Builder confidence, home prices slide
According to the National Association of Home Builders (NAHB), builder confidence fell in August two points to 22, compared with a level of 24 last month, its lowest level since January 1991. Scores from three component indexes are used to calculate the seasonally adjusted index, where any number over 50 indicates that more builders view sales conditions as good than poor.
Builders are responding by trimming prices and stepping up non-price incentives to sell homes in a difficult market, a statement from the NAHB said.
“Builders realize that issues related to mortgage credit cost and availability have become more acute, filtering some prospective buyers out of the market and prompting others to delay their decision to purchase a new home,” said NAHB president Brian Catalde.
Three out of four regions of the country reported declines in the index in July — the South’s reading remained unchanged at 25. The West recorded a one-point decline to 23, the Northeast posted a two-point decline to 30 and the Midwest reported a five-point decline to 14.
Home prices also dropped for the fourth straight quarter, according to the National Association of Realtors (NAR). The median single-family home price was $223,800 during the second quarter, down 1.5 percent from last year. Condo prices rose 1 percent to $226,800.
Prices are off 1.7 percent from their peak of $227,600, recorded during the third quarter of 2005. The biggest year-over-year decline on record of 2.7 percent came in the fourth quarter of 2006.
NAR senior economist Lawrence Yun said the results were “encouraging.”
“Although home prices are relatively flat, more metro areas are showing price gains with general improvement since bottoming-out in the fourth quarter of 2006,” he said. “Recent mortgage disruptions will hold back sales temporarily, but the fundamental momentum clearly suggests stabilizing price trends in many local markets.”
In individual metropolitan areas, prices showed strength in Salt Lake City, up 21.9 percent to $233,100; and in Salem, Ore., up 16.7 percent to $227,900.
Price plunged in Elmira, N.Y., down 17.9 percent to $71,700; in Palm Bay, Fla., down 15 percent to $183,300; and in Davenport, Iowa, down 11.3 percent to $103,300.
Restoration Hardware to cut 100 jobs
Specialty home decor and fixtures retailer Restoration Hardware has announced a restructuring plan for its Corte Madera, Calif.-based headquarters.
The company said the plan, which includes 100 job cuts at the company’s headquarters, is expected to yield $3.5 million in cost savings by the end of the year. Annually, the cuts are expected to save $9 million.
The company most recently revised its second-quarter forecast to reflect anticipated revenue of $183 million to $185 million for the quarter, down from its prior view of $195 million to $199 million.
“This is a difficult but necessary decision that will enable us to operate more efficiently in the current environment,” said Gary Friedman, president and CEO of Restoration Hardware. “We believe the cost cutting actions we have announced this year, combined with our strategic growth and supply chain initiatives, will drive improved sales and profitability in the second half of 2007 compared to a year ago.”
Friedman pointed to several new strategies for growth, including recently launched Restoration Hardware Bed & Bath, Restoration Hardware Baby & Child and Restoration Hardware Trade.
“We’re positioning the business to achieve our long-term revenue and operating margin goals,” Friedman said.
Restoration Hardware operates 102 retail stores and eight outlet stores in 30 states, Washington, D.C., and Canada.
Design Within Reach reports narrower losses
Despite an exceptionally tough home furnishings market, decor retailer Design Within Reach (DWR) posted narrower second-quarter losses of $575,000, compared with losses of $833,000 last year.
Sales rose 0.2 percent to $49.07 million from $48.96 million in the same period last year.
“We made solid progress during the quarter as we improved our overall financial position and continued to build awareness of the Design Within Reach brand,” said CEO Ray Brunner. “We achieved sales growth on top of a tough comparable period.”
He added, “While we are pleased with this increased level of operating performance, there are many opportunities for improvement. We have a number of initiatives in place, including sourcing alternatives to improve our product margins and an internally developed advertising campaign to further build brand awareness.”
The San Francisco-based company forecasts it will break even by the end of fiscal 2007.