Home Builder Reports on Southwest Florida Housing Market Results
Meritage Homes Corporation, a leading U.S. homebuilder based in the Florida housing market, recently reported preliminary sales, closings and backlog for the second quarter. Preliminary results for the quarter include approximately $569 million home closing revenue, $502 million home orders, and $1.2 billion ending backlog. These results represent declines of 37%, 28% and 39% from the second quarter of 2006, consistent with the trends for April and May previously announced on June 6, 2007.
Cancellations rose to approximately 37% of gross orders for the quarter, compared to 32% in the second quarter 2006 and 27% in the first quarter 2007.
“As reported by other homebuilders, the housing market in general continues to be very challenging,” said Steven J. Hilton, chairman and CEO of Meritage Homes. “Weak [Florida mortgage] demand and high inventory levels have increased competition among homebuilders, pressuring margins despite reductions in new home starts, lot supplies and operating costs. We continue to adjust our operations to compete effectively, maintain a strong balance sheet and better position ourselves for the future.”
Due to continued deterioration in the housing market during the second quarter of 2007, the company expects to incur additional pre-tax charges in the $75 to $80 million range related to inventory impairments and the write-off of land options.
In addition, the company’s operations in Ft. Myers/Naples, Florida continue to be significantly challenged and management expects the homebuilding housing market in southwest Florida will continue to be severely depressed for the foreseeable future.
As a result, the company believes the goodwill and other intangible assets relating to a February 2005 acquisition in Ft. Myers/Naples are impaired, and anticipates recording non-cash, pre-tax charges in the second quarter of 2007 of approximately $28 million relating to these assets.
“Southwest Florida has been experiencing some of the most difficult housing market conditions in the country. While our 2006 home closings there represented only approximately 2% of our Company-wide closings, our year-to-date 2007 home closings in Ft. Myers/Naples are down more than 70% from the level a year ago,” said Mr. Hilton.
“We have been unable to renegotiate acceptable terms for existing lot options, which led us to terminate all of our existing option contracts, and we have been unable to acquire new lots at prices that reflect today’s market values. Both factors significantly limit this division’s available lot inventory.”
