Thursday, September 07, 2006

New Homes Market Continues To Weaken

From Reuters:

KB warns, Hovnanian quarterly earnings fall

A rapidly deteriorating U.S. housing market prompted KB Home to cut its forecast on Wednesday and luxury home builder Hovnanian Enterprises Incto report earnings and orders that fell for the second straight quarter.

After the close of the market, KB, the fifth largest U.S. home builder, cut its forecast for the fiscal year ending Nov. 30 and said fiscal third-quarter orders fell 43 percent, based on preliminary numbers.

Hovnanian, one of the largest luxury home builders, reported fiscal third-quarter net income that fell about 36 percent, while orders declined 26 percent.

"I think you'll expect more pre-announcements, more lowering of guidance, more missing estimates, orders coming in below expectations, yada yada," said JMP Securities analyst Alex Barron. "It's just starting. It's only the 3rd inning of the downturn."
...
"We do not know how long the elevated levels of resale listings will persist and it is equally difficult to predict what events might cause a reversal in buyers' sentiment," Ara Hovnanian, president and chief executive, said in a statement.
...
Since the U.S. home-buying market began its slide in about September 2005, home builders have felt the pain more sharply as they were in the hottest markets that had seen the greatest fall off in demand for new homes.

From the AP:

KB Home Lowers 2006 Earnings forecast

"Our earnings expectations for the third quarter and full year reflect an increasingly challenging housing market, where the supply of new and resale home inventories has built up in recent months in markets that have experienced rapid price appreciation or substantial investor activity, or both, in the past few years," said Bruce Karatz, chairman and chief executive.
...
The company said preliminary net orders for the quarter were down 43 percent from the prior year to 5,989, as cancellation rates have shot higher. Gross unit orders and traffic to new home communities each slid 11 percent in the third period.

Update

From BusinessWire:

Beazer Homes Updates Fiscal Year 2006 Outlook

Beazer Homes USA, Inc. oday announced that it is revising its outlook for fiscal 2006 diluted earnings per share to be in a range of $8.00 - $8.50, compared to its previous outlook of $9.25 - $9.75. The Company expects to close fewer homes in the fourth fiscal quarter than previously forecasted, as net sales through the two months ended August 31 were 49% below prior year levels and cancellations of existing contracts rose to 50% from 26% in the same period in the previous year. As compared to prior years, a higher percentage of home closings are being deferred or cancelled, immediately prior to closing in many cases, due to worsening buyer sentiment and the inability of buyers to sell their existing homes. This revised outlook also contemplates potential charges to exit non-strategic land positions currently under review.

Disclaimer: The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.

10 Comments:

Blogger thatbigwindow said...

Maybe they should start building modest houses instead of cookie cutter McMansions. Not everybody wants a huge window above thier front door with a cheap Home Depot chandelier gazing out of it. ugh.

9/07/2006 06:55:00 AM  
Anonymous Anonymous said...

Blah blah blah!

Buyers sentiment!

Buyers have finally awaken to the risks of buying an over priced shoebox.

9/07/2006 07:12:00 AM  
Anonymous Anonymous said...

“With home values dropping, those homeowners that have ‘aggressive’ financing are not able to refinance because the value of their home is not high enough to make it profitable.”

9/07/2006 07:39:00 AM  
Blogger grim said...

Hat tip to all that brought this one to my attention:

Senate Committee Hearing/Meeting Schedule


Wednesday, Sep. 13, 2006

10 a.m.
Banking, Housing, and Urban Affairs
Housing and Transportation Subcommittee
Economic Policy Subcommittee

To hold joint hearings to examine the housing bubble and its implications for the economy.
SD-538

9/07/2006 08:15:00 AM  
Blogger RentinginNJ said...

Maybe they should start building modest houses instead of cookie cutter McMansions

Wow, do they even know how to build a regular home anymore? I think the entire building industry in NJ only has two sets of blueprints; "luxury condos" or "McMansion".

9/07/2006 08:38:00 AM  
Blogger grim said...

High fixed-costs prevent builders from building lower-priced homes profitably.

It's simply not as profitable to build a small home on a lot that could accomodate a much larger home.

Builders built McMansions because the market demanded them.

grim

9/07/2006 08:44:00 AM  
Anonymous Anonymous said...

mcmansions... they'll be like the fins on the back of the cadillacs, wired curb detectors, or other 'featureless features' we used to identify ourselves that we will outgrow and look back and say 'what the hell was that about?' the Japanese sobered us to our cars. the Chinese (holding our debt, holding off inflation and wages for now) will sober our housing lifestyle.

one day we'll be building up along busy streets in dense units like england suburbs because of the 'tax density' burden on our communities... along with 'return requirements' of homebuilders, as grim just stated.

grim is right (the word) and grim is right (the blog king).

curious

9/07/2006 09:26:00 AM  
Anonymous Anonymous said...

"To hold joint hearings to examine the housing bubble and its implications for the economy.
SD-538"
-----
Unless otherwise noted, Chairman Richard Shelby and Ranking Member Paul S. Sarbanes serve as ex officio (non-voting) members of each Subcommittee.

Subcommittee on Economic Policy
Jim Bunning, KY, Chairman
Charles E. Schumer, NY, Ranking Member
Elizabeth Dole, NC
Richard Shelby, AL
Zell Miller, GA

Committee was forewarned:
11/23/2005
"Ben Bernanke, the nominee to become the next chairman of the Federal Reserve, said Congress should limit the massive holdings of mortgage giants Fannie Mae and Freddie Mac in an effort to limit any danger their debt poses to the overall economy.
"Capping the size" of the two mortgage companies' portfolios is "important for controlling potential systemic risk," Bernanke said in a written response to a list of questions from Sen. Jim Bunning, R-Ky."

http://tinyurl.com/m6o9u

O.K. That was 2 years ago. Now are they getting info on projected foreclosure rate?

Pat

9/07/2006 10:01:00 AM  
Blogger jmf said...

hello from germany,

here is a summary from the ceo from kbh since june 05

Housing demand in our major markets during the second quarter continued to outstrip supply, producing the highest number of net new orders for any single quarterly period in our Company's history... we are comfortable raising our earnings guidance for 2005 to $9.00 per diluted share." - B. Karatz, June 16, 2005

"Net orders continued to show strength within our operating regions, providing important evidence of the fundamental health of our business.... a favorable outlook for our markets going forward have led us to increase our 2005 earnings guidance to $9.30 per diluted share." - B. Karatz, Sep. 22, 2005

"While year-over-year net order comparisons posted double-digit increases in each quarter of the year, our net order growth moderated in the fourth quarter... [however] the strengths within our business, economic factors, including positive job growth and demographic trends in the markets we serve, support our favorable outlook and earnings projection of $11.25 per share for 2006." - B. Karatz, Dec. 15, 2005

"There are signs of cooling in the hottest markets on both coasts and a shift in investor activity from buying to selling, resulting in less demand and increased supply in certain markets... [but] we feel confident in maintaining our earnings estimate of $11.25 per diluted share for 2006." - B. Karatz, Feb. 28, 2006

"The country's current-year home sales will likely fall well short of the record rates we have seen in the recent past as the market works through inventory build-ups, including a spike in investor/speculator resale inventory, higher interest rates and higher cancellation rates... we believe it is prudent to revise our 2006 earnings forecast downward to $10.00 per diluted share." - B. Karatz, June 16, 2006

"Our earnings expectations for the third quarter and full year reflect an increasingly challenging housing market, where the supply of new and resale home inventories has built up in recent months in markets that have experienced rapid price appreciation or substantial investor activity, or both, in the past few years," said Bruce Karatz, Chairman and CEO. september 7, 2006

to be continued.........

http://www.immobilienblasen.blogspot.com/

9/07/2006 10:17:00 AM  
Anonymous Anonymous said...

The home buying market is weakening and the apartment renting industry is heating up! The demand for apartments is climbing and the rents are up over 6.5% in many parts of the state. Check it out for yourself on the new NJ Apartment MLS http://www.GardenStateApartments.com I couldn't believe what the rents are going for now! Let's hope the fed cuts or at least freezes rates for a while.

9/07/2006 09:41:00 PM  

Post a Comment

<< Home