Losses widen at Standard Pacific
Residential builder Standard Pacific has reported a net loss of $14.8 million for its first fiscal quarter, compared with a net loss of $5.1 million for the same period a year ago. The increase in the quarterly loss was driven primarily by an 18% decrease in home-sale revenues from $174.9 million for the 2010 first quarter to $143.7 million for the 2011 first quarter, which ended March 31, and a 220-basis point decline in the company’s gross margin to 20.5%. The decrease in revenues was primarily the result of an 18% decline in new-home deliveries to 439 homes from 537 in last year’s first quarter.
The company’s consolidated average home price for the 2011 first quarter was $327,000, up slightly from $326,000 for the year-earlier period, largely due to a mix shift, which was partially offset by slightly lower pricing and fewer California deliveries.
Net new orders (excluding joint ventures) for the 2011 first quarter decreased 14% from the 2010 first quarter to 652 homes. There was a 10% increase in the number of average active selling communities from 126 to 138. The company’s cancellation rate for the 2011 first quarter was 14% versus 15% for the 2010 first quarter and 23% for the 2010 fourth quarter. The total number of sales cancellations for the 2011 first quarter was 106, of which 59 cancellations related to homes in the company’s 2011 first-quarter beginning backlog and 47 related to orders generated during the quarter.
The dollar value of homes in backlog (excluding joint ventures) decreased 24% to $211.8 million, or 627 homes, compared with $278.3 million, or 821 homes, for the 2010 first quarter. The decrease in backlog value was driven primarily by a 14% decrease in net new orders.
Ken Campbell, CEO of Standard Pacific, said in a prepared statement: "Despite challenging housing market conditions, we continued to make progress with our strategy of opening new communities. We opened 18 new communities during the quarter and expect to open another 22 communities by the middle of the year, representing a 20% increase in community count compared with last year and bringing our total community count to north of 155." He added: "While home pricing has been under pressure over the last few quarters, our gross margin has remained above 20% for the sixth consecutive quarter. In addition, we increased the dollar value of our backlog by 54% over the 2010 fourth quarter, while holding the line on our margins in backlog."
The Irvine, Calif.-based company continues to purchase lots, Campbell pointed out, while preserving its liquidity. "Consistent with our land strategy, we approved the purchase of 2,000 lots totaling $122 million and purchased 1,100 lots for $87 million during the quarter,” he said. “With $620 million of cash on hand and the additional liquidity provided by our new senior unsecured revolving credit facility, we believe we have ample liquidity to navigate through the market downturn."
Standard Pacific operates in a number of major metropolitan areas across the country, including California, Florida, Arizona, the Carolinas, Texas, Colorado and Nevada.
Construction spending up slightly in March
Numbers released on Monday from the U.S. Department of Commerce announced that construction spending during March 2011 was estimated at $768.9 billion, a 1.4% increase above February’s estimate of $758.6 billion. The March figure is 6.7% below the March 2010 estimate of $824.0 billion.
During the first three months of this year, construction spending amounted to $161.2 billion, 7.8% below the $174.8 billion from the same quarter in 2010.
Spending on private construction was estimated at $476.1 billion, 2.2% above February’s estimate of $466.0 billion. Residential construction was at an annual rate of $229.1 billion in March, 2.6% above the February estimate of $223.2 billion. Nonresidential construction was at an annual rate of $247.0 billion in March, 1.8% above the February estimate of $242.7 billion.
Public construction was essentially flat: $292.8 billion, 0.1% above the February estimate of $292.6 billion. Educational construction was estimated at $68.5 billion, 0.5% above the February estimate of $68.1 billion. Highway construction was at an annual rate of $82.9 billion, 0.6% above the February estimate of $82.4 billion.
Brighter outlook for remodeling
Two different forecasts portend a recovery in the repair and remodeling market based on current jobs, calls for bids and proposals, and job commitments over the next three months.
The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) reported an increase to 46.5 in the first quarter of 2011 from 41.5 in the fourth quarter of 2010. This marks the highest level for the RMI since the fourth quarter of 2006.
The overall RMI combines ratings of current remodeling activity with indicators of future activity. In quarter-over-quarter comparisons, current market conditions for the first quarter of 2011 rose to 46.1 from 43.3 in the previous quarter.
"Remodelers report a jump in activity so far this year and have been receiving more calls for work and appointments," said NAHB Remodelers chairman Bob Peterson, a remodeler from Ft. Collins, Colo. "However, many homeowners are still slow to commit to remodeling due to feeling uncertain about the economic recovery and difficulty obtaining loans."
Regional breakdowns for current remodeling market conditions showed growth in all but one area: the Midwest, which experienced a decline to 47.1 (from 54.3). The other three regions of the country showed increases: the Northeast was 46.1 (from 38.8 in the fourth quarter), the South was 46.1 (from 45.8), and the West was 46.1 (from 39.7).
All current remodeling market indicators increased: major additions to 50.3 (from 48.6 in the fourth quarter), minor additions to 48.0 (from 43.9), and maintenance and repair to 39.5 (from 37.0). Future market indicators also improved across the board: Calls for bids rose to 53.1 (from 47.2), appointments for proposals to 52.4 (from 43.1), backlog of remodeling jobs to 49.7 (from 42.6), and amount of work committed for the next three months to 32.1 (from 25.9).
BuildFax compiles its residential BuildFax Remodeling Index (BFRI) from building and permitting information from more than 4,000 cities and counties throughout the country. Its most recent data shows that every region of the United States had more remodeling activity in February 2011 than in February 2010. The BFRI rose 20% year-over-year — and for the sixteenth straight month — in February to 95.1, the highest February number in the index since 2006. Residential remodels in February were down month-over-month 3.9 points (4%) from the January value of 99.0, and up year-over-year 16.0 points from the February 2010 value of 79.1.
All regions posted year-over-year gains, although the West posted the highest at 21%, reaching well past index values in February 2010, 2009, 2008 and 2007. It was down 3% between January and February of 2011, however. The Midwest showed a larger-than-expected month-over-month decline of 22% between January and February, but rose slightly (1%) in year-over-year comparisons. The Northeast’s February 2011 BFRI numbers were up 7% year-over-year and down 11% month-over-month. The South was up 11% year-over-year and down 1% month-over-month.
“The cold weather and heavy snows in February could not put a damper on the sustained gains in the remodeling industry, as the month showed increased remodeling activity compared with a year earlier,” said Joe Emison, VP research and development at BuildFax. “February 2011 was a strong month for the industry, despite the fact that remodeling activity traditionally dips during the winter months. February 2011 was better than or equal to February 2010 in every region of the country.”