Builders Get More Confident About Improving Market

“Firming home values, improving employment, and low mortgage rates” are driving greater optimism over a recovery taking shape in the new-home market, says David Crowe, chief economist for the National Association of Home Builders.

Builder confidence for the market of newly built single-family homes rose five points this month, posting its best reading since May of 2007, according to a measure of builder sentiment by NAHB/Wells Fargo. The index measures builder sentiment on sales conditions and expectations as well as buyer traffic.

“Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April,” says Barry Rutenberg, NAHB chairman. “It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase.”

Still, housing experts warn the new-home market still has a long way to go toward normalizing, based on historical trends. Builders say consumer access to credit, inaccurate appraisals, and the rise in materials costs for new construction continue to pose major challenges to the industry.

According to May’s index, the largest gains in builder confidence occurred in the Northeast, followed by Midwest and South. The West posted a two-point decline in builder sentiment for May, according to the index.

Source: National Association of Home Builders

Builders Off to Early Spring Selling Season

The spring selling season is already heating up for home builders, with sales activity increasing and some builders slightly increasing home prices, reports Barclays Capital.

“We believe the spring selling season has arrived strongly enough to kick-start a positive feedback loop in housing for the first time since 2005,” Barclays Capital analysts reported.

Analysts with Barclays Capital project 1 million housing starts by 2013. The analysts project that housing starts will return to 1.7 million — a more normal amount by historical standards for the sector — by 2015. Last year marked one of the worst selling years for home builders on record.

Some home builders have already started rising prices slightly by about $1,000 to $3,000 due to the increase in demand.

Analysts attribute some of the pick up in demand to the rise in the nation’s employment rate recently.

“Job creation has been considerably better this fall than it was last year, which we believe will lead to a stronger, more sustained spring selling season,” analysts say.

Source: “Homebuilder Spring Selling Season off to Solid Start,” HousingWire (March 12, 2012)

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Home Builders are Predicting a Sales Comeback

New-home sales may bounce back this spring, and the rebound could last through at least 2012, predict market watchers.

The Mortgage Bankers Association forecasts a 10 percent jump in volume; while Fannie Mae and the National Association of Home Builders project gains of 18 percent and 20 percent, respectively.

The groups are optimistic despite tighter underwriting, the absence of a home buyer tax credit and stiff competition from bargain-priced foreclosure properties.

Source: “New-Home Recovery Seen as Post-Super Bowl Selling Season Starts”
Business Week (02/11)

Home Builders Getting Greener

Home builders are beginning to improve their green policies and practices, but they still have a way to go, according to a new study by Calvert Asset Management Co., which specializes in sustainable and responsible investing.

“KB Home has maintained its No. 1 spot in our rankings. Toll Brothers, Meritage, and Standard Pacific have made modest to significant progress since our last review. Overall, the economic crisis has not thwarted many home builders’ efforts to become more sustainable companies,” said Stu Dalheim, director of shareholder advocacy at Calvert.

The report also noted:

· KB Home is the only large U.S. home builder to produce a comprehensive sustainability report. But Meritage Homes and NVR have made national commitments to building new homes that meet EnergyStar standards.
· In light of SEC interpretive guidance on climate change in early 2010, some home builders are choosing to disclose risks related to climate change through their annual 10-K filings.
· Climate change may increase the home building industry’s vulnerability because uncertain supplies of raw materials, including land.

Calvert ranked home builders according to their green sensibilities:

1. KB Home
2. Pulte Homes
3. Meritage Homes
4. Toll Brothers
5. Lennar
6. DR Horton
7. Standard Pacific
8. NVR
9. Ryland Group
10. MDC Holdings

Source: Calvert Asset Management Co. (12/07/2010)

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Bankrupt Home Builders Revamping Businesses

Home builders that managed to emerge from bankruptcy with little debt while holding onto valuable land have a good shot at future success because they can price homes low enough to appeal to buyers and still make a profit.

David Fry, CEO of WCI Communities Inc., a privately owned builder, says the economic climate has caused his company to revamp the way it does business. It cut its workforce, reduced the number of floorplans and paid dramatically less for property.

“We will be much leaner going forward,” he says.

This kind of competition is particularly tough on publicly traded home builders that avoided bankruptcy but need to sell homes in weak markets. “It’s just a lot easier to steal market share if all the private guys are on the sidelines,” said Michael Widner, a home-building analyst with Stifel Nicolaus.

Source: The Wall Street Journal, Dawn Wotapka (10/14/2010)

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Home Builder’s Tactic: Hold the Line on Prices

Ian McCarthy, CEO of Beazer Homes, surprised analysts during his company’s quarterly call with his straightforward but counter-intuitive opinions about home sales and incentives.

When asked how hard his company is pushing for sales in this tough market, McCarthy said:

“Our view has been, hold back somewhat, preserve the margins within our communities. . .We don’t want to undercut our communities now and not take full advantage of what looks like an uptick as we go into 2011 and 2012.”

Source: The Associated Press (08/05/2010)

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Home Builders Yearn for Normalcy

Some home builders are reporting a second quarter surge in income, but business has slowed since buyers rushed to meet the April 30 tax credit deadline.

With unemployment high and foreclosures flooding the market, Ken Campbell, CEO of Standard Pacific Corp., said during an earnings call last week. “I think it will recover, but it sure as heck is not clear when it’s going to recover at this point.”

Reaching a point where the industry can make a profit selling a predictable number of homes is the goal for some builders.

DR Horton CEO Donald Tomnitz said no more tax credits, please. “We want to get back to a normalized market. It is a lot easier to run a business based upon designing your business with the current demand as opposed to having any kind of stimulus or incentives to create abnormal demand.”

Source: The Wall Street Journal, Dawn Wotapka (08/04/2010)

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Builders Report Improving Spring Sales

Home builders are seeing their sales improve after the slowdown that followed the end of the home buyer tax credits.

JMP Securities analyst James Wilson says sales activities in California, Texas, and Arizona are approaching pre-April numbers in many markets. In some markets, builders are able to continue to raise prices and homes are selling at the strongest pace since before spring 2009, he says.

Wilson said he expects home sales to continue to be up and down, but he believes that the market has already hit bottom and is on the upswing.

Source: Associated Press (06/07/2010)

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Home Builders Are Rebuilding

Business is improving for many home builders.

Everything from tax credits to longer tax-loss carry-backs to the ability to take big write-downs for the declining values of land and inventory has created a foundation that has allowed builders to rebuild themselves.

Beazer Homes USA Inc. announced last week that first-quarter new-home orders rose 37 percent, and its cancellation rate fell to 27 percent from 46 percent the previous year.

D.R. Horton also announced last week that it had posted a $192 million profit in the first quarter after losing $62.2 million in the same quarter last year.

Executives for both the companies are pleased with this quarter’s results, but both express concern that the overall economy isn’t picking up much speed.

“You have to have job growth in the economy, and there is obviously no job growth to speak of today,” D.R. Horton CEO Donald Tomnitz says.

Source: The Wall Street Journal, Paul Vignz and John Shipman (02/05/2010)

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Remodelers Say Business Is Picking Up

Home remodeling business is picking up all over the country. Contractors began noticing the trend at the end of what was a long, slow summer.

The reason for the upturn is that home owners, unable to sell properties, are deciding to stay and fix up the deficiencies. An added incentive is the $1,500 federal tax credit for energy-related improvements.

The National Association of Home Builders’ Remodeling Market Index, a measure of contractor confidence, rose slightly last month and its futures index also increased, indicating contractors are more confident that business is improving.

Kermit Baker, chief economist for the American Institute of Architects and Senior Research Fellow at Harvard University’s Joint Center for Housing Studies, agrees that the remodeling industry hit bottom during the summer, but he doesn’t expect substantial improvement until Spring 2010.

Source:, Les Christie (12/04/2009)

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