Beazer Homes: Sacramento "Probably is the Toughest Market at the Moment"

Centex and Lennar are not the only builders being punished by the sinking Sacramento housing market. Now Beazer Homes singles out Sacramento as the market with the sharpest drop in new orders. In a conference call, a Beazer representative stated that Sacramento "probably is the toughest market at the moment" in the United States with "substantially reduced sales."

From Reuters:

Beazer Homes USA Inc. on Thursday reported a fiscal second-quarter profit from a year-earlier loss, but a weaker U.S. housing market pushed orders down 19 percent, prompting the company to lower its forecast and sending its shares down 4 percent.

Beazer, which sells homes largely to mortgage-rate sensitive, first-time home buyers, followed Pulte Homes Inc. and Centex Corp., who late Wednesday also reported double-digit declines in home orders as rising mortgage rates and housing prices pressured buyers. "This whole space, I thought it was bottoming out," said Keith Gangl, portfolio manager at Thrivent Investment Management. "Maybe it will take a little longer..."

Revenue, which reflects orders taken months ago, rose 30 percent to $1.27 billion, above analysts forecast of $1.19 billion. But orders for homes, which are not reflected in the revenue, fell 19.4 percent to 4,224, and were off 46.3 percent in the West. Sacramento, California, was particularly hard hit, as orders fell and cancellation rates rose.

"In a number of markets across the country, we have seen the pace of sales decline and price appreciation moderate relative to that experienced over the past several years, as evidenced by the lower net orders this quarter," Ian McCarthy, Beazer's chief executive, said in a statement.

From the press release:

Increased closings in Arizona, Colorado and Nevada were offset by a decline in California, which was particularly impacted by continued entitlement delays in Sacramento, which have led to slower than anticipated community openings, coupled with moderating demand in that market.

Net new home orders totaled 4,224 homes for the quarter, where increases in several markets in both the Southeast and Central regions were offset primarily by significantly lower new home orders in the West region. In addition, during the quarter the company experienced an increase in the rate of order cancellations from the prior year. In the West, sales declines in Arizona, California and Nevada resulted from both moderating demand and delays associated with community openings. Both of these issues were particularly pronounced in Sacramento, where new order declines were the most significant.