Home-Builder Grp Sees Housing Prices Falling In '06, '07
This was from a wire story I saw today.
By John Spence
The U.S. housing market will continue to unwind after the multiyear boom with slower price increases and fewer housing starts as interest rates move up, according to a report released Wednesday by the National Association of Home Builders.
"We are coming off a very strong couple of years for the housing industry, and markets are now starting to cool to more sustainable levels," according to David Seiders, chief economist of the Washington, D.C.-based trade association representing home-construction companies.
"Each market has different factors that affect its local economy and housing market, but overall we are forecasting an orderly slowdown in housing starts," he said in a statement accompanying the study.
Full story...
By John Spence
The U.S. housing market will continue to unwind after the multiyear boom with slower price increases and fewer housing starts as interest rates move up, according to a report released Wednesday by the National Association of Home Builders.
"We are coming off a very strong couple of years for the housing industry, and markets are now starting to cool to more sustainable levels," according to David Seiders, chief economist of the Washington, D.C.-based trade association representing home-construction companies.
"Each market has different factors that affect its local economy and housing market, but overall we are forecasting an orderly slowdown in housing starts," he said in a statement accompanying the study.
Full story...
posted by Little_Silvered at 8:37 PM
6 Comments:
How long will this downturn in prices take and what percent decrease should we expect to see? Any guesses?
At this point in time it is hard to forecast what will happen. Right now you have sellers who refuse to drop prices and buyers who are sitting on the sidelines waiting for prices to drop. I have to laugh at people who say that it's a "buyer's market".Prices are so overinflated it will not be a buyer's market until there is a significant reduction in prices - at least 20%.Where's the bargain for buyers with both overinflated prices and rising interest rates?
All I have seen are over priced homes, but I do not see many "sold" signs. When I do see a home I am interested in making an offer on, it will be at least a 20% lower than asking price. I am in no rush to throw my money away. I'll keep the blog posted if I see any great price reductions.
jj
If I had to guess I would say a 25% drop over the next three years and then flat for a few years until the next boom begins.
>fyi
D.R. Horton quarterly orders fall, cuts forecast
Thu Jul 13, 2006 6:46 PM ET
By Ilaina Jonas
NEW YORK, July 13 (Reuters) - D.R. Horton Inc. DHI.N>, the largest U.S. home builder, said on Thursday that quarterly orders fell 4.4 percent, prompting the company to slash its forecast as the largest U.S. home builder succumbed to a deteriorating market.
Not even price cuts could save Horton from the forces of higher mortgage rates and a rising inventory of unsold homes.
"It's pretty brutal out there," JMP Securities analyst Jim Wilson said. "The strategy they're trying is to move product no matter what it takes. Their margins are getting clobbered."
The news sent Horton's shares down by nearly 9 percent in after-hours trading on the Inet brokerage system and swept other home builders along with it.
KB Home KBH.N> shares were off 3.5 percent at $40.20 and Toll Brothers Inc. TOL.N> were off 2.4 percent at $23.97
Horton's shares have lost more than half their value since last year.
In the fiscal third quarter ending June 30, orders for new homes fell to 14,316 from 14,980 a year earlier. The value of the new orders fell even more, down 7.4 percent in the quarter ended June 30 to $3.83 billion.
"The current home sales environment is characterized by an increase in both existing and new homes available for sale, higher than normal cancellation rates and an increase in the use of sales incentives in many of our markets," Donald Horton, the company's chairman said.
The company said it sees the third-quarter earnings of 93 cents per share, well below the $1.30 analysts had expected, according to Reuters Estimates. The new outlook includes write-offs totaling 11 cents per share.
Horton also cut its outlook for the fiscal year ending in September to at least $3.65 per share down from its prior forecast of $5.25 to $5.35. Analysts expected Horton to post earnings of $4.96 for the year, according to Reuters Estimates.
Horton, based in Fort Worth Texas, also reduced the forecast for the number of homes it expects to sell in the year to 50,000 down from 58,000.
The Southwest was the only one of Horton's five regions to see orders rise, up 12 percent.
In after-hours trading on Inet brokerage system, Horton shares were at $20.80 down from their close of $22.86 on the New York Stock Exchange.
Since the beginning of the year, Horton shares have lost 33 percent of their value, while the Dow Jones U.S. Home Construction Index .DJUSHB>, a wide barometer of home building stock activity, is off 35 percent.
Roof Collapses at Horton
By Nicholas Yulico
TheStreet.com Staff Reporter
7/14/2006 9:57 AM EDT
Click here for more stories by Nicholas Yulico
D.R. Horton (DHI - commentary - Cramer's Take) fell more than 9% Friday after it reported a drop in third-quarter new-home orders and slashed its full-year earnings forecast.
The largest U.S. homebuilder said that its orders for the quarter ended June 30 fell 4.4% to 14,316 homes from 14,980 a year earlier. The value of the homes sold dropped to $3.8 billion from $4.1 billion.
The company expects to post third-quarter earnings of 93 cents a share, well below analysts' average estimate of $1.30, as compiled by Thomson First Call. The company's forecast includes about 11 cents a share in write-offs related to land option contracts.
"The current home sales environment is characterized by an increase in both existing and new homes available for sale, higher than normal cancellation rates and an increase in the use of sales incentives in many of our markets," said Chairman Donald R. Horton in a statement.
For the full fiscal year, D.R. Horton sees earnings of at least $3.65 a share, compared with its earlier forecast of $5.25 to $5.35. Analysts target full-year earnings of $4.92 a share.
"We think the sharp deterioration in earnings throughout the end of fiscal 2006 likely reflects sharply lower closings and significantly lower margins," Bank of America analyst Daniel Oppenheim wrote in a research note.
He estimates the company's gross margins will fall to 16.2% in the fourth quarter of this year, down from 25.2% in the fourth quarter of 2005.
Oppenheim cut his 2006 EPS target on Horton to $3.65, down from $4.85, and slashed his 2007 target to $1.85, from $2.55, due to faster-than-expected margin declines.
Horton's sentiment echoes warnings from across the industry as builders ratchet down their fiscal 2006 estimates. Several major homebuilders, including Toll Brothers (TOL - commentary - Cramer's Take), KB Home (KBH - commentary - Cramer's Take) and Pulte (PHM - commentary - Cramer's Take), have cut their fiscal-year guidance in the past two months.
Shares of Horton fell 9.1% to $20.77 early Friday.
In other builder news Friday, Raymond James released a report that said contracts for housing sales fell 42% year-over-year in June in the greater Washington area, according to an area realtors groups. Closings declined 38% and the inventory on the market now represents 7.1 months of supply, compared with 1.6 months in June 2005, and 5.9 months in May.
"We continue to believe the Washington, D.C., market is headed lower as excessive speculation and overbuilding will weigh on the market for the foreseeable future," Raymond James analyst Rick Murray wrote.
Public homebuilders that have a major presence in the market include NVR (NVR - commentary - Cramer's Take), Toll Brothers and Hovnanian (HOV - commentary - Cramer's Take).
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