Slow Florida Mortgage Loan Market Slams into Home Building Company’s Profits
It’s not just sellers that suffer from a lack of Florida home mortgage shoppers. The stagnant real estate market slammed hard into the St. Joe Co.’s third-quarter earnings, as well. Net income for the building company fell to dismal numbers compared with the company’s report from the same period last year.
On Tuesday, the firm reported a third-quarter net income of $6 million (8 cents per share), compared to $36.1 million (47 cents) in third quarter 2005. Net income for the first nine months of 2006 was $28.7 million (39 cents), compared to $89.4 million in third quarter 2005 ($1.17 per share).
In a morning teleconference, St. Joe’s top executives tempered the third-quarter report with optimism about the future and confidence that the Florida housing market will recover from its current downturn.
“We continue to face challenging conditions in our Florida residential markets, but particularly in St. Joe’s resort markets,” St. Joe CEO and Chairman Peter S. Rummell said. “The inventory of new and existing homes in the marketplace remains high. We continue to believe it could take until 2008 before a supply-demand balance begins to return.”
St. Joe’s slowdown in activity reflects broader market conditions in Florida and across the nation, Rummell said.
The company expects better results in the fourth quarter because of various pending transactions, but the annual result totals for earnings in 2006 will more than likely come in at the lower end of a previously estimated range of 70 cents to $1.05 per share, said Anthony M. Corriggio, chief financial officer for St. Joe.
“With several land-sale transactions in various phases of due diligence, and given the challenges in our residential markets, the potential for meaningful variability in this estimate remains,” he added.
The company’s residential real estate segment lost $4.4 million in the third quarter, compared with a $30.5 million gain during the third quarter of 2005.
Residential real-estate closed on sales of 447 units and generated revenues from housing and home sites of $121 million, compared to 641 units and $164 million in third quarter 2005. There was a significant drop off all around in Florida mortgage loan demand.
“We do, however, expect improved earnings from the residential segment in the fourth quarter as compared to the third quarter as a number of residential contracts close, including several for higher-end resort product at WaterSound Beach and SummerCamp,” Corriggio said.
