Quote of the Day
"It's like a craps table. You got all these winnings and profits out there, but you just keep gambling it. You never pull any money off the table. And then all it takes is ... to roll that seven one time and all the money is gone." - Industry veterans Bill Kimberley, owner of high-end homebuilder Kimberley Homes, on the demise of Iowa’s largest homebuilder, Regency Homes
Other Builders Stay Cautious, But Say Market Poised To Rally. “The news that [Iowa homebuilder Regency Homes] had laid off 130 workers and would halt home construction hit as some central Iowa home builders say they see the market nearing a recovery. In the past two years, builders have reduced new-home starts to lessen a surplus of homes, pulled back on new developments and worked to avoid being overleveraged. The central Iowa housing industry's rebound hinges, in part, on whether Regency's decision rattles consumer confidence, already shaken by a weak national economy and rising energy prices… Builder Oaks Development... is also facing… lawsuits to foreclose on local projects.”
Del Webb Ready To Tout 'Lifestyles' Park. “California: Del Webb is [heavily promoting] its 1,412-home Manteca development… Gregory Group real estate consultants: Del Webb was eighth on the list of top sales out of 95 builders doing business in the two-county area… last year. [It] sold 135 homes last year at its sole project in San Joaquin County… The top seller was Pulte Homes (NYSE:PHM), which had 301 sales last year in the same area. "We've slowed down," Hagelin said. "The big challenge isn't that they don't want to live here. It's selling their house so they can move here."
Developer's Withdrawal Disappoints Haverstraw. Upstate NY: “WCI Communities (WCI) plan to build the 500-unit housing development has been dropped, forcing its potential buyers to put their plans on hold or to look for something else. Realtor Emily Martin: The company's withdrawal disappointed many empty nesters [wanting to downsize]… Upon WCI's withdrawal, the town retained a $500,000 deposit, which had been put down by the company. The town also retained the right to WCI's plans, which town officials said cost the company from $7 million to $8 million to develop.”
Builders' Slow Invasion Of Glades Under Way. “Each hole punched in the imaginary wall that is Miami-Dade County's Urban Development Boundary makes it easier for more development on the county's western fringes… Right now… Lennar Homes (NYSE:LEN) and developer Edward Easton want to build a small town called Parkland [in the area]… Commissioner Katy Sorenson: “You can see the negative effect of destroyed wetlands simply by looking at what happened to New Orleans during and after Hurricane Katrina. The wetlands absorb the rainfall. When you pave over them, you create more flooding.''
Homebuilders Endorse Right-To- Work Initiative. “The Colorado Association of Home Builders, which represents about 4,000 member companies, and the Delta-based Colorado Timber Industry Association, whose members employ about 2,500, have endorsed the right-to work initiative, the effort to ban mandatory union membership in Colorado.”
Dirt Cheap: In A Textbook Real Estate Move, Investors And Builders Are Buying Unsold Lots Left Over From Distressed Developers. “Investment groups and home builders are starting to buy excess lots from distressed developers in the central San Joaquin Valley, leading some observers to think the real estate slump may be close to playing itself out… John Trotter, SVP of Capstone Advisors. The company is financing acquisitions and buying land to hold until prices rise -- and then plans to sell it back to developers. Capstone has completed two deals, spending about $20 million, and is considering more… Prices of raw land in Fresno have fallen 30%-40% over the past several years, making them more attractive to speculators. Finished lots [have] also have declined in value.”
Ryland Group Downgraded To 'BB+'; Outlook Remains Negative - S&P. “Standard & Poor's Ratings Services said it has lowered Ryland Group Inc.'s (NYSE:RYL) corporate credit and unsecured debt ratings to 'BB+' from 'BBB-', citing expectations for continued, very weak housing market conditions, which S&P expects to continue pressuring earnings over the next year, as well as the company's relatively limited liquidity. The outlook remains negative, the rating agency said. Reasonable debt levels and minimal near-term maturities continue to support the lower ratings, as do the U.S.-based home mortgage and homebuilding company's good geographic diversity, conservative operating strategy, and generally moderate financial policy, S&P said.”
Pulte Homes Corporate Credit Rating Cut To 'BB', Outlook Negative - S&P. Standard & Poor's Ratings Services said it has lowered its corporate credit and senior unsecured debt ratings on Pulte Homes Inc. to 'BB' from 'BB+' with a negative outlook. The ratings agency said the downgrade follows a large charge-driven loss in Pulte’s Q1 that further eroded its equity base and pushed leverage levels to their highest point in about 20 years… The negative outlook reflects S&P's expectation for continued deterioration in many of Pulte's key housing markets and acknowledges that weak consumer demand and pricing pressures could further reduce the value of some of the company's land holdings.”
Extension Granted To Princeton Housing Project. Central NJ: “The Regional Planning Board of Princeton on Thursday night authorized a one-year extension on a proposed senior housing development project to be located on Bunn Drive. The extension was approved, 9-2, despite opposition voiced by several representatives of environmental groups and residents, who expressed concern about the potential impact of a housing project on the Princeton Ridge vicinity. The initial approval for the development had been granted to the developer K. Hovnanian (NYSE:HOV) in 2005. However, when zoning changes rendered the plans a non-permitted use, the project was turned over to the property’s owner, Chatham Capital Investors L.P.”
Smaller Homes Make a Comeback for Builders. “A senior regional president for Beazer Homes (NYSE:BZH) reports that square footage for his company’s homes was down about 5% between 2007-2008. Much of the decrease is so struggling builders can hold prices down to attract home shoppers looking for lower selling prices... Also, energy-conscious house hunters are looking for smaller homes, as are baby boomers looking to downsize. Beazer said that it is incorporating “Smartdesign” in its home plans, making the most of reduced square footage by maximizing space in important areas like the kitchen, garage and bedrooms, and adding shelves and closets.”
Centex CEO: Market Conditions Improved by Failure of Private Builders. “Centex (CTX) management reaffirmed its commitment to a strong presence is what it considers roughly 30 core markets on Thursday... [But] after leaving Jacksonville, Fla. as well as Michigan in Q4’07, CEO Tim Eller acknowledged that more market retrenching is likely… Eller: Centex [was building up its cash position] to build share in markets that could best support the company's quest for smoother and more predictable cash flow--a benefit of the company's move to a sell-and-build model… Some markets at least felt like they were getting better, largely due to the decreasing competition [due to] the increasing number of smaller private builders going under.”
Brookfield's 1st-QTR Loss is $12 Million. “Brookfield Homes (BHS), based in Fairfax, Va., on Thursday reported a net loss of $12 million for Q1’08 as housing revenue fell 36.5% to $66M and average selling price fell 19.2% to $571,000, both compared to Q1’07… Loss impairments were $6.2M on 222 lots in six communities and a $9.3M loss on interest rate swaps that were undermined by declining rates in the current market. Closings fell fell 20.5% to 120 units, a decrease from the 151 units in Q1’07. Net new orders fell 20% to 231 units from Q1’07 but were up significantly from 104 units during Q4’07. Backlog was down 33% to 266 homes.”
Shottenstein: Prices Can Be Cut Further. “M/I Homes (NYSE:MHO) CEO Bob Schottenstein, when asked if he would speculate as to whether the majority of impairments are behind his company: "I think there is way too much uncertainty to speculate. The notion that prices can't be reduced...I don't understand that. They can, they do, and in some of our markets, they are… As markets diminish, there are less horses at the trough. I think that when things begin to improve, they will generally begin to improve in all our markets at about the same time." The company also announced that it remains committed to its current markets, especially the Midwest, despite the number of builders exiting.”
Builders Ask for New Tax Incentives. “Calling green building “the next evolution in residential construction,” the National Association of Home Builders told Congress that the best way to help small home builders promote residential energy efficiency and sustainability technology in home construction is by extending tax incentives for new energy-efficient homes… Michael Hodgson, president of the Stockton, Calif.-based energy consulting firm ConSol, said these incentives dovetail with the normal supply and demand for home construction. “A tax credit program leaves important production decisions in the hands of builders, buyers and home owners and does not require expensive administrative oversight that is usually associated with a mandate.”
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