When condo specialist WCI Communities
Hobbyist condo flippers were feeling the sting of depreciating assets long before WCI painted its latest grim forecast. The company announced that it would still turn a profit for its September quarter, but that the actual earnings would fall well shy of the $0.52 a share it had projected back in August. Making matters worse, back in May, WCI had targeted third-quarter profits to clock in between $0.85 and $0.95 a share.
A lot of factors are coming into play here -- and none of them are encouraging. The company is writing off $13 million in land option deals that it will no longer pursue for development. About 80 non-condo homes that were expected to close in the period did not. On the condo side, defaults are hovering around a pathetic 4% clip. That means that disgruntled buyers are walking away from their condo deposits before the projects are even completed.
And it's won't get any better in the near term. New orders at WCI are off a whopping 80% from last year's third-quarter contract signings, mostly due to weakness in the company's crumbling condo tower business. Weep, cranes. Weep.
Florida was one of the hottest markets, so it's only natural that it's also one of the hardest hit. Last month, Miami-based Lennar
What has to hurt is that even with all of these companies scaling back, we still have a glut of new homes, existing homes on the market, and condos in development. They still don't get it. Prices have no choice but to come down at this point. Until we see some stability there, how can there not be more downside in this problematic sector?
A market recovery coming sooner rather than later? Now that would surprise me.
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Longtime Fool contributor Rick Munarriz has been living in the same place since 1999 -- but he did refinance twice when borrowing costs got dirt cheap, only to pay off his home earlier this year. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. T he Fool has a disclosure policy.