(By Mayur Pahilajani - iStockAnalyst Writer)
New York, NY – Some signs of improvement in the real estate sector have began to trickle into the markets as home builders post better-than-expected performances during the last three months of 2008.
Denver-based M.D.C. Holdings, Inc. (NYSE: MDC) is one of the homebuilders that announced narrower fourth-quarter net loss on Tuesday, gained by lower writedowns on assets.
It also finished the worst year since the Great Depression with more cash than debt, which has impressed many investors. The homebuilder has some $1.4 billion in cash and investments, compared with almost $1 billion in debt, allowing the firm to use seek opportunity in challenging economic environment.
MDC is one of the few homebuilding companies that has been able to curb the impact of negative growth in the sector due to overall sentiment. The company, which mainly caters to first-time and move-up buyers, is fairing well in the slumping real estate condition.
Atlanta-based Beazer Homes USA Inc. (NYSE: BZH) is another homebuilder that reported narrower first quarter losses on lower impairment charges, boosting its shares up by as much as 26 percent on Monday.
The tenth largest U.S. homebuilder, MDC, said on Tuesday that fourth-quarter net loss of $89 million, or $1.92 per share, compared with a net loss of $281.1 million, or $6.14 per share, reported in the year earlier period.
"During 2008, we faced extraordinary conditions in the homebuilding industry and the overall economy,” Larry A. Mizel, MDC's chairman and chief executive officer, said in a statement today.
“Increasing unemployment levels, deteriorating consumer confidence, rising foreclosures and faltering conditions in the mortgage and banking industries all contributed to continued deterioration in the housing market,” he added.
The quarterly results included pre-tax charges of $59.7 million for asset impairments and a $19.2 million increase in our deferred tax asset valuation allowance.
The prior year’s quarterly net loss included pre-tax charges of $175.2 million for asset impairments as well as $7.8 million for write-offs of deposits and pre-acquisition costs.
But revenue of the company was hit by sharp declines recorded in both home sales and land sales revenue. It dropped by as much as 62 percent to $296.2 million in the quarter, from $772.1 million.
Revenue was affected due to a 57 percent year-over-year decline in home closings combined with an 8 percent decrease in the average selling price of homes closed.
While, the net home orders slipped by 53 percent to 350 on a decline in active subdivisions; and the cancellation rate decreased to 52 percent, from 65 percent, the company said.
The market analysts had projected the company to post earnings of $1.22 per share, excluding one-time items, on revenue of $346.1 million.
"It’s one of the few homebuilding companies that I think really has been on top of things," Mark Levine, director of the Burns School of Real Estate and Construction Management at the University of Denver, told Bloomberg last week.
Robert Curran, the lead homebuilding analyst for Fitch Ratings, noted that the company has managed to avoid taking on too much debt when the real estate market was on the boom. MDC has also been trying to attract home buyers with its low interest rates, by offering a 30-year fixed-rate at 4 percent as of last month.
Most of the analysts have recommended the stock. "Most of these stocks have been beat up pretty good," Keven Lindemann, director of the real estate group at SNL Financial in Charlottesville, Virginia, told Bloomberg. "I don’t think it’s so much a valuation issue. It’s more that there are some large fundamental issues with the economy."
Shares of the company had closed higher by 13 cents or 0.37 percent to $35.35 on New York Stock Exchange composite trading yesterday. The stock has traded between $20.89 and $47.73 in the last 52-week period with average volume of 996,000.
