Housing Market Tracker - Some Homebuilders Looking Up, Some Down

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Includes: CTX, HOV, KBH, LEN, MHO, MS, MTH, PHHMQ, PHM, RYL, TOL, WCIM
by: Judy Weil

Homebuilder Stocks and Sentiment

Builders Don’t Budge on Low Confidence. "National Association of Home Builders: The housing market index for March was the third lowest reading on record. The index, which gauges builders' perceptions of current conditions, interest from potential buyers and expectations for home sales over the next six months, came in at 20 in March for the second-consecutive month. The index has been at 20 or below since September, a sign of persistent pessimism from builders. The report is derived from a survey of about 400 residential developers nationwide." (AP via Chron.com, Mar. 17th)

Meritage Homes Director Buys Shares. "A director of homebuilder Meritage Homes Corp. (NYSE:MTH) bought 25,000 shares of common stock, according to a SEC filing Friday. In a Form 4 filed with the SEC, Robert G. Sarver reported he bought the shares last Wednesday for $13.88 to $13.99 apiece... Meritage Homes is based in Scottsdale, Ariz." (CNN Money, Mar. 17th)

WCI Communities 4Q losses $459.8M vs year-ago $64.6M. "WCI Communities Inc. (WCI) Monday reported a fourth-quarter loss of $459.8 million, or $10.93/share, wider than a year-ago equivalent loss of $64.6M, or $1.55/share... reflecting pre-tax impairments and write-offs totaled $339.2M as well as a deferred tax asset valuation reserve of $150.1M... Q4 Revenue fell 63.4% to $191.6M from $524M in Q4'06... WCI said its backlog... stood at 317 as of Dec. 31 and gross new orders declined 34.7% to 171 units. WCI [couldn't] comply with certain covenants of its quarterly and full year credit line... [so] it amended its senior secured revolving credit and term loan agreements." (Forbes, Mar. 17th)

S&P Equity Research Upgrades Lennar (NYSE:LEN) to Hold. "S&P analyst, K. Leon: "With shares down 18% year-to-date, the price is near our view of fair value, which is our 12-month target price of $14, raised today from $12, and based on a 0.55X price-to-book value, near that of large homebuilders. We believe LEN's formed joint venture with Morgan Stanley (NYSE:MS), whereby MS paid $525M to LEN for an 80% equity stake in acquired land, will support LEN's liquidity to meet its working capital and debt obligations... We would hold shares on our view that LEN can gain market share when the housing market recovers." (Street Insider, Mar. 17th)

Pulte Homes Unit's Borrowing Capacity Cut By A Third. "A unit of No. 3 U.S. home builder Pulte Homes Inc. (NYSE:PHM), Pulte Mortgage LLC, has had its borrowing capacity cut to $100 million from $150M, the company said in an 8-K securities filing on Monday. On March 14, Pulte Mortgage LLC entered into a Ninth Omnibus Amendment to its asset-backed commercial paper program, which decreases the borrowing capacity." (Reuters, Mar. 17th)

Loma Colorado Hosts Sportsplex Dam Dedication. "A dedication ceremony for the Montoyas Arroyo Sportsplex Dam at Loma Colorado in Rio Rancho is scheduled for March 21. Ground was broken on the dam, which is adjacent to the Rio Rancho Sports Complex, in August 2006...The public/private project was undertaken by the Southern Sandoval County Arroyo Flood Control Authority and Pulte Homes in conjunction with the city of Rio Rancho. The dam, which is also the main entry into Pulte's Loma Colorado residential subdivision, was created to manage the area's storm water run-off. Pulte contributed nearly $1 million toward the project." (New Mexico Business Weekly, Mar. 17th)

Hovnanian's 'B-' IDR Affirmed, Outlook Negative – Fitch. "Fitch Ratings said it affirmed Hovnanian Enterprises Inc's (NYSE:HOV) 'B-' issuer default ratings and 'B-/RR4' senior unsecured notes rating, and raised the US-based housing developer's senior secured revolving credit facility rating to 'BB-/RR1' from 'B-/RR4'. The rating outlook is now negative, Fitch said. On March 7, HOV [reduced] its revolving credit agreement... from $1.2 billion to $900 million and borrowings under the facility will be secured by a portion of the company's assets. As of Jan 31, 2008, HOV had $325M outstanding under the revolving credit facility, which would have left $306M of borrowing availability under the $900M credit facility." (Thomson Financial via CNN Money, Mar. 17th)

ACPT Reports Results for 2007; Suspends Dividend Payment. "American Community Properties Trust (ACPT) reported a 2007 net loss of $541,000, or $0.10/share, on revenues of $85,376,000. vs. net income of $4,591,000, or $0.88/share, on revenues of $98,163,000 for 2006. In January 2008 ACPT agreed to a temporary amendment to its lot sales agreement with Lennar Corp... Lennar also agreed to purchase lots with an aggregate base purchase price of $3,722,000 on or before June 1, 2008. In addition, the Company temporarily agreed to reduce the final sales price of the 100 lots defined in the amendment from 30% to 22.5% of the base price of the home sold on the lot." (Press Release, Mar. 17th)

Partners S&S Electric and M/I Homes Honored by CEA TechHome. "S&S Electric, an electric and electronic systems contracting company dedicated to leveraging the latest technology, and M/I Homes (NYSE:MHO)... are proud to announce their first joint distinction: the CEA [Consumer Electronics Association] TechHome Mark of Excellence Award for Builder Home of the Year... The CEA TechHome Mark of Excellence Awards honor outstanding innovation and achievement in home technology, services and installation trends. The Builder Home of the Year category for the Mark of Excellence Awards recognizes how an integrator demonstrates the use of technology to enhance a production home, resulting in value for the consumer." (Press Release, Mar. 17th)

Real Estate Round-Up March 17, 2008. "New York City: Hordes of people came out to City Planning’s scoping meeting on the Toll Brothers’ proposed development on the Gowanus Canal Thursday night, and not many of the residents who showed up had supportive things to say about the project, reported GowanusLounge.com. Of the 18 people who spoke at the meeting, 14 of them spoke negatively about it, with only a few having positive things to say, commuity leader Buddy Scotto among them. Community Board 6 District Manager Craig Hammerman, also running for City Council, has serious concerns about it." (Brooklyn Eagle, Mar. 17th)

Toll Brothers A Partner In 2 Projects That Got Default Notices. "Wall Street Journal: Two Las Vegas housing developments in which Toll Brothers Inc. (NYSE:TOL) is involved as part of a joint venture received default notices. The developments were supported by a partnership of Focus Property Group, a Las Vegas homebuilder; as well as Toll Brothers, KB Home (NYSE:KBH), Lennar Corp.; and others. The group missed an interest payment and is in negotiations with its lenders, the report said. Developers often go into joint ventures to share any risk in a project." (Philadelphia Business Journal, Mar. 17th)

Wagner Adds New Realty Agents To Staff. Florida: "Ryland Homes' Sonoma community in southern Manatee has rolled back prices on its new single-family homes. The homes are priced from $349,990 to more than $500,000 and range from 2,189 to 3,959-sf of living space. Sonoma is just northeast of Lockwood Ridge Road and University Parkway." (Bradenton Herald, Mar. 16th)

KB To Sell Remaining Land: Developers, Builders Likely To Get Property. "KB Home will put houses on all lots that are already under contract, [but] it plans to sell any remaining property within the five active New Mexico communities to developers or builders... KB's director of communications, Lindsay Stephenson: "Land will be graded and infrastructure put in place... The properties [KB hasn't sold] probably will be sold to developers or other builders and could be sizable. KB's active communities include Montecito Estates, which had plans for 600 new homes... The Orchards at Anderson Heights, a planned 475-home subdivision... And The Villas... with plans for 213 condominiums." (Trading Markets, Mar. 16th)

Visits To Valley Often Spur Purchase Of A 2nd Home. Arizona: "Last November, the Dellingers left Pennsylvania and moved into their new $250,000 house in the Del Webb [Pulte] retirement community of Sun City Festival, near the West Valley's White Tank Mountains. Retirees continue to boost the Valley's growth and housing market. Some housing analysts think the area's retirement communities are holding their values because homeowners buy for the lifestyle and not necessarily the investment. The Dellingers know prices have dropped since they bought, but they're not concerned. "It would be difficult to sell for a profit now," Mary said. "But we plan on keeping this house for awhile." (Arizona Central, Mar. 16th)

Top Atlanta Builders Reporting Weekly Sales and Traffic to Shareyourtraffic.com. "Shareyourtraffic.com, the only real-time traffic and sales data information source for Atlanta’s homebuilding industry, is pleased to announce 19 builder members have joined in its first month in effect, reporting sales data for over 220 Atlanta area communities. Shareyourtraffic.com collects data from home builders and developers on a weekly basis and disseminates it into a usable format to be used for market comparison and other marketing related activities. Centex Homes (CTX), McCar Homes, Ashton Woods Homes and Robert Harris Homes are just some of the builders using this service." (Press Release, Mar. 16th)

County to Reimburse Toll Brothers. Florida: "As part of an original development agreement, Palm Beach County Commissioners have agreed to reimburse Toll Brothers $48,714 for remediation of some environmental issues... in west Boca Raton. Toll is the developer of [the] Mizner Country Club [there]... The reimbursement will fund Toll Brothers removing, disposing of, and replacing with clean fill some contaminated soil discovered by a county environmental survey in 2007. Toll will also have the area retested, commissioners said." (Boca Raton News, Mar. 16th)

Lennar To Discuss Mare Island Projects. Vallejo, California: "New businesses, land transfers and environmental cleanup efforts - these are expected to be included a progress report Lennar Mare Island will give the City Council on Tuesday... Lennar Mare Island spokesman Jason Keadjian: Lennar has 800,000-sf of new commercial space, has launched the rehabilitation of Azuar Drive and continues its work with environmental cleanup work. Within the last three months, Lennar Mare Island has secured three new leases, he said. The pace of the housing construction has slowed down, he added." (Times Herald Online, Mar. 15th)

Palm Harbor Homes Gets Credit Extension. "Home builder Palm Harbor Homes Inc. (PHHM) said its lending unit has negotiated an extension on its warehouse borrowing facility until April 30 [from] March 14. Palm Harbor said the total amount outstanding under the facility is $42.2 million... During the extension period, the lending unit, CountryPlace Mortgage Ltd., will stop taking applications for non-conforming chattel loans but will continue to originate conforming mortgage loans. At the end of its FQ3 this year, CountryPlace serviced 4,312 loans with outstanding balances of $290.5M. CountryPlace has historically originated about 20% of the chattel and non-conforming mortgages for PHHM homes." (Dallas Business Journal, Mar. 14th)

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