RISMEDIA, June 5, 2009-(MCT)-Markets will be focused on quarterly results from a pair of the nation’s largest home builders this week to check the pulse of the key selling season that traditionally plays out during the warm months.
However, a fresh sales promotion from Beazer Homes USA Inc. unveiled on Monday is a reminder that builders need to layer on additional enticements for nervous buyers despite still-attractive mortgage rates and discounted prices.
Atlanta-based Beazer said it will be offering “exceptional savings and additional incentives” to qualified buyers during a sales campaign set to run June 12 to 14.
Other builders have been trotting out promotions in an effort to juice sagging sales, including rock-bottom interest rates and free upgrades.
Beazer, which has been dogged by investigations into its mortgage operations and restated earnings, said it also wants to educate prospective buyers about the benefits of home ownership. According to its own survey, Beazer said 26% of those considering the purchase of a new home did not know that mortgage interest payments are tax deductible, while 31% of respondents were unaware of the $8,000 federal tax credit for first-time buyers.
Still, a recent uptick in mortgage rates could sideline some buyers who were sitting on the fence.
“The major market story in recent weeks has centered on the sharp increases in U.S. bond yields and mortgage rates,” says Bob Doll, BlackRock Inc.’s global chief investment officer of equities.
Meanwhile, the tax credit expires on Dec. 1.
Investors are set to digest financial results this week from Toll Brothers Inc. and Hovnanian Enterprises Inc.
J.P. Morgan analyst Michael Rehaut estimated Hovnanian’s orders for new homes in the latest quarter fell 40% from the year-ago period, and he expects the company to book charges of $115 million. Wall Street analysts are looking for Hovnanian to post a quarterly loss of $1.26 a share, on average, according to a Thomson Reuters poll.
Toll announced some quarterly results in late May ahead of the full report. The luxury builder said its orders fell 37% but noted it saw signs for “cautious optimism.”
Analysts will be dialing into the firm’s earnings call, as Chief Executive Robert Toll is known for his frank and colorful assessments of the housing market. The consensus estimate is a loss of 44 cents a share for Toll.
Most builders have already reported results for the quarter ended in March, but Hovnanian’s and Toll’s fiscal quarters wrap up in April.
“Overall, the results have brought a new sense of optimism to the space as builders reported sequential improvements in net orders (largely due to lower cancellation rates) and impairments (although not by all builders),” wrote Barclays Capital analyst Megan McGrath in a recent report.
“On the negative side, margins deteriorated sequentially for many builders as they delivered a lower-priced backlog built in the back-half of 2008 – the fourth quarter was arguably the toughest housing environment since the current downturn began,” McGrath added.
An exchange-traded fund tracking builder stocks, iShares Dow Jones U.S. Home Construction Index Fund, was up 1.4% for the year-to-date period through the end of May, according to Morningstar Inc.
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