New Home Builders (Surprise: rent, mortgage, credit)

[Monster Daddy]

In finance, when I hear restructuring that is something companies do to avoid bankruptcy (as in restructuring debt and credit arrangements). If they weren't at risk of bankruptcy you would never hear that word. Some restructuring companies will be successful in avoiding bankruptcy, others will not.

In any case, even bankruptcy may not be too bad. But any earnest money deposits are lost and you become a creditor that is pretty low on the totem pole. It depends on the bankruptcy restructuring whether the deposits will be honored or not, usually it makes sense to honor them so the buyer will go through with the purchase.

[NYtoAZ2007]

We've been looking for a house to purchase for about 6 months now. Here's our experience and opinions:

We're leasing an Engle home and in general, it's OK. There are some minor, cosmetic issues that should have been taken care of when it was 1st built. But it's investor owned and I doubt they even bothered with a walk-through.

While most builders have lowered their prices and/or increased their incentives, they are not all negotiating pricing, but most seem to be flexible about their "your realtor must accompany you on your 1st visit" rule.

I don't want to bash anyone, but we could not get Standard Pacific to work with us: we were negotiating to get an additional $20k off, which was their incentive a couple of weeks prior and they just flat out said 'no'...not, "geez we'd love to sell you a house but we can't give it away, let's talk about this..." End of story.

In addition to the builders already mentioned, I would throw Standard Pacific and Lennar into the hat as builders that may not make it through...this statement is based on financial data about the company recently, not my personal experience.

One of the things holding us back from buying a spec home from a builder is our concern that the development or community may not get built out much further than it is...either it will, but it will be a much slower process than in the past few years, or the builder will go under and the development will sit until another builder comes in. There are communities further along than others, and those are the ones we're focusing on.

We've worked in 2 directions: picked an area we liked and looked at what was available, and picked a builder we liked and looked at what they had available in different areas. It all depends on your preferences and priorities.

My advice - to get a better idea of the quality of the builder, look at the spec homes available: they're not decked out like the models and you can see how they build...we've been through many that were in the process of quality control and had the blemishes and mistakes called out for the workers to fix. You can also see what the house you fell in love with as the model will look like stripped down to your price range

Of course, with small children, my house will never look like the models, even if I had all of the furniture and decorations...just doesn't look the same with Power Ranges and Barbie dolls strewn across the floor.

[Monster Daddy]

Changes loom for Engle Homes (broken link)

Changes loom for Engle Homes
Engle's parent will review its capital structure after losses, decision to halt earnings guidance
Russ Wiles
The Arizona Republic
Oct. 9, 2007 12:00 AM

The parent company of Arizona builder Engle Homes has hired a Wall Street firm for advice and stopped offering earnings guidance in response to worsening market conditions.

Florida-based TOUSA Inc. on Monday said it hired Lazard Freres & Co. to conduct a complete review of its capital structure.

Last week, the firm withdrew its financial guidance for 2007 and 2008 and said it won't offer any in the near future.

TOUSA, also known as Technical Olympic USA, has been hampered by weak conditions for homebuilding -mortgage problems, declining consumer confidence, lower home prices plus rising inventories and foreclosures.

Its Western operations accounted for the largest share of losses.

For its second quarter ended June 30, TOUSA lost $132 million or $2.21 a share on a 10 percent drop in revenues to $577 million. Net home sales fell 15 percent year over year.

Its operations in Arizona, Colorado and Nevada accounted for $47 million in red ink from continuing operations, compared with $42 million in homebuilding losses in mid-Atlantic states and $15 million in Florida. Operations in Texas showed a $14 million profit.

Engle Homes has 39 existing or planned developments in the Valley, yet its local presence has dimmed a bit.

In 2005, Engle ranked third in Valley homebuilding permits with a 4.3 percent market share, said real estate analyst RL Brown, who publishes the Phoenix Housing Market Letter. In 2006, it fell to sixth with a 3.2 percent share.

Antonio Mon, TOUSA's president and chief executive officer, said the company remains committed to generating cash, paying down debt and evaluating all opportunities to deleverage its balance sheet.

But Morningstar Inc. analyst Eric Landry indicated the lack of guidance signals management's inability to deliver on prior predictions of positive cash flow for the second half of 2007.

"The fact that it's no longer confident of its cash-generation abilities indicates that a crucial element of its deleveraging strategy is probably now gone," Landry wrote recently.

"It's likely TOUSA will now have to turn more heavily toward asset sales in an effort to stave off a restructuring, a strategy we think has little chance of success."

TOUSA's stock, which traded near $30 a share in 2005, closed yesterday at $1.71.

In the above article, Landry is referring to bankruptcy when he mentions "stave off a restructuring". With the stock at $1.71 a share, Engle Homes is in big trouble. I think its past the point of selling discounted homes as a piecemeal solution.

[waterboy1]

How is the quality of a Hallcraft or Biltmore home?

[sierraAZ]

Originally Posted by MotleyCrew

Engle is restructuring, not going under. I doubt that they will go under, probably see lowered prices first.

And more are being added to the struggling group...

Tighter lending standards, rising defaults among borrowers with weak credit and falling home prices have meant fewer buyers for struggling homebuilders such as D.R. Horton Inc., Lennar Corp., Centex Corp. and Toll Brothers Inc.

Homebuilder Outlook Falls to Record Low: Financial News - Yahoo! Finance (broken link)

[sheena]

Originally Posted by Monster Daddy

Please be aware, there will probably be several builders going under and you will definitely not want to contract with them for a new build and risk losing your earnest money. (Or insist it all goes to escrow.) Engle, Beazer, D.R. Horton are a couple at risk right now.

Buying an already built new home (a "quick build") is safer and you can still get a few options put in. Lots of buyers have cancelled contracts so there may be many quick build homes available for great discounts.

Pretty sure Fulton Homes will not be going under, they appear to be conservatively managed. They have some less expensive communities in Casa Grande and Queen Creek.

We are hip to the Engle jive, besides my hubby can't breathe in AZ he would be unemployed.

Oh what happen to the greedy builders making you put your name in a hat and raising the prices 10,000 a week. Oh well...........

Fulton was greedy too, although they always offered the Realtors 3 %. They just didn't have the volume these other guys did.

[Great Joy]

Monster Daddy, thanks for sharing that article. I think it's important to note the sentence you bolded is an opinion.

About the word "restructuring", I didn't understand that in the article to mean "going bankrupt". I've worked in the corporate world for many years, and that word means reorganizing people, resources, etc. Of course the builders need to reduce their staff that they hired during the boom because the demand has decreased now. For example, look at this article about Pulte's restructuring: Pulte Homes Restructuring Plan - News - MSNBC.com

Please know I have no desire to debate builders, industry, or the housing market. I just think it's safe to say that all builders are feeling the pain right now, so I don't think it's right to single out any builder.

For instance, here's another article about one of the many builders feeling the pain: Ashton Woods Hit Hard By $10.6 Million Quarterly Loss

[sheena]

Originally Posted by Great Joy

Monster Daddy, thanks for sharing that article. I think it's important to note the sentence you bolded is an opinion.

About the word "restructuring", I didn't understand that in the article to mean "going bankrupt". I've worked in the corporate world for many years, and that word means reorganizing people, resources, etc. Of course the builders need to reduce their staff that they hired during the boom because the demand has decreased now. For example, look at this article about Pulte's restructuring: Pulte Homes Restructuring Plan - News - MSNBC.com

Please know I have no desire to debate builders, industry, or the housing market. I just think it's safe to say that all builders are feeling the pain right now, so I don't think it's right to single out any builder.

For instance, here's another article about one of the many builders feeling the pain: Ashton Woods Hit Hard By $10.6 Million Quarterly Loss

Ashton Woods has my money. I would love to get it back, but a small drop in the bucket is better than getting stuck with a house that appraises for 100,000 less.

[sierraAZ]

Originally Posted by Great Joy

Monster Daddy, thanks for sharing that article. I think it's important to note the sentence you bolded is an opinion.

About the word "restructuring", I didn't understand that in the article to mean "going bankrupt". I've worked in the corporate world for many years, and that word means reorganizing people, resources, etc. Of course the builders need to reduce their staff that they hired during the boom because the demand has decreased now. For example, look at this article about Pulte's restructuring: Pulte Homes Restructuring Plan - News - MSNBC.com

Please know I have no desire to debate builders, industry, or the housing market. I just think it's safe to say that all builders are feeling the pain right now, so I don't think it's right to single out any builder.

For instance, here's another article about one of the many builders feeling the pain: Ashton Woods Hit Hard By $10.6 Million Quarterly Loss

Well, "reorganization" is just a nice euphemism for Chapter 11 bankruptcy...

Chapter 11 Reorganization

[sheena]

Originally Posted by sierraAZ

Well, "reorganization" is just a nice euphemism for Chapter 11 bankruptcy...

Chapter 11 Reorganization

The first time they said they were reorganizing they layed off about 100 people. Many in upper Management jumped ship last year before they were pushed out.