Interest Rate Roundup

Tuesday, November 13, 2007

Home Depot earnings sink, while builders put sales on hold

Just a few random notes while we await the release of September pending home sales (due out at 3 p.m. today rather than the customary 10 a.m. EST) ...

* Retailer Home Depot said third quarter earnings dropped to $1.1 billion, or 60 cents a share, from $1.5 billion, or 73 cents in the year-earlier period. Sales dipped for a second quarter, something that hasn't happened at Home Depot since 1982, per Bloomberg.

* Meanwhile, the Wall Street Journal notes that some home builders are just stopping home sales all together in certain communities. An excerpt:

"As the glut of unsold home remains stubbornly high and housing demand slides, home builders face a dilemma: to sell, or not to sell?

"Lennar Corp., for one, has joined the "not to sell" camp at its development in Orange County, Calif. The Miami company plans to finish building 259 homes -- the first phase of a 1,100-unit development in Irvine -- but it has decided not to sell any of them until the constrained mortgage market and swollen housing inventory improves.

"We are better off holding off on sales at this asset and not discounting as steeply as the market is discounting right now," says Emile Haddad, Lennar's chief investment officer, who oversees the company's large West Coast projects. "It doesn't make sense for us to sell it in an environment that as strained as it is right now."

"Mr. Haddad says Lennar will monitor the Orange County market on a monthly basis, but "this might be put on hold for the whole year of 2008." Lennar also is halting development of a large community planned near Angel Stadium of Anaheim, despite preparing the land to support the project."


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