builders now concede, forcing them to carry the debt on empty, unsold houses. "Patrick S. Duffy, Metrointelligence Real Estate Advisors: "Homebuilders [are] not selling any houses."
Home Builders Go 'Green' To Seek New Selling Point. "[Shea Homes'] 1,500-2,000 new homes this year... will have environmentally friendly features such as increased insulation and energy-efficient electronic appliances. KB Home (NYSE:KBH) this year also began including appliances awarded the federal Energy Star rating for high energy efficiency as standard in homes, even though they cost more than those without the designation. And Pulte Homes (NYSE:PHM) is adding more insulation and energy-saving appliances at some of its subdivisions in the southwestern U.S... National Association of Homebuilders: As much as 10% of all housing starts, at a market value of $38 billion, are expected to include environmentally friendly construction by 2010."
Beazer Homes Cut To 'B+', Stays On Negative Watch – Fitch. "Fitch Ratings cut Beazer Homes' (NYSE:BZH) issuer default rating to 'B+' from 'BB-', senior notes to 'B/RR5' from 'BB-', convertible senior notes to 'B/RR5' from 'BB-' and junior subordinated debt to 'CCC+/RR6' from 'B'. Beazer's ratings remain on negative watch as it has not filed financial results... since its FQ2'07. Beazer has until May 15 2008, to file its financial statements to avoid an event of default under its bank credit facility and bond indentures. Also, there is uncertainty as to the financial impact of Beazer's potential liability as well as regulatory fines related to the violations found within its mortgage subsidiary, Fitch said."
Ryland Mortgage Pays Fine for Lending Practices. "North Carolina Office of the Commissioner of Banks [NCCOB]: Ryland Mortgage, the lending affiliate of builder Ryland Homes (NYSE:RYL), has agreed to pay certain North Carolina homeowners a total of $220,851 in compensation because of allegations claiming the lending unit overcharged based on state lending standards... Ryland Mortgage also agreed to pay a $161,000 fine to the state... NCCOB: Ryland has agreed to ensure that its loans do not exceed state standards; To guarantee that applicants are made fully aware of the actual loan terms and discounts included; [And] to utilize three different independent appraisers to assess home value."
Big Foreclosures Close Quietly. "A $74 million loan to Irvine-based developer SunCal Cos. for a major housing project in Shafter was foreclosed on Wednesday morning at a public auction on City Hall steps. SunCal’s outstanding debt to national homebuilder Lennar Corp. had reached almost $86 million with interest and fees by auction time. Opening bids for the 515-acre site started at $10M. No one made an offer, so the property went back to Lennar."
Centex Steps In For Lennar. Illinois: "Centex Homes Inc. [announced it] will take over the undeveloped lots in Summerfield subdivision and begin building single-family homes as soon as the weather breaks. There are still 83 lots undeveloped in the subdivision on Wildy and Ridge roads, north of Interstate 80, previously owned by Lennar Homes... Minooka trustees [want to] make sure improvements to Wildy Road are completed in accordance with the original annexation agreement... but Centrex didn't want to pay for Lennar's obligation either. All parties agreed to a resolution [where] Lennar will keep their end of the original bargain and relieve Centrex and the village of the liability."
KB Home CEO Earns $24.4 Million in 2007. "KB Homes' CEO received compensation valued at $24.4 million in F2007... SEC filing: The bulk of Jeffrey T. Mezger's compensation came from stock and option grants that the company valued at $16.3M... Some of those grants were awards the company delayed in 2006 during a review of improperly dated stock option grants. Mezger's compensation package included $1M in salary and a $6M bonus that Mezger received for strengthening the company's balance sheet, improving performance on a customer satisfaction survey, cutting costs and developing senior leadership in his first year as CEO... In 2006, Mezger earned about $5.9M in total compensation, including $2M in restricted stock awards."
Reports of Mideast Purchase of Lennar 'Rumors,' VP Says. "Contrary to recent reports published elsewhere, no firm from the Middle East is buying development giant Lennar Corporation, the company's VP told The Signal Wednesday. Marshall Ames... called a story in the Los Angeles Business Journal "old news" and "rumors..." when asked about reports Monday that Middle Eastern investors might purchase Lennar Corp., the parent of Valencia-area developer Newhall Land and Farming Co."
Pulte CEO Advocates Tax Credits for Home Buyers. "Pulte Homes' CEO says his company is aggressively lobbying federal lawmakers to craft a second stimulus package that would directly benefit the housing industry by offering tax credits to home buyers... Richard Dugas [said] there have been "serious discussions" among legislators and housing industry officials about allowing home buyers to forego paying a portion of the taxes they would owe on the purchase of a home. He said the tax credits being discussed range from $3,000-$15,000, although there is still debate about whether these credits should be extended to all home purchases, or limited to the purchase of new homes, or to entry-level homes."
For Single-Family Builders, Going Vertical Carries Risk. "Single-family homebuilder Toll Brothers Inc. (NYSE:TOL)... has 10 buildings 12 stories or higher under construction, with eight more on the drawing board. Hovnanian Enterprises Inc. (NYSE:HOV) is building its first high-rise tower... in Jersey City, N.J., which should be finished next fall... Wall Street isn't enthusiastic: Once construction starts, it is nearly impossible to pull back if market conditions change, a key difference from single-family communities where the developer could simply build fewer homes. One consultant says the [Bal Harbour, Florida] area now has a 61-month condo supply, with tens of thousands more units set to flood the market."
WCI Communities Sees Pre-Tax 4Q Loss of $410M-$460M on Land Impairment Charges. "WCI Communities (WCI) late Tuesday said it expects a pre-tax loss of $410 million to $460 million for the fourth-quarter period. The loss includes land impairment charges of approximately $335M-$350M. The charges relate to finished inventory of unsold traditional and tower homes, amenities and other assets, abandoned option deposits and related costs, and goodwill write downs.The company said it may not file its 10-K with the SEC by Mar. 17, citing the unexpected length of time needed to complete a detailed impairment analysis for each community and to complete its provision for income taxes including a tax asset allowance."
Beazer Adopts Tougher Ethics Code. "Beazer Homes USA has set in place a Global Compliance Program [which] makes clearer employees' obligations to report non-compliant activities, adds additional obligations for document retention, discrimination, anti-trust competition, the protection of confidential information and customer privacy, and spells out the company policy for electronic communications and computer systems. The section of the code requiring employees to blow the whistle on wrong-doers is especially beefy. It spells out a requirement to report, gives a list of people the violations could be reported to and even sets up a telephone hot line and an Internet address where employees can report what they see as wrong-doing anonymously."
Digital Dirt: Land Deals In the Works. "SunCal is under contract to buy the 1,600-acre Toho Preserve property in the Orlando area from D.R Horton (NYSE:DHI). Though neither party will confirm the price, a figure upward of $35 million is being openly used by industry land experts. SunCal has previously maintained its footprint in the Western regions, but last year expressed a desire to expand. Though pockets of Florida real estate make sense to land experts on a long-term horizon, this location falls smack in the middle of an area primed for nearly 30,000 lots to come online. In other words, it's difficult to imagine builders feeling much urgency to reload their pipeline any time soon. Besides, isn't SunCal already holding more lots that capital partner Lehman is comfortable with?"
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