USG earnings fall 68 percent
USG, the worldwide manufacturer of building materials, posted lower second-quarter earnings of $56 million, down 68.2 percent from $176 million in earnings last year.
Sales fell 10 percent to $1.41 billion from $1.57 billion last year.
“The housing recession is entering the second year of what is likely to be a multiyear downturn,” said William Foote, chairman and CEO. “We took further action during the quarter to adapt our operations to market conditions by eliminating approximately 500 salaried positions.”
The company has already eliminated more than 1,100 positions in the past year and removed about 2.5 billion square feet of wallboard manufacturing capacity. Foote said the company planned to halt an additional 350 million square feet of wallboard capacity in Detroit late in the third quarter.
“This market is burdened by an excess supply of new and existing unsold homes,” Foote added. “The unusually large inventory of unsold homes will depress new construction and put continued pressure on volumes and prices of building materials until the excess inventory is absorbed.”
Chicago-based USG serves residential and non-residential construction markets with wall, ceiling, flooring and roofing products.
Existing-home sales fall in June
Sales of existing homes fell in June with some indications of buyer unease, according to the National Association of Realtors.
Total existing-home sales — including single-family, townhomes, condominiums and co-ops — declined 3.8 percent to a seasonally adjusted annual rate of 5.75 million units in June, compared with a downwardly revised level of 5.98 million in May.
Existing-home sales are 11.4 percent below the 6.49 million-unit pace in June 2006.
Lawrence Yun, NAR senior economist, said some consumers are uncertain.
“Home buyers have been getting mixed signals about the housing market, which is causing some of them to hesitate,” he said. “Mortgage interest rates have risen recently, and tightening lending standards are continuing to hamper sales, but fewer risky loans will put the market on a healthier path.”
Regionally, existing-home sales in the South fell 1.7 percent to an annual sales rate of 2.26 million in June, and are 11.4 percent below a year ago. The median home price in the South was $190,800, up 0.7 percent from June 2006.
Existing-home sales in the Midwest declined 2.8 percent in June to a level of 1.37 million, and are 8.1 percent below June 2006. The median price in the Midwest was $171,700, which is 1.5 percent below a year ago.
Existing-home sales in the West dropped 6.8 percent in June to an annual pace of 1.10 million, and are 19.1 percent below a year ago. The median price in the West was $340,000, down 0.4 percent from June 2006.
Existing-home sales in the Northeast are down 7.3 percent to a level of 1.01 million in June, and are 7.3 percent lower than June 2006. The median existing-home price in the Northeast was $294,400, up 1.8 percent from a year ago.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.66 percent in June, up from 6.26 percent in May; the rate was 6.68 percent in June 2006.
The national median existing-home price for all housing types was $230,100 in June, up 0.3 percent from June 2006 when the median was $229,300. The median is a typical market price where half of the homes sold for more and half sold for less.
Total housing inventory fell 4.2 percent at the end of June to 4.2 million existing homes available for sale, which represents an 8.8-month supply at the current sales pace, the same as a downwardly revised 8.8-month supply in May.
The statistics came out at 10 a.m., a day after Countrywide Financial, the largest mortgage lender in the country, held a quarterly conference call that painted a picture of softening home prices and rising delinquencies and defaults. Countrywide CEO Angelo Mozilo further suggested that because of high inventory, the housing market will not begin recovering until 2009, a relatively pessimistic view.
“It just takes a long time to turn a battleship around, and this is a huge battleship and it’s heading in the wrong direction,” he added. “First we have to get it to slowdown, then stop, then turn. It’s going to take the balance of this year to get this thing to look like it is slowing down, 2008 to get it to slow down and stop, and 2009 to head in the other direction.”
Countrywide posted earnings of $485 million, a decline of 33 percent. Following the news, Standard & Poor’s 500-stock index dropped 2 percent on the day.
Mozilo also said he was optimistic. The first key to the turnaround is a reduction in housing inventory. “Once that turns around the psychology of the country changes,” he said. “Today, the potential buyers simply wait, because they’ll be able to buy the house cheaper tomorrow than today. That psychology has to change.”