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Thursday, September 07, 2006

Homebuilders Lower Forecasts

by Calculated Risk on 9/07/2006 09:52:00 AM

From MarketWatch: Beazer trims 2006 outlook

Beazer Homes USA Inc. again cut its earnings forecast for 2006, blaming higher cancellation rates and weakening sales as the deluge of negative news from the home-building group continues.

The Atlanta-based company said net home sales for the two months ended Aug. 31 fell 49% from the year earlier as the cancellation rate rose to 50% from 26%.

"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," the company said in a statement.
Beazer said its revised 2006 outlook "also contemplates potential charges to exit non-strategic land positions currently under review." ... The builder said it is reviewing its operating plan for 2007 "in light of the ongoing deterioration in business conditions."
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Incentives gone "berserk"! These non-price concessions are masking the actually drop in New Home prices.

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From CNNMoney:
David Seiders, chief economist for the National Association of Home Builders says 75 percent of the nation's builders and developers are offering incentives.
"Incentives are all over the place," says Salli Kirkpatrick, founder of SK Associates, a Sacramento-area advertising agency that works with homebuilders. "No closing costs, no payments for six months, $10,000 toward a built-in swimming pool. Things have gone berserk."
The AP reports: Homebuilder Hovnanian's Profits Down As Housing Market Slows
Homebuilder Hovnanian Enterprises Inc. reported Wednesday that its profit sank 36 percent for the third quarter as the company struggled with higher costs, slower-paced orders and increased cancellations in a slowing real-estate market.
The company said it booked $11.4 million in write-offs for walkaway costs and another $800,000 in land write-downs in the latest quarter.

For the past year, the single-family homebuilder has "experienced a deteriorating environment for new home sales in many of our more regulated markets," President and Chief Executive Ara K. Hovnanian said in a written statement.
Ara K. Hovnanian said the housing slowdown is unusual because the economy as a whole is strong -- and that makes it difficult to forecast.

"Thus, we are making decisions today with the assumption that current conditions will persist for the foreseeable future," he said.
From Reuters: KB Home cuts profit forecast again as orders drop
KB Home, one of the largest U.S. homebuilders, on Wednesday cut its full-year profit forecast for the second time in three months, saying a more difficult housing market is causing orders to decline.
Chief Executive Bruce Karatz said KB Home is being hurt by "weaker-than-expected demand for new homes" and growing inventories in markets that have experienced rapid price appreciation and substantial investor activity.