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Georgia's real estate "bubble"GDO Report
The article read: "The nation's home builders are expected to defy naysayers once again and post another round of double-digit percentage increases in earnings and orders when they report first-quarter results. Home builders are poised to report earnings growth of 43 percent on average in the quarter, despite weather-related construction delays in Florida and California, said Wachovia Securities Inc. analyst Carl Reichardt. Lennar Corp. and KB Home, whose fiscal first quarters ended Feb. 28, set the pace by reporting earnings increases of 39 percent and 65 percent, respectively. Attractive mortgage rates and a recovering economy continue to keep buyers in the market, experts said. The 30-year fixed-rate mortgage averaged 5.75 percent in the first quarter, according to Freddie Mac spokesman Eileen Fitzpatrick. That's up slightly from 5.73 percent in the fourth quarter and 5.6 percent a year ago, she said. However, it's still low by historical standards. "(Rates) haven't really had any impact," said JMP analyst Jim Wilson. Fitch Ratings analyst Bob Curran said rates would likely have to approach 8 percent before home buyers would dramatically pull out of the market. Most economists are not projecting such an increase in the next year. And as rates do start ticking up, buyers who were sitting on the fence will likely jump into the market so that they can buy a home before rates climb too high. This could trigger a flurry of new home orders, said Reichardt. He said he's already started to see an uptick. "Orders for new houses picked up fairly sharply as the quarter went on, and I think that's probably at least partially due to the fact that interest rates began to go up," said Reichardt. "Normally, the beginning of rates going higher will entice people to get into the market quickly, and I think we saw that phenomena amongst the home builders this quarter." Orders rose more than 20 percent on average in the quarter, said Wilson. Demand for homes was strongest in Phoenix, Florida, Washington and Northern California. Southern California and Las Vegas, which had been slowing in the last quarter or two, recovered slightly in the quarter. Reichardt isn't convinced those two markets are out of the woods just yet, though. "It does look like there's some improvement, but it's possible that that improvement is seasonal because this is typically the strong selling portion of the year. This is seasonally the time of year when we get the most traffic and usually the highest order rates," said Reichardt. "So sometimes people will mistake seasonal strength with cyclical or secular strength." Remaining soft are Texas; Atlanta; Raleigh-Durham, N.C.; Denver; Cleveland; Cincinnati; and Columbus, Ohio. The strongest markets are those that enjoyed the biggest job growth, Wilson said. The Florida hurricanes last fall and the recent rainstorms in California continued to cause construction delays for many home builders that operate in those markets. In Florida, a shortage of roofers and inspectors has delayed the closings of many homes as contractors and inspectors focus on rebuilding and repairing homes that were damaged by the hurricanes. Wilson said that there were about 250,000 roof claims in Orlando, Fla., alone "and that stuff won't even get done before the end of the year." Lennar, which has the largest exposure to Florida, saw orders fall 9 percent in Florida in its fiscal first quarter. But the company said it deliberately slowed sales in certain Florida markets to keep pace with construction. Lennar expects sales to rebound in the second half of 2005. Overall, Lennar's orders were up 9 percent in the quarter. KB Home's expenses were a little high in its fiscal first quarter because rain delayed the closings of a couple hundred homes. However, its orders were up 23 percent in the quarter". <--> |
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