Trouble on the Home Front

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

FYI:
--------------------------------------------------------------------------------
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.

HenryTo · Posted: Tue Nov 25, 2008 9:46 am Post subject:

I agree - this gives the best "bang for the buck" in terms of inducinig investors to invest not just in GSE-backed MBS, but also other assets aside from Treasuries, such as bank loans, bank debt, etc. This will also directly lower the cost of buying a new house. $500 billion (four times the size of the PIMCO Total Return Fund) should be sufficient to bring GSE MBS spreads back in, as this purchase represents about 10% of the entire agency MBS market:

http://www.sifma.org/research/pdf/AgencyMortgageOutstanding.pdf

rffrydr · Posted: Tue Nov 25, 2008 8:59 am Post subject:

Finally--straight into MBS

rffrydr · Posted: Mon Nov 17, 2008 7:37 pm Post subject:

Rents showing effects of overbuilding....not just homes:

http://seekingalpha.com/article/105728-how-to-solve-the-excess-supply-in-housing?source=feed
_________________
Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Thu Nov 13, 2008 11:00 pm Post subject:

Economists trying to discount a housing bottom based on inventory (all important vacant inventory), or spiking starts that are just coming to fruition are forgetting the number three rules of RE: location, location, location.

The boom vastly increased supply in marginal areas (excluding Las Vegas which could be said to be one of these in its entirety). Some of these are so far out (ie Baker in CA) that no bulldozers are necessary. They will just sit. And while livable structures succomb to the demographics of household creation (still 2X supply) this outside supply will stand as if it has never existed. And those were the subprime loans already well written off.

rffrydr · Posted: Tue Nov 11, 2008 9:32 am Post subject:

So.....at long last: Citi et. al. are suspending foreclosures and setting mortgage payments at 38% income. This cudda/shudda/wudda been done for subprime a year-half ago. With govt. buying in structures and negotiating them out at cost and it'd be a differnet world right now. Rolling Eyes

_________________
Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Mon Oct 27, 2008 10:23 am Post subject:

nodoodahs · Moderator Joined: 06 May 2005 Posts: 2408

FWIW, I am still taking the "over" on hard economic numbers in the U.S. This includes housing, GDP, etc. My opinion remains this is a financial speculation event far more than a broad economic event.

Not that there's no bleedover ... just that mainstream perception of that bleedover is overestimated.
_________________
I haven’t seen a beatin’ like that since somebody stuck a banana in my pants and turned a monkey loose.

HenryTo · Posted: Mon Oct 27, 2008 9:44 am Post subject:

New home sales surprise on the upside. Home Depot rallying in response:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCnoEGB5FdDo&refer=home

HenryTo · Posted: Fri Oct 17, 2008 9:49 am Post subject:

Housing starts drops to its lowest level since January 1991. This should help clear out more "idle" inventory going forward:

http://www.ft.com/cms/s/0/96e3994e-9c4f-11dd-a42e-000077b07658.html

rffrydr · Posted: Fri Sep 19, 2008 11:06 am Post subject:

Beep beep:

http://www.mortgagenewsdaily.com/mortgage_rates/blog/post.asp?id=1061
_________________
Today is the Tomorrow you worried about Yesterday!

rffrydr · Posted: Thu Sep 18, 2008 10:14 pm Post subject:

The fading of the 30Yr conforming and the "qudruple whammy":

http://www.realtytrac.com/news/Press/newsletter-articles.asp?a=b&ItemId=5034&accnt=187020
_________________
Today is the Tomorrow you worried about Yesterday!

HenryTo · Posted: Wed Sep 17, 2008 1:35 pm Post subject:

The negative construction spending effects on GDP is going to pretty much come off in the fourth quarter, even if housing starts continue to decline.

rffrydr · Posted: Wed Sep 17, 2008 8:20 am Post subject:

Amazing that its being reported as another "knock on GDP."
_________________
Today is the Tomorrow you worried about Yesterday!

HenryTo · Posted: Wed Sep 17, 2008 6:39 am Post subject:

Housing starts decline below 900,000 units (on an annualized basis) for the first time in the current housing cycle. We need more readings like this in order to work off our outsized housing inventory. From briefing.com:

rffrydr · Posted: Thu Sep 04, 2008 9:35 pm Post subject:

https://research.mfglobal.com/Dailyres/Financial/Equities/stocks_files/image008.gif

HOV said that there is no evidence as of yet that the overall housing market has bottom. However, there are a few signs that individual markets are improving. It indicated that it had cut prices by 26% in California since January and reduced prices by 14% Arizona since February. It said that the months supply of homes fell in Northern Virginia, and the unsold inventory is falling in Stockton California.

· TOL said it sees a recovery in housing after foreclosed inventory is exhausted. It could not predict when the housing market would recovery. Cancellations were 195 units in the quarter, the lowest in over two years.
_________________
Today is the Tomorrow you worried about Yesterday!