Profits Fall for Home Builder in South Florida Housing Market

In the Fort Lauderdale housing market, home builder Levitt Corp. said it earned $3 million, or 15 cents a share, on revenue of $131.9 million for the period. In the year-ago quarter, Levitt said it earned $10.7 million, or 53 cents a share, on revenue of $129.5 million.

Company Chairman and Chief Executive Officer Alan B. Levan said the U.S. housing market is facing one of its most difficult periods in more than a decade, as national and Florida mortgage demand has waned.

“Levitt’s results reflect the challenges of the current operating environment,” he said. “The homebuilding trends in Florida, where most of our inventory is concentrated, continues to be severely impacted as evidenced by slowing demand, declining new orders, lower conversion rates and an increase in forfeited deposits on homes under contract.”

Levan said the duration of the adverse market conditions is uncertain and may continue for some time.

“As a result, higher selling expenses are being incurred for advertising, outside brokers and other expenditures aimed at increasing traffic to our sales centers,” he said. “Selling, general and administrative costs inventories and debt have also increased as we have opened new communities and also diversified into new markets in Georgia and South Carolina during the past year.”

Inside the Florida housing department

Levan said demand in active adult communities, which constitutes 67 percent of Levitt’s unsold lot inventory, experienced continued softness in Florida, as buyers appeared to remain concerned about their ability to sell their existing homes. If they’re unable to do, they are stuck paying two sets of Florida home loans.

Average selling prices for third quarter new orders rose to $347,000 from $340,000. However, margin fell to 19.2 percent from 21.2 percent as the homes cost more to sell. This is why many Florida home building companies have experienced a downturn.

Inventory, at 1,592 homes, was 6.5 percent lower than the 1,703 homes in backlog as of Sept. 30, 2005. However, higher selling prices within communities pushed the backlog value up 12.1 percent, to $554.6 million from $494.8 million.

Levitt also recorded a $900,000 charge as it cut its workforce by about 11 percent in July and paid for retirement costs and retention programs. The company predicted annual cash savings of about $4.2 million from the July workforce reduction.