New-Home Sales Fell Record 26% Last Year
Tuesday, January 29, 2008
Cash-strapped home builders from Virginia to Florida to California are unloading hundreds of millions of dollars' worth of vacant land to generate capital and stay afloat in a jittery housing market.
The Commerce Department yesterday reported that sales of new single-family houses nationwide dipped 4.7 percent in December from November. Sales in 2007 plummeted 26.4 percent from 2006, the biggest year-to-year drop since the agency began keeping track in 1963.
Over the past two years, weak demand has prompted 12 of the nation's larger builders to collectively cut loose 1.1 million lots, or about 45 percent of the land inventory they owned or had options to buy, according to Gopal Ahluwalia, vice president of research at the National Association of Home Builders, which tracks those top builders. Private investment groups have often been the beneficiary, snapping up properties at cut-rate prices.
One of those big builders, Miami-based Lennar, last week announced a $1.2 billion loss for its fourth quarter, which ended in November. It has reduced its land inventory 36 percent in the past two years.
Its chief executive, Stuart Miller, said in a conference call to analysts that the company was unloading land "that wouldn't be needed for years to come."
"The market has given us cause to pull back, to retrench, to reconsider and to position for another day," he said.
The land purge is one more indicator of an industry in retreat, trying to recast itself while recording staggering quarterly losses and attempting to sell off a bloated inventory of homes at deep discounts.
"The motivation is to raise cash to take some of the pressure off, or at least buy them some time until hopefully the market stabilizes," said Mark Zandi, chief economist with Moody's Economy.com.
The Commerce Department reported yesterday that it would take 9.6 months at the December sales pace to dispose of the inventory of new homes, up from 9.3 months in November. Six months or less is considered good.
Two small, publicly traded builders, Levitt and Sons of Fort Lauderdale, Fla., and Neumann Homes of Chicago, filed for bankruptcy protection last year, and more could follow suit in 2008, Zandi said.
Some builder stocks were up yesterday, including Beazer Homes USA, Lennar and Pulte Homes. Some analysts suggested that lower interest rates, economic incentives and reduced home prices might help spur a quicker-than-expected turnaround.
"We are cautiously optimistic that 2008 will turn out better than 2007 did," said Keith Gumbinger, vice president of HSH Associates, a financial publishing group in New Jersey.