June 2006 Volume 45, Issue 5
Block - PCBC 2006
A Preview of PCBC
Exhibitors Showcase Innovative Products to Builders
RECENT NEWS IN HOMEBUILDING
FEMA Prepares for Hurricane Season
The 28th National Hurricane Conference, held last month in Orlando, Fla., brought together 1,500 federal, state and local officials, emergency managers, voluntary agency representatives, engineers, planners, media, meteorologists and other response, recovery and hazard mitigation professionals. The Federal Emergency Management Agency (FEMA) participated in a number of training sessions designed to help communities respond and recover from disasters.
In his address at the opening general session, FEMA acting director R. David Paulison described the upcoming hurricane season as a defining moment in emergency management.
“Americans want to know if we are ready for future disasters and they are anxious and looking to us for reassurance, and that is reassurance we can give them,” Paulison said.
“This hurricane season presents us with a tremendous opportunity; an opportunity to reaffirm the core principals of the emergency management community.”
Paulison also outlined various preparations FEMA is taking along with goals of strengthening the federal-state partnership to expedite response and hasten recovery.
On the national level, Paulison discussed various steps FEMA is taking to retool for the upcoming hurricane season including improving logistics tracking and commodity replenishment capacity; as well as improved coordination with other federal agencies including the Department of Defense. New technologies will improve field visibility and communication interoperability, and several mobile registration intake centers and improved debris removal practices are two of the ways FEMA is further prioritizing customer service in the coming hurricane season.
Builder Confidence Declines in April
Rising mortgage rates, continued affordability issues and subsiding demand from investors/speculators are prompting single-family homebuilders to adjust their perspectives on the new-home market, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for April. The HMI declined four points from a downwardly revised reading in the previous month to hit 50 for the latest report.
“Homebuilders definitely view this as something of a transition period, where demand from speculators is easing off and the market is heading to a more sustainable level of activity following the record-breaking performance of 2005,” said NAHB president David Pressly, a homebuilder from Statesville, N.C. “This process should help restore a healthier balance between supply and demand going forward.”
“With mortgage rates back up to the 6.5 percent range and serious affordability issues in the highest-priced markets, today’s HMI numbers are neither surprising nor alarming,” noted NAHB chief economist David Seiders. “Indeed, a reported reduction in home buying by investors/speculators in the market for new single-family homes is a positive development.
Furthermore, we expect solid growth in employment and household income to essentially offset the minor increases in the interest-rate structure that we’re projecting for the balance of this year.”
All three component indexes slipped this month, with the largest decline registered for current single-family sales. That component declined five points to 54 in April, while the component for sales expectations in the next six months was down four points to 58 and the component gauging traffic of prospective buyers declined a single point to 39.
Regionally, only builders in the West registered greater confidence in market conditions in April than in the previous month; there, a four-point gain to 70 partially offset a significant decline in March. Meanwhile, the HMI for the Northeast posted a seven-point decline to 49, the HMI for the South recorded a four-point decline to 55, and the HMI for the Midwest showed continued weakness in that region with a five-point decline to 32.
MERGERS AND ACQUISITIONS
Hovnanian Enterprises Buys CraftBuilt Homes
Hovnanian Enterprises Inc. has acquired CraftBuilt Homes, a privately held homebuilder, headquartered in Bluffton, S.C., for an undisclosed purchase price paid in cash. The acquisition expands Hovnanian’s operations into the coastal markets of South Carolina and Georgia.
In its 2005 fiscal year, CraftBuilt Homes delivered 220 homes with revenue of approximately $42 million. CraftBuilt Homes currently has approximately 100 homes in contract backlog, with a sales value of $22 million and owns or controls approximately 2,800 lots throughout its markets.
CraftBuilt Homes designs, markets and sells single-family detached homes. Due to its close proximity to Hilton Head, S.C., CraftBuilt Homes focuses on first-time, move–up, empty-nester and retiree homebuyers.
Hovnanian will not be booking any goodwill in conjunction with the transaction. Further, after taking into account the effects of the acquisition, the company expects to be within its targeted ratio of 50 percent net debt to capitalization at its fiscal year end.
Centex Sells Mortgage Arm
Dallas-based Centex Corp. has signed a definitive agreement to sell Centex Home Equity Co., LLC to an affiliate of Fortress Investment Group LLC.
The sale is subject to certain conditions including regulatory approvals. The purchase price will consist of a payment based on the book value of the company, plus a premium to be calculated in accordance with agreed upon procedures. Centex estimates that net after-tax cash available in connection with the sale, at closing, will be approximately $575 million.
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