The Housing Roundup

It's tough for investors to make heads or tails of the seemingly incessant flow of information about the housing industry. It seems that every day such organizations as the Commerce Department, the National Association of Home Builders, or the rose-colored glasses-wearing realtors crank out yet another housing statistic.

Through the Housing Roundup, we hope to help Foolish readers digest and make sense of the latest trends in housing. We hope our efforts are successful.

The tip of the news
It continues to be a chore to find positive news about housing or homebuilding.

  • The Commerce Department has told us that March housing starts slid 11.9% below February's already depressed levels. The new seasonally adjusted annual rate was 947,000 units. Starts are down 36.5% versus last year! At the same time, building permits dropped to a seasonally adjusted annual rate of about 927,000 units, a 5.8% decline from February, and the lowest since April 1991. Further, the median price of new homes fell 13.3% versus March 2007.
  • The National Association of Realtors said that sales of existing single-family homes and condominiums fell by 2% to a seasonally adjusted annual rate of 4.93 million units. At the same time, the median price of existing homes sold during March dropped to $200,700, or 7.7% below last year's level. (It's likely that Fools in some locations would be pleased to sell their homes for only 7.7% less than they might have gotten last year.)
  • According to the Mortgage Bankers Association, loan applications fell by a somewhat sobering 14.2% last week.

Ryland and Pulte
The beat -- or maybe it's a drone -- goes on for the builders, many of whom must now feel like the 185 surrounded by 5,000 at the Alamo a century and a half ago. Pulte (NYSE: PHM  ) and Ryland (NYSE: RYL  ) both reported widening losses for the most recent quarter.

Pulte lost $696.1 million, or $2.75 per share, for the quarter ended in March. And since the builders don't do anything by half-measures anymore, those numbers compare to a loss of $85.7 million, or $0.34 a share, in the March 2007 quarter. The culprit in the drop was a set of charges totaling $663.6 million (pre-tax) to write down the company's land and inventory-carrying values. The company's revenues were off 23% from the year-earlier period.

Ryland's loss was far less staggering, coming in at "just" $29.3 million, or $0.69 a share. In the same quarter a year ago, the company's loss was $24.4 million, or $0.58 a share. The company's revenues for the most recent quarter fell 41.5% to $416.2 million.

What's the latest on builders' share prices?
Beyond the losses incurred by Pulte and Ryland, let's look briefly at how the market has treated five major builders this year:

Price 12/31/07

Price 04/24/08

Change

Beazer (NYSE:BZH)

$7.43

$10.40

40%

KB Home (NYSE:KBH)

$21.60

$23.55

9%

Pulte

$10.54

$13.81

31%

Ryland

$27.55

$34.46

25.1%

Toll Brothers (NYSE:TOL)

$20.06

$23.14

15.4%

Unweighted Average

   

24.1%

Source: Yahoo! Finance and TMF calculations.

So, in stark contrast to the continuing stream of negative news about housing, the big builders are still attempting -- with some success -- to right their listing ships. (I'm into sailing and nautical metaphors.) For the sake of perspective, and for those Fools who don't walk about with the most recent issue of The Housing Roundup tucked neatly into their pockets, last month's unweighted average builders' share price improvement was 21.7%.

And what's up with mortgage lending and the foreclosure rate?
As the statistic above indicates with regard to sliding mortgage applications, for a variety of reasons, buyers are hardly lining up at lenders' doors. There are probably at least three causes for the falloff: There are fewer lenders' doors to line up at, there's a domino effect wherein those who might be home buyers can't sell their existing homes, and consumer confidence remains low, thereby putting another damper on housing sales.

As to foreclosures, despite demands for help for those in the foreclosure process from the campaign trail and other places, there really isn't much recourse currently for those unable to pay their mortgages, a number of which continue to reset to higher monthly payment levels. Obviously, the stream of foreclosures only adds to the bloated inventory of homes available for sale.

Conclusions
If you glom onto the 24.1% figure in the table above, you might conclude that housing -- and by extension the homebuilders -- is out of the woods. Nevertheless, the magnitude of Pulte's write-downs, and the absence of anything approaching positive news in the bullet points at the beginning of this Roundup, causes me to emphasize care and caution regarding the group to my Foolish friends.

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