News

Builder Confidence Increases for Second Straight Month

Wed, 19 May 2010 01:57:00 GMT

May 17, 2010 - Builder confidence in the market for newly built, single-family homes rose for a second consecutive month in May to its highest level in more than two years, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI gained three points to 22 in May, its highest point since August of 2007.

“Builders surveyed for the HMI at the beginning of May were undoubtedly reacting to the heightened consumer interest they had just witnessed as the deadline for home buyer tax credits arrived at the end of April,” said Bob Jones, Chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. “Builders are also hopeful that the solid momentum that the tax credits initiated will continue even now that those incentives are gone.”

“The really encouraging part of today’s HMI is that sales expectations for the next six months continued to gain, despite the expiration of the home buyer tax credits at the end of April,” said NAHB Chief Economist David Crowe. “This means builders are more comfortable that the market is truly beginning to recover, and that positive factors for buying a new home – low interest rates, great selection, stabilizing prices, and a recovering job market – are taking the place of tax incentives to generate buyer demand.”

Crowe was quick to point out, however, that while builder confidence has improved from the depths of the housing downturn, it is still quite low by historic standards. “Obviously we still have a long way to go, and it’s worth repeating that continued challenges such as the critical lack of project financing, inappropriate appraisal procedures, competition from short sales and foreclosures, and the soaring costs of some building materials are major obstacles on the path to a healthier housing market and economy,” he said.

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

Each of the HMI’s three component indexes posted three-point gains in May. The component gauging current sales conditions climbed to 23, its highest level since July of 2007. The component gauging sales expectations in the next six months rose to 28, its highest point since November 2009, and the component gauging traffic of prospective buyers improved to 16, its best showing since September 2009.

The HMI also posted gains in every region in May. The Northeast, which has the smallest survey sample and is therefore subject to greater month-to-month volatility, rose 14 points to 35, its highest point since June of 2007. The Midwest posted a two-point gain to 17, while the South registered a one-point gain to 22, and the West posted a seven-point gain to 20.

National Association of Home Builders Press Release (04/17/2010)

New Home Construction Beats Expectations

Wed, 19 May 2010 01:45:00 GMT

U.S. home construction posted a bigger-than-expected gain in April thanks to the extension of a tax credit, but the plunge in permits suggests the housing sector will remain a weak spot in the economy.

Housing starts rose 5.8% to a seasonally adjusted 672,000 annual rate compared to the prior month, the Commerce Department said Tuesday.

Economists surveyed by Dow Jones Newswires expected starts to rise 3.8%. March starts, originally seen up 1.6%, were revised to an increase of 5.0%.

However, building permits decreased 11.5% to a 606,000 annual rate, suggesting a slowdown in construction over the next several months as demand is expected to wane. Economists had expected permits to drop by only 0.4%.

The housing sector was hit hard by the recession and still has a long way to go to recover. Low house prices and mortgage rates, coupled with the government's tax benefit, are helping the industry drift higher from very low levels. But another setback may occur once the tax incentive--which was extended to include deals inked by April 30 and closed by June 30--expires.

"Normally, the U.S. economy needs to construct over 1.5 million housing units a year to meet underlying demand. This will not happen until 2012," said Patrick Newport, U.S. economist at IHS Global Insight, in a research note.

Builders are cautious because of a surplus of unsold homes, including a so-called "shadow" inventory made up of property withheld from the market because of low prices.

Reported by Wall Street Journal (05/18/2010)

Housing Starts Rise to 17-month High

Fri, 16 Apr 2010 15:01:00 GMT

WASHINGTON (Reuters) - U.S. housing starts rose more than expected in March to their highest level since November 2008 and permits to build new homes scaled a 17-month peak, offering hope the housing market recovery remained on course.

The Commerce Department said on Friday housing starts rose 1.6 percent to a seasonally adjusted annual rate of 626,000 units. February's housing starts were revised up to show a 1.1 percent increase, which was previously reported as a 5.9 percent drop.

Analysts polled by Reuters had expected housing starts to rise to 610,000 units. Compared to March last year, starts were 20.2 percent higher.

"Some of the worries about the housing market have been alleviated by this report," said Cary Leahey, an economist at Decision Economics in New York.

U.S. stock index futures held on to small losses after the data, while Treasury debt prices were steady at slightly higher levels. The U.S. dollar was little changed.

Groundbreaking for single-family homes slipped 0.9 percent last month to an annual rate of 531,000 units after rising 5.7 percent in February. Starts for the volatile multifamily segment surged 18.8 percent to a 95,000-unit annual pace after falling 21.6 percent the prior month.

The housing market recovery has stalled in recent months and sales have dropped after strong gains in the second half of 2009. The sector, a key factor behind the worst economic downturn since the Great Depression, remains one of the headwinds confronting the recovery.

Analysts are cautiously optimistic the improving economic conditions, particularly the resumption of job growth, will help put the sector back on an upward trend and March's housing starts data will be seen as a step in that direction. A National Association of Home Builders survey on Thursday showed home-builder sentiment rose to a seven-month high in April as consumers rushed to take advantage of a home buyer tax credit. Better economic conditions also helped.

New building permits, which give a sense of future home construction, jumped 7.5 percent to a 685,000-unit pace last month -- the highest level since October 2008, the Commerce Department said. That compared to analysts' forecasts for 630,000 units. Permits rose 2.4 percent in February. Permits were up 34.1 percent from March 2009, the biggest year-on-year gain since February 1992.

New home completions fell 3.1 percent to a record low 656,000 units. The inventory of total houses under construction dropped 1.4 percent to an all-time low of 489,000 units in March, while the total number of units authorized but not yet started soared 7.5 percent to 103,200 units -- the highest level since June.

Reported by Reuters/Chris Keane (04/16/2010)

Investors Gaining Confidence in Homebuilder Bonds

Thu, 15 Apr 2010 15:56:00 GMT

April 15 (Bloomberg) -- U.S. homebuilder bonds have recovered to levels last seen before the global credit freeze as investors gain confidence the economic recovery is strong enough to prevent defaults.

Yields fell to within 6.06 percentage points of Treasuries, the narrowest since August 2007, according to Bank of America Merrill Lynch’s U.S. High-Yield, Homebuilders/Real Estate Index. Hovnanian Enterprises Inc.’s debt has surged 11 percent since New Jersey’s largest homebuilder posted its first profit in more than three years on March 2.

“There is no question that the worst is over for homebuilders,” said Christopher Towle, who helps oversee $47 billion in fixed-income assets, including Hovnanian debt, as a partner at Lord Abbett & Co. in Jersey City, New Jersey. “The numbers show it.”

Investors are growing more bullish as the economy recovers from the worst recession since the 1930s, unemployment falls from a 17-year high and the Federal Reserve supports the housing market with record-low interest rates. Calabasas, California- based Ryland Group Inc., the homebuilder that targets first-time buyers, will sell bonds as soon as today, a person familiar with the deal said.

Home affordability for families with a median income rose in the fourth quarter to about the highest level since records began in 1986, according to National Association of Realtors data compiled by Bloomberg.

“It is hard to view this as anything but bullish,” Citigroup Inc. analysts led by Tom Fitzpatrick in New York said in an April 13 report. “There are good reasons to suspect some ‘brighter days’ are around the corner.”

Reported by Bloomberg BusinessWeek (04/15/2010)

New Homes Sales Show Positive Signs in Southeast

Thu, 15 Apr 2010 15:45:00 GMT

Memphis, Tenn. — The sale of new homes in Memphis is picking up, a sign that construction in the residential real estate market may be resurging after a four-year slide.

MarketGraphics of Memphis LLC, which reports housing activity three times a year, reports that between Nov. 1, 2009, and March 1, there were 398 new home starts, compared to 358 a year ago in the five-county Memphis metropolitan area.

At the same time, the gross inventory of homes has dropped 16% from its last report in November to 1,975 homes. That’s a 65% decline from March 2009.

Don Berge, president and owner of MarketGraphics of Memphis, says the numbers are clear evidence that the market is starting to lift off in terms of construction and closings compared to last year, the worst in decades.

Reported by Memphis Business Journal (04/09/2010)

Economists Say Demand for Calif. Homes Sign of Recovery

Fri, 05 Feb 2010 20:02:00 GMT

After a three year market "correction," economists think that Orange County's real estate industry may be in recovery with signs, like consumer reaction to the grand opening of the Irvine Company's Woodbury and Woodbury East development, showing that demand for housing is back.

On Jan. 30, the Irvine Company sold 70 of its new Woodbury and Woodbury East houses and condos, the largest Irvine Ranch sale on record since around the peak of the housing bubble in 2006.

More than 10,000 people visited open houses at the Woodbury grand opening on Saturday and Sunday, and the development attracted more than 700 prequalified buyers for its 685 new homes.

To meet demand, the Irvine Company has already begun to sell the 56 homes for the next construction phase in the Woodbury development, the company's first major residential project since halting construction for more than three years after the housing market collapsed.

"The response has been tremendous," said Dan Young, Irvine Company President of Community Development, "We're more than pleased, this is a great opportunity to buy a new home. We're back."

This demand has been driven, according to Dr. Esmael Adibi, Director of the Anderson Center for Economic Research at Chapman University, by significant improvements in house affordability and the job security of potential homebuyers.

"Recession is healthy," Adibi said, "driven by easy lending practices, higher prices made (purchasing a home) extremely difficult for a potential buyer. (The recession) lowered prices and affordability has improved."

The real estate recovery will be fueled by consumers purchasing houses that fall below the median Orange County home price, said Adibi. The prices for these homes, less than Orange County's $430,000 median, have bottomed out and are more stable than their costlier counterparts.

The cost for the new Woodbury homes range from the low $300,000's to around $900,000, and Adibi thinks that it may be wise for builders to continue to focus on constructing less expensive homes in the near term.

With the Irvine Company indicating that it may begin building more houses soon, Building Industry Association of Orange County CEO Kristine Thalman is optimistic that job growth is on the way.

Reported by The Orange County Register (Feb. 2, 2010)

National Builders Buying Up Land

Wed, 18 Nov 2009 16:52:00 GMT

Like most public builders, Lennar Corp. is back in the land game, a sign of confidence for a sector limping through its worst downturn in generations.

But the game has changed since the heady days of the boom when sky-high price tags and out-of-the-way locales didn’t seem to matter. Now builders are seeking deals, snapping up prime lots ready for building with streets, sewers and other improvements already in place. That reduces construction costs and boosts margins, key as builders struggle to turn a profit.

In Homestead, Fla.-located in hard-hit Miami-Dade county-Lennar recently snapped up 107 home sites for $3,000, according to an SEC filing Tuesday. In boom-to-bust San Bernardino, Calif., 38 sites commanded $28,000. San Francisco had the priciest parcels; 33 sites went for $139,000, according to the filing. Of course, builders still have lots of land. Lennar alone owns 78,000 home sites, according to the filing.

That might leave one wondering: Why buy more?

During the housing frenzy, builders weren’t all that picky, taking almost anything that came along. But the downturn soured many buyers’ appetites for long, traffic-heavy commutes, making locations near urban centers and public transportation more valuable.

Most builders have sold their less-desirable land and put projects on hold until the market returns. Ryland, for one, says it has land in Phoenix, one of the best known bubble markets, but isn’t actively selling for now. Industry giant Lennar wasn’t specific about its purchases, saying only they were “well located.”

With only so many choice lots to go around, builders are getting aggressive and paying cash if necessary. Bidding wars have resumed, but some builders say they’ve learned their lesson and won’t overpay.

Last week, luxury builder Toll Bros. said it came in eighth place in a California bid. “We may not be the swiftest or the brightest, but after 40-some-odd years in the business, I would have hoped that we would have come closer than eighth,” Chairman and Chief Executive Robert Toll said in a quarterly preview call. “But on the basis of the current markets, even with a little inflation thrown in, we couldn’t see to get ourselves any closer than eighth to the winning lines.”
Reported by Wall Street Journal (Nov. 17, 2009)

Home Builders Rebuilding Inventories

Mon, 16 Nov 2009 16:34:00 GMT

Eight miles west of I-95 in suburban Boynton Beach, water gurgles down a man-made brook in front of the towering Valencia Reserve main gate. Behind it, diesel engines growl, hammers pound, and shovels dig into fresh landscaping beds.

Home builders are rebuilding – their inventories and businesses.

For the first time since the real estate bust, a recent study showed that construction of new single-family detached homes in Palm Beach County subdivisions is outpacing the number of homes people are moving into.

In other words, builders have finally run low on inventory.

In the second and third quarters of this year, construction began on 441 new Palm Beach County homes, while the number of move-ins was 389, according to an October report from the housing data firm Metrostudy.

In the first quarter of 2009, Palm Beach County's single-family new home construction bottomed out at 93, while move-ins stood at 269.

Housing experts say the turnaround in the later part of 2009 is a good sign for the economy.

Although the gain is modest – consider in the third quarter of 2005, nearly 1,400 new Palm Beach County homes were under construction – it's how the real estate recovery is expected to proceed, in baby steps.

Reported by The Palm Beach Post (Nov. 15, 2009)

Housing Prices Record Slight Gains

Thu, 08 Oct 2009 03:24:00 GMT

WASHINGTON — U.S. home prices rose slightly in July from a month earlier, according to a government index, further evidence the housing market is stabilizing.

The Federal Housing Finance Agency said Tuesday prices rose 0.3% in July from the prior month, but June's price increase was revised down to 0.1% from 0.5%.

The index is still 4.2% below last year's levels and 10.5% off its peak from April 2007. It is based on loans owned or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.

The index has declined less than other housing market measurements because it excludes the most expensive homes and some of the subprime loans that have fallen into foreclosure.

The report "supports other evidence that the three-year long decline in prices has come to halt," Paul Dales, U.S. economist with Capital Economics, wrote in a note to clients. But he cautioned that "rising foreclosures and the fragile economic environment suggest that further gains in prices will be modest and patchy."

Associated Press (09/22/2009)

Home Prices Record First Gains in 3 Years

Thu, 08 Oct 2009 03:24:00 GMT

Home prices in major U.S. cities registered the first monthly gain in nearly three years, according to a new report that provided fresh evidence that the severe U.S. housing downturn could be easing.

Standard & Poor's Case-Shiller index, which tracks home prices in 20 metropolitan areas, rose 0.5% for the three-month period ending in May, compared with the three months ending in April. It marked the index's first increase after 34 straight months of decline, and came after a variety of housing indicators has shown glimmers of hope for the past several months.

But most Wall Street economists who discussed the survey focused on the April-to-May rise, saying it represents a significant change in direction. Home prices in 15 of the 20 areas in the survey rose or remained stable.

The results were also consistent with other recent housing data, these economists said. Sales of new and existing homes rose for three consecutive months through June. Housing starts were up in June, and an index of builder sentiment rose in July, though both remained at low levels.

May's uptick came in part as home prices in some areas fell enough for investors and first-time buyers to begin competing for bargains, helping to ease the backlog of unsold homes.

Other likely sales spurs included mortgage rates that fell to 50-year lows, an $8,000 federal-tax credit for first-time homebuyers and the ability of buyers to secure mortgages from the Federal Housing Administration with as little as 3.5% down.

The latest readings don't necessarily herald a full-blown recovery for the housing market or broader economy. Consumer confidence remains near record lows. The U.S. unemployment rate, at 9.5% in June, is expected to hit double digits before year end, making swift growth and an expanding labor force unlikely anytime soon.

The home-sale numbers surprised Robert Shiller, the Yale University economist who helped create the Case-Shiller indexes. "The change in momentum here is very significant," he said. Last month, Mr. Shiller forecast sustained home-price declines into the next few years, which he said now looks less plausible. He said he expects home prices to remain near current levels for the next five years.

Reported by Wall Street Journal (7/29/09)

Home prices remained down about 17% from a year earlier, according to the index. According to S&P/Case-Schiller's seasonally adjusted numbers, which it began reporting only earlier this year, prices in May posted a 0.2% decline.

New Home Sales on The Rise

Thu, 08 Oct 2009 03:24:00 GMT

New-home sales soared in June from the previous month, the third increase in a row and supplying fresh evidence the housing market is beginning to recover from its long crisis.

Sales of single-family homes increased by 11.0% to a seasonally adjusted annual rate of 384,000 compared to the prior month, the Commerce Department said Monday. Though, year-over-year, new-home sales were 21.3% lower than the level in June 2008.

The median price for a new home was $206,200 in June, down 12.0% from $234,300 in June 2008. On a monthly basis, the price fell from May 2009's $219,000.

Economists surveyed by Dow Jones Newswires expected June sales to climb just 2.3% to 350,000.

The increase was the fourth in six months, as buyers take advantage of falling prices. It appears new-home sales reached a bottom in January, at a level of 329,000, and that the market is beginning to recover slowly. The level of 384,000 in June was the highest since 390,000 last November.

Home construction unexpectedly rose in June, the government said July 17. Housing starts increased 3.6% to a seasonally adjusted 582,000 annual rate compared to the prior month. The starts data also showed building permits surged, and single-family starts made their biggest climb in four years.

May new-home sales rose 2.4% to an annual rate to 346,000, Monday's data showed. Originally, the government said May sales fell, sliding 0.6% to 342,000. April sales climbed 1.8%.

Reported by Wall Street Journal (07/28/09)

C.P. Morgan Closes Doors

Thu, 08 Oct 2009 03:24:00 GMT

Citing untenable market conditions, homebuilder C.P. Morgan Homes Inc. announced it is closing its doors and ceasing operations effective Feb. 27, 2009. One of Central Indiana's most dominant builders of single-family homes for more than two decades, the Morgan firm said the collapse of the real estate industry "makes it impossible for us to serve our customers effectively and remain viable." "This is one of the most difficult decisions I've ever had to make," said Charles P. Morgan, company founder and chairman. "With home prices dropping precipitously, resulting in millions of foreclosures, we believe our industry will be in trouble for many months to come. Unfortunately, I believe it's a crisis that will swallow up many companies like ours all accross the nation." Morgan said all homes under construction have been completed. Applicable warranties on all Morgan homes will continue to be honored by a residential warranty company as outlined in each homeowner's warranty manual. Calling the housing crisis "the worst catastrophe I've seen in my lifetime" Morgan said the company did everything possible to prevent this from happening and could not have anticipated this as little as six months ago. In its 26 year existence, the company built more than 25,000 homes in some 200 Indianapolis and Lafayette, Ind., neighborhoods in addition to the Charlotte and Piedmont Triad areas of North Carolina. C.P. Morgan Company Press Release

Standard Pacific, TOUSA Talk Merger

Thu, 08 Oct 2009 03:24:00 GMT

Standard Pacific Corp. and TOUSA Inc., confirmed they are "engaged in preliminary discussions and the exchange of information . . . regarding a possible transaction," according to statements released by both companies.

TOUSA filed for Chapter 11 bankruptcy protection in January, two months after it was delisted by the New York Stock Exchange. It reached a reorganization agreement with creditors in October that presumably includes the potential merger, although neither company is calling it a done deal.

Industry insiders say the common link between TOUSA and Standard Pacific is private equity firm MatlinPatterson Global Advisers, which specializes in revitalizing distressed companies. The equity firm is the largest shareholder in Standard Pacific and one of TOUSA's major creditors.

Standard Pacific, which is traded on the New York Stock Exchange, announced Thursday that it had named MatlinPatterson partner Ken Campbell as its new president and chief executive officer, with founder Jeffrey Peterson stepping aside but staying on as a director of the company.

Reported by Arizona Republic (12/23/2008)

WCI Names New CFO

Thu, 08 Oct 2009 03:24:00 GMT

WCI Communities Inc. has named a new chief financial officer who will come to the luxury home builder in December from an Arizona-based company.

Russell Devendorf will become a senior vice president for the Bonita Springs-based WCI, which is under federal bankruptcy protection. He was vice president of finance at Meritage Homes Corp. in Scottsdale, Ariz., and is a certified public accountant and certified treasury professional.

Before joining Meritage, the 35-year-old worked with Hollywood, Fla.-based home builder TOUSA Inc., where he held several financial and accounting management positions during a six-year period, most recently as vice president and treasurer.

Devendorf also was a senior auditor at Ernst & Young, LLP, in the company's real estate practice.

Reported by The Herald Tribune (11/12/2008)

SunCal Seeks Bankruptcy Protection for 2 Projects

Thu, 08 Oct 2009 03:24:00 GMT

Venerable Irvine builder SunCal Cos. said Thursday that it would seek federal bankruptcy protection for two of its premier planned residential developments in Southern California -- including a 45-story luxury Westside tower on one of the region's most valuable pieces of land.

Faced with the loss of a major investor and a collapse in the demand for new homes, the company plans to file today for Chapter 11 protection for its proposed skyscraper at 10000 Santa Monica Blvd. -- designed by renowned French architect Jean Nouvel and the subject of a battle over the land two years ago that involved Donald Trump.

SunCal on Thursday also filed for protection for Marblehead, a 313-home planned community on a coastal plateau in San Clemente that has been the subject of controversy for decades.

The bankruptcies come against a backdrop of trouble for the privately held SunCal, which along with other builders is facing crushing financial difficulties.

LandSource Communities Development, the parent company of the developer building the 21,000-home Newhall Ranch community near Santa Clarita, filed for Chapter 11 bankruptcy protection in June. Utah-based Woodside Homes Inc. filed for bankruptcy protection in September.

Reported by Los Angeles Times (11/14/2008)