Thursday, April 27, 2006

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.

7 comments:

Lander said...

The discussion on Sacramento is about 37 minutes into the conference call. I should also mention that the Beazer rep. mentioned "backing off" the Sacramento market and heading for greener pastures in Fresno. You can run, but you can't hide!

norcal ray said...

lander,

how is the resale market in Sac, Roseville and Granite Bay these days? Any price reductions you see?

Happy Renter said...

I wish they would have published some specific numbers for the Sac area. I'm curious as to how much property Centex is backing out of.

We should see some some major price slashing in the next few weeks.

Happy Renter said...
This comment has been removed by a blog administrator.
Happy Renter said...

http://www.centexhomes.com/Sacramento/

If you hover over the blue boxes, on the map, you get the price range for that area. I think the prices are before the $100,000
reduction.
I was really surprised to see their coverage in Sacramento.
The next round of reductions will have good impact as the are just down the street fom seemingly everyone.
I've heard that during the 90's bust some builders sold just above cost. I've also heard your basic track home cost about $75/sq ft. to build.

The word in the building comunity right now is "dump," Prices will get trashed across the board.

Happy Renter said...

Sadly, realestate has been responsible for half of the job growth in this area for the past few years.

The "heading for greener pastures" scenario is about to send our inventory through the roof.

I know a few people moving to Texas. Come to think of it I know quite a few people who are trying to sell their homes right now. I don't know anyone trying to buy.

cba said...

Tract (or production) single family detached homes that are in the 1800-2400 SF range cost approximately $75 PSF to build for the "sticks and brick." This does not include 1)the land (pick your number)2)site improvements (35K +/- per lot), 3)fees (depends on city, but could run as high as 50K per lot once all fees are included and 4) all other indirect or soft costs (sales, marketing, job site salaries, office salaries, insuranace, warranty, finance etc). In the good times (fast sales), this may run 16-18% of the sales price. Now, it could cost a builder 22% or more of the sales costs in a slow market. Add to costs all discounts and upgrades added to the home. If the land was bought in 2005/2006, the builders are likely underwater.