Trouble on the Home Front

HenryTo · Posted: Wed Jan 25, 2006 9:14 am Post subject: Trouble on the Home Front

FYI:
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Trouble on the Home Front
By Nicholas Yulico
TheStreet.com Staff Reporter
1/25/2006 9:48 AM EST
URL: http://www.thestreet.com/markets/realestate/10263958.html

Homebuilders Centex (CTX:NYSE) and Ryland (RYL:NYSE) both reported strong quarterly earnings, but their new-order numbers, which will drive future growth, look dismal.

Calabasas, Calif.-based Ryland said its net income rose 49% to $162 million, or $3.32 per share, compared to $108.7 million, or $2.17 per share, a year earlier. The results handily beat the consensus $3.12 estimate on First Call.

But Ryland's unit orders fell 5% year-over-year for its latest quarter. The lackluster performance led A.G. Edwards analyst Greg Gieber to cut his rating on Ryland to sell. He also dropped his 2006 EPS estimate to $10.25 from $10.90. In a research note Wednesday morning, Gieber noted that the only area of strength in Ryland's orders came from Texas, where unit sales were up 27%. However, the average selling price in Texas is 36% below the company's average, with equally low gross margins, he said.

"Using our new 2006 EPS estimate, Ryland currently trades at a 7.3 times multiple. That is a 12% premium to the group's current average 2006 multiple of 6.5 times. We don't believe Ryland warrants any premium to the group," Gieber wrote.

Centex, which reported a 30% increase in its quarterly earnings, reported order growth, but it was weaker than analysts expected.

The Dallas-based builder said its new orders rose 4% to 8,128 homes. Sales were strongest in the Southwest, where orders spiked 28% year over year. On the West Coast, orders rose 10%. But orders fell 15% in the Southeast, 8% in the mid-Atlantic and 3% in the Midwest.

"This is not particularly positive to hit only 4%, though we don't know all the details behind it," says Gieber, who was expecting nearly 11% order growth.

Centex said net income rose to $329.3 million, or $2.49 a share, for its fiscal third quarter ending Dec. 31, up from $253.8 million, or $1.91 a share, a year earlier. Excluding discontinued items, Centex posted earnings of $332.7 million, or $2.52 a share. Analysts expected earnings of $2.48 a share, according to Thomson First Call.

Revenue rose 25% to $3.74 billion, shy of analysts forecast of $3.81 billion.

Centex's earnings growth came amid an 18% increase in home closings, which rose to 9,504 units from 8,047, and a 130-basis-point jump in operating margin.

The weak orders will likely be a focus on both companies' conference calls Wednesday morning. Homebuilder Meritage (MTH:NYSE) will also report earnings today at an unspecified time.

The existing home sales data comes out at 10 a.m. EST from the National Association of Realtors.

anti · Junior Poster Joined: 07 Jun 2007 Posts: 29

Very interesting update Bill.

I didn't go thru the OFHEO data, But may be you could answer a question
regarding Fannie/Freedie transactions used.....

Do they diferentiate between purchase and refi tranctions ?

HenryTo · Posted: Wed Feb 27, 2008 10:25 am Post subject:

Bill, thanks, that is a great update.

Note that for folks looking at investing in either Fannie or Freddie, the OFHEO HPI and the other OFHEO sub-indices are the ones to watch.

nodoodahs · Moderator Joined: 06 May 2005 Posts: 2408

The OFHEO Home Price Report (PDF) shows their all-transactions House Price Index (HPI) rose 0.1 percent over the latest quarter and 0.8 percent over the latest year. Of the 291 cities on OFHEO’s list of "ranked" MSAs, 192 had positive four-quarter appreciation and 99 had price declines. Of the 20 ranked cities with the greatest price declines over the latest four quarters, all but two were in California or Florida (Nevada and Michigan accounted for the remainder). 40 of the 51 "states" (they include D.C.) showed appreciation, and while 11 showed losses in value, there were nine that showed average annual gains of 5% or more, year over year.

http://www.ofheo.gov/media/hpi/4q07hpi.pdf

See also:
http://www.billakanodoodahs.com/2007/08/home-price-appreciation-and-its-measurement/
http://www.billakanodoodahs.com/2007/08/compare-and-constrast-on-home-price-appreciation-indices/
http://www.billakanodoodahs.com/2007/08/calculating-the-home-price-impact/

The differences between OFHEO HPI and S&P C-S HPI are important; neither is perfect, but I would lean towards the OFHEO version as more indicative of overall economic impact.

While the OFHEO is "higher" now than the C-S index is, there have been (and will be in the future) times when that relationship is reversed.
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I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

rffrydr · Posted: Wed Feb 27, 2008 7:54 am Post subject:

Spurt of refis last month fading fast:

http://www.cnbc.com/id/23366843
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Today is the Tomorrow you worried about Yesterday!

mtvk · Veteran Poster Joined: 12 Jun 2007 Posts: 242

Why should govt absorb the loss? It looks like Chavez country.
Its like taking someones money (debt) and giving to someone else
without any constitutional basis.

"govt" indirectly here is all tax payers.

In the name of govt, all things done are making this a pseudo-socialistic/dictatorship country.

Its sad in this dreamers country, people vote for promises of liars and not
see the truth of Ron Paul.

Here is an article on ultimate sell signal on US:
http://tinyurl.com/256ypx

rffrydr · Posted: Tue Feb 26, 2008 10:56 pm Post subject:

Neverland faces foreclosure:

http://www.reuters.com/article/entertainmentNews/idUSN2638244820080226
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Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Wed Feb 20, 2008 5:19 pm Post subject:

"Valuing" CA res RE:

http://online.wsj.com/article/SB120276871472760255.html?mod=djemTEW

I suspect the selloff won't be as far as he's looking: two-income, immigrant co-habs and chinese wealth influx, the rise of the international local SD, LA, SF (and concomitant dollar discount).
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Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Sat Feb 16, 2008 9:30 am Post subject:

Some ground-up solutions made possible by, you know what:

http://finance.yahoo.com/real-estate/article/104429/I'll-Buy-Your-House-If-You-Buy-Mine;_ylt=AvYNdFFPU.8BeLJnkVQmXOlO7sMF

10 percent price not a problem with 12 percent out of the realtors hide.
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Today is the Tomorrow you worried about Yesterday!

HenryTo · Posted: Wed Feb 13, 2008 10:52 pm Post subject:

The potential government solutions are now piling up - as we have suggested earlier:

http://online.wsj.com/article/SB120294935869166831.html?mod=hpp_us_whats_news

rffrydr · Posted: Tue Feb 12, 2008 9:10 am Post subject:

"Toxic Title"

http://www.businessweek.com/magazine/content/08_02/b4066046083770.htm?chan=search

PMI to stop insuring high LTV mortgages.

http://money.cnn.com/news/newsfeeds/articles/djhighlights/200802120310DOWJONESDJONLINE000114.htm
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Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Fri Feb 01, 2008 11:29 pm Post subject:

Again, here's a bold stock...mortgage REIT:

http://finance.yahoo.com/q/bc?s=RWT&t=1y

Classic "retest" on lower low on much lighter volume...but do you really want to own this at July's levels?
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Today is the Tomorrow you worried about Yesterday!

cblanchb · Newbie Joined: 16 Jan 2008 Posts: 16

How do you guys think IMB will do with this home crisis? They already laid off quite a few employees and recently their default ratings were reduced to junk. Think they will pull through or are they goners?

HenryTo · Posted: Thu Jan 24, 2008 12:04 pm Post subject:

This is something else I had been looking for:
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US package may up GSE loan cap to $625,000-sources

WASHINGTON, Jan 24 (Reuters) - The loan limit U.S. mortgage funders Fannie Mae FNM.N and Freddie Mac FRE.N can finance will be raised to $625,000 from the current $417,000 in an economic stimulus package now being put together by lawmakers, sources familiar with the negotiations said on Thursday.

While many lawmakers favor a plan that would raise the conforming loan limit across the country to $625,000, several sources said the final plan might be narrowly tailored to raise the loan level for some high-cost metro areas as high as $700,000.

A U.S. Treasury Department spokeswoman said on Thursday that the department opposes expanding the loan size for Fannie Mae and Freddie Mac before lawmakers pass comprehensive reform.

rffrydr · Posted: Wed Jan 23, 2008 3:17 pm Post subject:

that's a cool idea:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aP_dK4hKcQq8&refer=home

--except now the banks WILL take the writeoff.
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Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Tue Jan 22, 2008 8:45 am Post subject:

Ryland offering "floors":

http://www.lvrj.com/real_estate/13917222.html
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Today is the Tomorrow you worried about Yesterday!