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Maronda Homes Inc., the region's third-largest home builder, filed for bankruptcy protection from creditors yesterday amid a national and local housing market that continues to stagnate.

The Findlay-based company owes creditors as much as $100 million and hasn't been able to renegotiate credit terms, according to documents filed in U.S. Bankruptcy Court in Pittsburgh. The company that builds houses in Florida, Georgia, Kentucky and Ohio, as well as Pennsylvania, said it wants to restructure under Chapter 11 of the bankruptcy code.

For Maronda customers, homes will be built, and closings will be held on time "with no issues whatsoever," according to attorney Joseph F. McDonough, representing Maronda.

U.S. Bankruptcy Judge Judith Fitzgerald approved an order that closings continue, he said.

"Maronda Homes made the difficult decision to seek Chapter 11 bankruptcy protection because certain banks failed to perform their credit obligations," a statement from the company said, noting that only three out of more than 30 Maronda companies filed for reorganization. Those filings relate only to Pennsylvania and Ohio operations, the statement said.

Family-owned Maronda has been building homes since 1972 and listed assets worth as much as $500 million in court documents. Maronda Homes lists 46 housing developments in Allegheny, Beaver, Butler, Washington and Westmoreland counties, as well as developments in 12 cities in Florida, including Daytona Beach, Jacksonville and Orlando.

Housing starts in the Pittsburgh region fell to the lowest level in more than 16 years in 2010. There were 2,778 housing units started, down 1 percent from the year before, according to Tall Timber Group in Ross. Sales of new homes in the region were down by 9 percent in March from a year ago. There were 141 sold last month, down 9 percent from 155, according to South Side-based RealStats.

Maronda said in court documents that it was left with no option but to file for bankruptcy because it could not reach a revised financing agreement with its 14 lenders, led by Bank of America and Wells Fargo.

Maronda blamed "the recalcitrance of Huntington Bank and the refusal of the lenders to solve the stalemate and proceed with revised terms" for pushing it into bankruptcy. Maronda said all but Huntington National Bank agreed to the revised loan agreement reached in December, and the other banks would not sign the deal without all banks on board.

Huntington spokesman Bill Eiler said the bank has a policy of not commenting on litigation.

Maronda said it ran into financial problems with its lenders in March 2010 when a new financing deal raised interest rates and required substantial collateral on Maronda's development projects. Beginning in October, Maronda said its lenders took all of the proceeds from the sale of properties. Maronda said it could not continue to operate under those terms.

Reported by Pittsburgh Tribune-Review (4/19/2011)

Homebuilders trying to fight off customers’ attraction to cheap foreclosures are doing more to show buyers that the good deals can come with pitfalls.

The companies are increasingly trying to woo buyers like Arizona couple Katie and Mike Zwanziger, hoping that warnings about unknown repairs, limited selection and haggling with banks might help them recover from the most dismal year for new home sales in more than 50 years of record-keeping.

The Zwanzigers were ready to move to a larger home and were enticed by the number of resales and foreclosures in the area they liked. But after several weekends of hunting, the physical therapists from the Phoenix suburb Gilbert decided to look at a new development.

“And we got in there and found out that, truly, we spent maybe $50,000 more and got the exact house we want, the layout we wanted, the backyard we wanted,” said Katie Zwanziger, 31. “So we could be happier with just a little bit more money.”

Many national builders are using some form of marketing to try to make that point and beat back the quiet competition from lower-priced foreclosures and short sales — transactions in which homeowners sell their properties short of the outstanding balance owed on their mortgage.

In the Pikes Peak region, foreclosures and short sales have made up an increasingly larger share of homes sold each month on the resale market, which, in turn, poses stiff competition for homebuilders.

In February, there were 448 single-family home sales in El Paso and Teller counties; 25 percent of those sales were distressed units, according to Pikes Peak Association of Realtors’ figures assembled by Rick Van Wieren of Re/Max Properties in Colorado Springs. During the same month five years ago, distressed units made up just 8 percent of sales, according to Van Wieren’s figures.

Against such competition, local builders are striving to maintain their market share, but it’s been tough. In 2010, single-family building permits totaled 1,404 in Colorado Springs and El Paso County — a 27.1 percent gain over 2009. But even with that increase, the pace of homebuilding is far below levels reached during the last 10 years, when annual permits peaked at a record 5,314 in 2005.

Part of the battle is over price. Since distressed properties often sell at bargain-basement prices, buyers then expect similar discounts when they look at new homes and traditional resales, Van Wieren said.

“It (a distressed property sale) sets a price expectation in the market that denigrates the pricing of other units,” he said.

Some builders are fighting back. Miami-based Lennar is pushing its “Buying a New Home vs. a Foreclosed Home” Web page. The page lays out benefits of new construction — like home warranties, energy efficiency, and customization options — while highlighting potential risks of buying a foreclosed home. Lennar no longer builds in Colorado Springs but maintains a presence along the northern Front Range.

Michigan-based Pulte Group, which builds townhomes in Colorado Springs, uses similar tactics in its advertising, as does Shea Homes of California, which has developments in the Denver area. Shea promotes new homes with a “foreclosure cost calculator” on its website that lets customers calculate potential costs.

Builders point out numerous drawbacks to foreclosures, such as hidden defects, and the potential of dealing with disgruntled former owners or evicting a current tenant.

Jay Walther, president of startup Springs builder Reunion Homes, said a recent buyer strongly weighed a new Reunion home against a foreclosure. The company stressed its energy-efficient homes that will result in lower energy bills, along with 2-by-6 exterior walls that make for better construction and its new-home warranty.

And, Walther said, buying a new home meant no costly repairs or unexpected problems. “They didn’t have to clean up the foreclosure mess,” he said.

The couple wound up buying the new home.

Reunion hasn’t launched a marketing campaign against foreclosures like some of the national companies, yet it’s mindful of the competition created by distressed properties, Walther said.

“We’re just actively marketing our compelling value across the broader market,” he said. “Our consumers are shopping that against foreclosures, against regular resales and against new-home competition.”

Ken Peterson, Shea’s vice president of sales and marketing, said, “there are hundreds of people that purchased homes from us that have been lured in by low prices on foreclosures, have tried to purchase those homes and have been outbid by investors. Or, they waited months to get an answer back on ‘can I get this short sale, can I get this foreclosure,’ only to discover that they didn’t get that home.”

Those homebuyers not willing to take on the risks would be better off buying a new home, the companies argue.

The Zwanzigers don’t disagree. The foreclosures in their preferred neighborhood left them unimpressed.

“We’d see them online, they look beautiful and nice and clean, and then you get in there and they were trashed,” Katie Zwanziger said.

She and husband Mike, 29, “took a chance” and looked at a nearby Shea Homes development, expecting them to be too pricey.

Now, the couple are watching as Shea Homes builds their new 3,100-square-foot home. They’re able to choose details such as colors, flooring and cabinets.

Homebuilders say they’re hopeful that as more customers turn to them instead of the overloaded foreclosure market, they’ll be able to show the value in new construction.

Nationally, new-home sales numbers for 2010 were dismal. Only 321,000 new homes sold, a drop of 14.4 percent from the 375,000 homes sold in 2009 and a peak of 1.28 million in 2005, according to the Commerce Department. It was the fifth consecutive year that sales have declined after hitting record highs for the five previous years when the housing market was booming.

The top 10 homebuilders took huge hits, going from 289,000 homes sold in 2005 to just 85,000 last year, according to statistics compiled by Builder Magazine. Sales for market leader Pulte fell by 82 percent during that period, going from 46,000 to 17,000 last year.

Builders, both locally based and national, are adjusting the homes they build to meet the lower prices of existing homes. They’re getting cost cuts from subcontractors hungry for work and slimming down material and labor costs by putting in different windows, kitchen and exterior treatments, or cutting out stone facings.

“Our average size hasn’t changed as much as our prices have,” said Dennis Webb, vice president of operations at Tempe, Ariz.-based Fulton Homes. “We can still build a 2,500-square-foot house but make it $150,000 less than the other 2,500-square-foot house.”

For Shea Homes, drawing buyers also means a focus on energy efficiency. The new homes it is building include beefier insulation and more-efficient windows.

“Our homes are better today than they were a few years ago, and that’s just because there this cycle of research and development that’s going on in homebuilding, and those things that were out of the reach of many consumers two, three, four years ago, they’re now more affordable,” said Shea’s Peterson. “So we have the ability to add some of those features in our homes that truly differentiate that home from any other home out there.”

Reported by Colorado Springs Gazette (3/12/2011)

"Our elephant gun has been reloaded and my trigger finger is itchy," Warren Buffett declared this weekend in his annual letter to Berkshire Hathaway shareholders.

Buffett also reiterated a pro-American stance in his latest letter: "Money will always flow toward opportunity, and there is an abundance of that in America," the famed investor writes.

But those statements should not be interpreted as a market call, says hedge fund manager Jeff Matthew

s, author of Pilgrimage to Warren Buffett’s Omaha.

"I don't think he's saying ‘the stock market is screamingly cheap and I want to get ready to go,'" Matthews says. "He's just staying, ‘we've got a ton of cash and we can do what we want.'"

It may not weigh quite a ton, but Berkshire Hathaway had $38 billion of cash on hand at the end of 2010. Matthews thinks Buffett would be willing to do another mega-deal like the $44 billion Burlington Northern acquisition in late 2009. "If another Burlington Northern walked in the door and [Buffett] could spend $30 or $40 billion overnight like he did on Burlington, he'd feel comfortable doing that now," he says.

House of Bull

Amid all the speculation over what Buffett might buy, it's notable where Buffett has been putting Berkshire's money lately: U.S. Housing.

"A housing recovery will probably begin within a year or so. In any event, it is certain occur at some point," Buffett writes.

Putting Berkshire's money where his mouth is, the "Oracle of Omaha" detailed the firm's housing-related expenses, featuring:

• -- MiTeck: Five "bolt-on acquisitions" in the past 11 months.

• -- Acme: Acquired the leading manufacturer of brick in Alabama for $50 million.

• -- Johns Manville: Building a $55 million roofing membrane plant in Ohio.

• -- Shaw: Planned spending of $200 million in 2011 on U.S.-based plant and equipment.

"Buffett doesn't spend money unless he thinks he's going to make money," says Matthews, suggesting the housing bullishness is "interesting because that didn't happen last year [and] didn't happen the year before that."

Reported by Yahoo Finance (2/28/2011)

The National Association of Home Builders/Wells Fargo sentiment index registered a reading of 16 for the fourth consecutive month, in line with the median forecast of economists surveyed by Bloomberg News, data from the Washington- based group showed today. Readings below 50 mean more respondents said conditions were poor.

Builders must compete with a glut of unsold properties depressing home prices as the number of foreclosure filings rises and unemployment holds above 9 percent, damping demand for new construction.

“While builders are starting to see more interest among potential home buyers, we are also dealing with a multitude of challenges, including competition from foreclosure properties and inaccurate appraisals of new homes, which are limiting our ability to sell,” said NAHB Chairman Bob Nielsen, a homebuilder from Reno, Nevada, in an e-mailed statement “On top of that, an extremely tight lending environment continues to make it almost impossible to obtain credit for viable new and existing projects.”

Economists forecast the builder index in February would hold at 16, according to the median of 47 projections. Estimates ranged from 15 to 18.

The measure, which was first published in January 1985, reached a record low of 8 in January 2009, and averaged 54 in the five years before the recession began in December 2007.
Reported by Bloomberg News (02/15/2011)

Builders began work on more homes than forecast in January, reflecting a surge in multifamily units.

Housing starts climbed 15 percent to a 596,000 annual rate, the most this year, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey called for a 539,000 rate. Work started on 78 percent more dwellings with two or more units, overshadowing a drop in single-family houses that indicates the housing market continues to struggle.

As unemployment hovers around 9 percent and lenders continue to foreclose on delinquent owners, homebuilders must compete with a surfeit of unsold properties. Companies like Hovnanian Enterprises Inc. anticipate falling prices and low borrowing costs will lift homebuyer traffic later this year.

“Housing activity is going to remain at depressed levels this year,” said Ellen Zentner, a senior macro economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York who forecast a rate of 555,000. “We’ve got home prices that have taken another leg down and will probably stay down through midyear.”

Wholesale costs in the U.S. increased for a seventh consecutive month in January, led by higher prices for fuel, a report from the Labor Department also showed today. The producer price index rose 0.8 percent. The so-called core measure, which excludes volatile food and energy costs, rose 0.5 percent, the biggest rise since October 2008.

Shares Rise

Stock-index futures held earlier gains following the reports and Treasury securities were little changed. The contract on the Standard & Poor’s Index maturing in March rose 0.4 percent to 1,331.1 at 8:47 a.m. in New York. The yield on the benchmark 10- year note was 3.61 percent, the same as late yesterday.

Estimates of 76 economists in the Bloomberg News survey ranged from 475,000 to 590,000. December’s pace was revised to 520,000 from a previous estimate of 529,000.

Building permits, an indicator for future construction, dropped 10 percent to a 562,000 annual pace in January. Permits had climbed 15 percent in December after builders rushed to complete applications before new building codes went into effect this year.

Single-Family Drops

Construction of single-family houses decreased 1 percent to a 413,000 rate in January from the prior month, the fewest since May 2009. Work on multifamily homes, such as townhouses and apartments, jumped to a 183,000 pace, the most since February 2009, from 103,000 rate in December.

Starts rose in three of four regions last month, led by a 42 percent jump in the Northeast. Work began on 9.7 percent fewer houses in the West.

While other parts of the economy have rebounded from the recession, the housing market must improve “to ensure a complete, stable, and sustainable recovery,” according to Federal Reserve Governor Sarah Bloom Raskin, who last week urged mortgage companies and investors to help revive housing.

Reported by Bloomberg News (02/16/2011)

Standard Pacific Corp. said Tuesday it bounced back to a third-quarter profit from a year-ago loss as average sale prices improved and the homebuilder booked smaller charges. However, contracts for new homes, excluding joint ventures, tumbled 38 percent reflecting a sharp drop in housing demand this summer following the end of federal homebuyer tax credits.

The weak U.S. economic recovery, stubbornly high unemployment and sluggish job market continue to keep many would-be homebuyers on the sidelines despite mortgage interest rates falling to historic lows. Standard Pacific, which has operations in eight states including California, Florida and Texas, said completed home sales fell 33 percent to 599 from 893 homes during the quarter. Still, the average sales price climbed 14 percent to $345,000 from $302,000.

The builder reported net income of $4.5 million, or 2 cents a share, for the three months ended Sept. 30. That compares with a loss of $23.8 million, or 10 cents a share, in the same quarter last year.

The prior-year results included $17.8 million in charges related to write-downs on land sales, early debt payoff and restructuring costs. The latest quarter included only a $1 million charge related to paying off debt early. And price increases in Southern California and lower construction costs helped lift the builder's gross margin on home sales to 23.6 percent versus 18.6 percent a year earlier.

The decline in new home orders drove down the value of the company's backlog, which represents future housing revenue, by 35 percent to $214.2 million, or 605 homes. In all, Standard Pacific's homebuilding revenue declined to $207.5 million from $327.4 million.

Analysts polled by Thomson Reuters had expected, on average, a loss of a penny a share on revenue of $220 million. President and CEO Ken Campbell said the company's ability to turn a profit while delivering 1.5 homes per community every month bodes well for when the housing market recovers.

"Unfortunately it appears that the nation's economic recovery may take longer than many anticipated," he said.

Despite sluggish homebuyer demand, Standard Pacific continued to load up on new land. The builder bought about 2,000 lots for $93 million during the quarter. Through the first nine months of the year, the company has acquired about 4,600 lots valued at $281 million.
Reported by Orange County Business Journal 10/26/10

Construction spending in the U.S. unexpectedly rose in September, led by increases in homebuilding and public projects. The 0.5 percent gain brought spending to $801.7 billion after a revised 0.2 percent drop in August that was previously reported as a 0.4 percent gain, Commerce Department figures showed today in Washington.

Homebuilders are recovering from a slump in demand following the expiration of a government tax break and still face the challenge of mounting foreclosures that are adding to the housing inventory. While rising profits may help corporate spending on structures grow next year, government construction outlays may slow as federal stimulus funds fade and state and local municipalities cut budgets.

“Construction is still a very low- to no-growth scenario for the next nine months at least,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “There’s still a lot of capacity out there to be absorbed. We’ve already been seeing some hit to infrastructure spending from budget cuts on the state and local governments especially as the federal stimulus eases.”

Economists forecast construction spending would decrease 0.5 percent, according to the median projection in a Bloomberg News survey. The 50 estimates ranged from a drop of 1.2 percent to a 0.5 percent increase. Other figures from the Commerce Department today showed consumer spending rose less than forecast in September as incomes dropped for the first time in more than a year, a sign Americans may keep rebuilding savings and paring debt as the economy is slow to recover.

Spending Slowdown

Purchases advanced 0.2 percent, the smallest gain of the third quarter. Incomes fell 0.1 percent, the first drop since July 2009, and the Federal Reserve’s preferred measure of inflation stagnated, capping the smallest 12-month increase in nine years. Construction spending was down 10 percent in the year ended in September, today’s report showed. Private construction spending was unchanged. A 1.8 percent increase in homebuilding was offset by a 1.6 percent drop in commercial projects as fewer factories were put up. Non- residential construction decreased to the lowest level since January 2005.

Public construction climbed 1.3 percent following a 2.2 percent gain in August. Federal construction outlays increased 6.1 percent, while state and local government spending rose 0.8 percent. New transportation grids and schools accounted for most of the gains.

Federal Spending

The Obama administration has been boosting U.S. investment in rail projects. High-speed rail projects in 23 U.S. states will share $2.4 billion in federal aid, Transportation Secretary Ray LaHood said Oct. 28. That is in addition to $8 billion in stimulus money already awarded for passenger train service. State and local spending may continue to be restrained as municipalities cut projects to balance budgets when tax revenue remains limited. Newark, New Jersey’s city council Oct. 28 passed a $605 million budget that closed an $83 million deficit by raising property taxes 16 percent and cutting as many as 866 jobs.

“Every city is doing terrible and Draconian things to balance their budgets this year,” Councilman Ronald Rice said in a telephone interview.

Home Sales

Home sales are stabilizing at low levels after a plunge in demand following the end of the homebuyers tax credit, which required contracts be signed by April 30 and closed by Sept. 30. Purchases of new homes increased to a 307,000 pace in September, the Commerce Department said last week.

Housing starts unexpectedly increased in September though building permits were the lowest in more than year and less than starts, figures from the Commerce Department showed last month. That is a signal residential building will remain near record lows in coming months. “It is difficult to predict when buyer confidence will return and the market will strengthen, but we are optimistic that we’ll see some improvement in 2011,” Meritage Homes Corp. Chief Executive Officer Steven Hilton said in a statement Oct. 27.

The Scottsdale, Arizona-based homebuilder took orders for 706 homes in the third quarter, down 36 percent from a year earlier. The company attributed some of the decline to having closed some communities over the last year.  The economy is a central issue in tomorrow’s mid-term Congressional elections. There is no clear consensus on which party deserves more blame for the economy’s problems, or how best to fix them, according to a Bloomberg National Poll conducted Oct. 24-26. It showed Republicans are poised to retake the U.S. House without a mandate from voters to carry out their policies.
Reported by Bloomburg BusinessWeek 11/01/10

New home sales edged higher in September, according to government figures reported Wednesday, but the recovery from the all-time lows reached earlier this year remained slow.

Sales of newly built single-family homes rose to an annual rate of 307,000 units in September from 288,000 units the month before, the Commerce Department said.

The sales figure was higher that the annual rate of 299,000 expected by analysts surveyed by Briefing.com.

But the modest increase does not give "too much cause for hope," according to Celia Chen, a senior director at Moody's Analytics.

"Sales did rise which is good, but the pace is still very weak," Chen said. "It's still close to a record low. It just doesn't seem that demand is really firming."

The August sales were the third-lowest level since the Commerce Department started tracking new home sales in 1963, trailing only the 282,000 rate reported in May, and 285,000 in July.

The government said the median sales price of new homes was $223,800, up from $220,500 the month before.

That was one bright spot, according to Chen, but it might have had more to do with limited inventory than increased demand.

"There are not many of them [new homes] on the market, and inventories are very tight. Builders have just not been putting up a lot of homes," Chen said.

At the end of September, 204,000 new homes were for sale, equal to an 8-month supply at the latest pace.

Reported by CNNMoney.com (10/27/10)

NEW YORK (Reuters) - Homebuilders in the UnitedStates, who lost hundreds of millions of dollars when land they bought during the housing boom lost value after the bust, are bidding up lots despite new softness in the market.

Home sales have slumped since the federal home buyer taxcredit expired in April. In July, new home sales were at their slowest pace since the Commerce Department started tracking them in 1963.

But builders keep restocking land inventories because theyfear shortages and because they see rivals doing it, said industry consultant John Burns, who has been advising them to "back off for now." If demand for new homes does not revive, these lot purchases could jeopardize profitability into 2012, when they would build on land they are currently buying.

Falling home prices would mean they are overpaying today,especially because they are increasingly focused on the same markets, where they are cannibalizing each other's business.

The economy softened more than anybody anticipated, Burns said. He and the rest of the industry is well aware economists would have builders stop altogether rather than add to the already excessive supply. "But builders need to build enough to justify theirexistence," Burns said.

TIE IT UP

Some industry consultants and land brokers say the pace of land purchases has slowed, but not significantly.

Land deals are still drawing multiple offers, although the number has dropped, said Greg Vogel, Chief Executive Officer of brokerage Land Advisors, which operates in Arizona, California, Nevada, Florida, Texas and other states. Tom Dallape of the Hoffman Company, a brokerage in California and Nevada, said he has done as many land deals this year as last year. Land prices have fallen, but not by much, he added.

 "A lot of these guys have been working on these deals for the last 120 days and still have corporate mandates to go out there and find land and tie it up," said broker Ryan Arp of Westland Properties Group in the Phoenix area.

Fox Business (09/08/2010)

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)