Homebuilders: Lawsuits, Incentives, Even Some Building [Housing Tracker]

by: Judy Weil

Quote Of The Day 

The homes are "simply gorgeous,” but “I don't know what they heck they were thinking to put something that far out." – Prospective homebuyer Nicole Oahrig, on a Pulte Homes development 30 miles outside of Tucson. (AZ Starnet, Aug. 10)

Homebuilder Stocks

Supervisors Approve White Tract Plan. Pennsylvania: “The Upper Makefield supervisors this week approved a revised final plan to develop the White tract off route 532… The revisions… allow the land to be separated into three parcels… Twenty-seven acres will go to the county for a proposed veterans park, while a little less than 80 acres will be developed by Toll Brothers (NYSE:TOL), which will initially acquire the entire plot, Supervisor Robert West said… The vote allows officials to move forward with developing the county's portion, while the Toll segment continues to be held up by litigation and other compliance issues.” (Bucks County Courier Times, Aug. 10) 

Toll Brothers Begins Clubhouse Construction. Florida: “Toll Brothers began construction of the community clubhouse at Firano at Naples, a new community of single-family homes off the Davis Boulevard corridor… Construction is expected to be completed and the clubhouse open in time for the spring season. Firano at Naples will include 112 single-family homes on approximately 40 acres. Homes 2,058 to 3,753-sf start in the $300,000s.” (News Press, Aug. 10)

Drainage Concerns On Three Oaks Parkway May Cause Lawsuit. Florida: “Lee County may end up in court over Three Oaks Parkway. The road is open and the traffic is flowing. The water is flowing, too. It’s just not going where it’s supposed to… Centex Homes (CTX) had plans to build homes on more than 500 acres in the path of the road… So in 2005 the county and Centex made an agreement. The road would be redesigned to accommodate the development. In return, Centex would provide needed drainage easements so water from the road and its ditches could be treated before it reached wetlands west of the road.” (Naples News, Aug. 10)

WCI Doesn’t Owe All 61,000 Parties On List. “When WCI Communities (WCI) filed for bankruptcy protection a week ago, along with the Chapter 11 petition came a list of potential creditors 2,033 pages long – with about 30 names on each. The list of 60,976 businesses, individuals and organizations WCI might owe money to has left several local business owners scratching their heads and looking into files, wondering: When, why and how much does WCI owe us — if they do at all? The list amounts to almost every entity with which WCI has conducted business.” (Naples News, Aug. 10)

Developments Moving Forward. Nevada: “Despite several developments receiving notices of default in the last year, almost all existing projects in the area are moving forward, albeit at a reduced pace… Here's a sampling of developments that are moving forward:  Centex Homes is doing well with their Cyan projects in the South Meadows area and Sterling Ridge in Sparks…  KB Homes (NYSE:KBH): Building continues at its Calabria at Monte Sereno development at Southeast Reno's Curti Ranch area, with homes starting at $243,400.” (Reno Gazette Journal, Aug. 10)

Red Rock Hanging On. “To prospective homebuyer Nicole Oahrig, Pulte Homes' (NYSE:PHM) Red Rock Village offers some big attractions: Homes priced as low as $129,000 with family-friendly amenities like a swim complex and a skate park. But then there's the deal-breaker: "The distance," said Oahrig, about the 30-mile commute… to Tucson… Consumers are worrying about higher gas prices and long commutes and thinking twice about buying homes in far-flung subdivisions… Shawn Chlarson, Pulte division president: The development is on track to have 400 families moved in by the end of the year, down considerably from previous expectations, but enough to keep the project in the black.” (AZ Starnet, Aug. 10)

San Francisco Black Population Way Down. “The African-American Out-Migration Task Force: Black residents in San Francisco have dropped to 6.5% of the population… In 1970, 13.4% of San Franciscans were black. Now, there are fewer black-owned businesses, and the remaining black residents are less likely to be homeowners, more likely to live in substandard or public housing and poorer than the rest of the city. Residents at the hearing accused Lennar Corp. (NYSE:LEN), which is redeveloping the Hunters Point Naval Shipyard, of trying to push blacks out of the Bayview-Hunters Point neighborhood, the last majority-black area in the city.” (UPI, Aug. 10) 

D.R. Horton Launches Single Story Super Sale Event In New Communities. “D.R. Horton's (NYSE:DHI) Las Vegas division will begin its "Single Story" sales event through the weekend of Aug. 16-17. Currently modeling more than 30 ranch-style floor plans, the sale will take place valley-wide across the builder's 24 Las Vegas neighborhoods. Jeff Ward, Las Vegas division director of marketing: "President Bush recently signed a Housing Bill under which the Nehemiah seller assisted down-payment program will be ending soon. During this sale, our buyers may still be able to benefit from this tremendous program.” (Las Vegas Review Journal, Aug. 9)

Pulte Homes Unveils Azure Canyon Today. Nevada: “Pulte Homes is unveiling three brand new model homes today at the builder's Azure Canyon neighborhood, within the Mountain's Edge master -planned community. The three new model designs measure from 1,788, to 2,088 square feet, and offer up to four bedrooms and 21/2 baths with two-car garages. The homes are Green Built Certified and qualify for the Southern Nevada Water Authority's Water Smart Home" Program.” (LVRJ, Aug. 9)

Beazer Posts Narrower Loss On Spending Cutbacks. “For FQ3, ended June 30, Beazer Homes (NYSE:BZH) reported a net loss of $109.8 million, or $2.85/share, compared with a prior-year net loss of $118.7M, or $3.09/share. The latest results include $118.4M in pretax charges, mostly from inventory write-downs and land-option contract abandonments, as well as write-downs of joint-venture investments and goodwill. Revenue fell 40% to $455.6M. Analyst estimates were for a loss of $2.34/share on $430M in revenue. Land and land-development spending plunged 60%. Home closings fell 37% to 1,677, with the average sales price sliding 8.8% to $257,400... The cancellation rate was 37%, compared with 36% a year ago.” (WSJ, Aug. 8)

Beazer Hopes to Settle With Regulators. “Beazer managed to negotiate itself some security by renegotiating its revolving credit facility, currently untapped, to eliminate potential covenants that might be tripped if the company's financials slip during the market downturn. CFO Allan Merrill [said it would] eliminate the need to frequently renegotiate terms. That, plus the fact that the builder has no big debt due until 2011, should help the company better weather the downturn, he said. Meanwhile the company faces challenges dealing with the elimination of seller-assisted down-payment-assistance program loans. Beazer's FHA loans had grown to about half its business and roughly 20% of buyers were using the seller-assisted financing.” (Big Builder Online, Aug. 8)

Union Blames Builders For Mortgage Problems. “Laborers' International Union of North America: Homeowners who purchased at newer developments are more likely to have 100%-financed, adjustable-rate mortgages because of builders' efforts to push risky subprime loans. As a result… certain new-home communities are now littered with vacancies created by foreclosures that are pushing prices down. Zeroing in on Maricopa County in Arizona, the report found that more than a third of mortgages made by the finance arms of three major builders there -- KB Home, Lennar Corp. and Richmond American Homes -- were five-year ARMs set to adjust in 2010 and 2011.” (LA Times, Aug. 8)

Keycorp Cuts Exposure With Struggling Builder. “Regional banking company KeyCorp said Wednesday it is cutting $12.9 million of lending exposure with WCI Communities Inc. As of June 30, KeyBank National Association, a subsidiary of KeyCorp (NYSE:KEY), still had $12.9M of remaining exposure to WCI under credit agreements. Of that, $8.6M was cleared July 30, and $4.3M is pending settlement this month. KeyBank and WCI Communities have a separate risk management transaction agreement that also is being terminated. WCI said that a bankruptcy court in Wilmington, Del., approved its use of $50 million in cash on hand for operations.” (Sarasota Herald Tribune, Aug. 8)

Redevelopment Cooked Lennar Grant. “Officials with the San Francisco Redevelopment Agency admitted yesterday that they cooked a state grant application, by claiming that they needed the funds to fill a $25 million gap in the budget of a project that the City is developing with Lennar at Hunters Point Shipyard. But what they really wanted the monies for, the agency claimed, was to boost a shrinking community benefit fund that was supposedly to be derived from development profits. The admission came during a hearing into Lennar’s fiscal health…. The June 10 grant application discovery, coupled with Lennar's June 7 bankruptcy filing at Mare Island, heightened concerns that Lennar was planning to mothball the Shipyard/Candlestick redevelopment project.” (San Francisco Bay Guardian, Aug. 8)

Highest Home Supply Since '82 Seen Needing 50% Cut. “Hovnanian Enterprises Inc. (NYSE:HOV), New Jersey's largest homebuilder, cut the number of unsold houses by more than 50% over the past two years after lowering prices and still had 1,500 on its books as of April.  CFO Larry Sorsby: “We pretty much start a home these days when we have a contract from a buyer wanting to purchase one.” The company's sales price in the northeast for homes under contract dropped 7.4% in April from a year earlier. “We don't build them and hope they come,'' he said. NAR: There are 3.9 million unsold existing single-family homes, the most since at least 1982.” (Bloomberg, Aug. 7)

Bethel Residents Say Blasting By Builder Is Rattling Nerves. Connecticut: “Toll Brothers, a national luxury home builder, is clearing the site near the Danbury border to build 62 townhomes expected to sell in the low- to mid-$400,000 range. The development is called Bethel Meadows… The site, which was vacant, has been controversial since 2002, when Toll Brothers proposed a 128-unit affordable housing development. Neighbors were strongly opposed… A settlement last fall allowed Toll to submit an application for a 62-unit housing development. None of the units would be affordable housing, but Toll Brothers agreed to put $960,000 into an affordable housing trust fund the Board of Selectmen will establish.” (News Times, Aug. 7)

HOV Is On the Move. “Over the last 52 weeks Hovnanian Enterprises stock has ranged from a low of $4.25 in January to a high of $17.00 in August. Hovnanian has been showing support around $6.47 and resistance in the $7.65 range. Technical indicators for the stock are neutral and S&P gives HOV a neutral 3 STARS (out of 5) hold ranking. If you are looking for a hedged play on HOV the stock seems like it could be a candidate for a September out-of-the-money bull-put credit spread below the 5 range.” (Market Intelligence Center, Aug. 7)

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