For the quarter ended May 31, Los Angeles-based KB Home reported a loss of $255.9 million, or $3.30 per share, compared to a loss of $148.7 million, or $1.93 per share, in the same period of the previous year. This includes a charge of $176.5 million against unsold homes and to abandon some land option contracts.
Revenue tumbled 55% to $639.1 million, driven by lower housing and land sales. Analysts polled by Thomson Financial had expected a loss of 94 cents per share on revenue of $691.3 million.
As of May 31, KB Home's backlog of homes yet to be delivered was 6,233 units, down 54% percent from the same quarter last year. Unit deliveries, meanwhile, fell 41% to 2,810 as the company attempted to scale back its inventory of homes on the market.
KB Home said its cancellation rate was 27%, down from 34% in the year-ago period and 53% in the first quarter, but new orders during the quarter fell 42% from a year ago to 4,200.
When one travels in economists' circles, one tends to tap into the issues, controversies and policy ideas 'dismal science' practitioners are debating.
And one issue economists have rattled around concerns the speed of fiscal policy stimulus, or more accurately, the lack thereof. In the digital age, the internet has propelled a host of speed-enhancing changes, and it occurred to this group of economists that U.S. Government policy is decidedly behind the curve in this area.
Here's why: economist David H. Wang noted that the U.S., in an attempt to jump-start its economy stalled by the nation's worst housing slump in more than 15 years, has implemented a host of monetary policy changes to provide monetary stimulus quicker. The U.S. Federal Reserve cut key, short-term interests multiple times during a 10-week span (and later implemented additional rate cuts), and devised two, new, Fed-administered institutions to address the credit crisis, provide liquidity, and ensure the orderly operation of financial markets.
AP reports that Countrywide Financial Corp(NYSE: CFC) lost $893 million in the first quarter. That $1.60 a share loss was not exactly what analysts had forecast -- they were looking for a profit of two cents a share.
Meanwhile the LA Times reports that Countrywide CEO Angelo Mozilo took in $10.8 million and cashed out $121.5 million in stock gains as his company got hammered by losses on sub-prime loans in 2007. Mozilo also enjoyed perks worth $176,513, including $44,454 in rides on the company's jet; $23,755 in automobile use; $8,581 in country club dues; and $31,238 in company-paid tax and investment advice. Mozilo faces an informal U.S. inquiry into his stock sales.
And Countrywide's financial condition is deteriorating fast. It set aside a $1.5 billion reserve to cover loan up 62% from $925 million in the fourth quarter of 2007. Moreover charge-offs totaled $606 million during the first quarter. Fortunately, Countrywide has an exit strategy. In January, Countrywide agreed to sell itself to Bank of America (NYSE: BAC) for about $4 billion in stock. The question is whether Bank of America will pull out of the deal now that it sees the rising costs it will incur if it moves forward. Since Countrywide trades 15% below that takeout price, the market has its doubts.
Investors don't seem happy with today's announcement -- the stock was down 5% in premarket trading.
The Boston Globe interviews Warren Group CEO Timothy Warren whose firm tracks housing in Massachusetts. He suggests that it could take about 10 years before housing prices return to where they were at the peak in 2005.
Warren is a breath of fresh air when it comes to analyzing the housing market. Unlike industry-sponsored studies -- such as this bubbly comment from the National Association of Realtors -- Warren carefully tracks and analyzes data and his observations are not filtered by the need to use public pronouncements to spur real estate transactions.
But Warren's loyalty appears to lie with objective data gathering and analysis, rather than having an ulterior motive. He thinks that the declining number of home sales is worse than the previous housing slump of the early 1990s. He notes that "In the 1990s, we had just two years when the number of sales declined. We are in the fourth year of declining sales in the current slump."
On Saturday, President Bush warned that the government must guard against going too far in trying to fix the troubled economy. "If we were to pursue some of the sweeping government solutions that we hear about in Washington, we would make a complicated problem even worse -- and end up hurting far more homeowners than we help."
"Democrats know that wait-and-see is not a responsible strategy for an economy that is teetering on the brink of recession," said Senate Majority Leader Harry Reid. "The president continues to convince himself that inaction is the cure-all for the economic problems hurting hardworking Americans." Democrats intend to strengthen the economy with measures dealing with housing, energy efficiency, and renewable energy.
President Bush said the recently passed program of tax rebates should begin to lift the economy in the second quarter of the year and have an even stronger impact in the third quarter. But he urged caution about doing more, particularly about the crisis in the housing market.
America's largest home improvement superstores, Lowe's Companies Inc. (NYSE: LOW) and Home Depot Inc. (NYSE: HD) are scheduled to report earnings this coming week. Here's a quick peek at them ahead of results.
Lowe's has missed earnings expectations only once in the past five quarters. When the company reported third-quarter fiscal 2008 results back in November, earnings came to 43 cents per share, beating the consensus forecast of analysts polled by Thomson Financial by two cents. For the current quarter, analysts expect only 25 cents per share, compared to 40 cents in the year-ago quarter.
The company's earnings per share growth forecast for the next three to five years is 19.1%, less than the industry average of 31.6%. The analysts' consensus recommendation is to buy Lowe's, though 10 of 21 analysts rate it a hold. Shares are up from the 52-week low of $19.94 in January, and closed Friday at $23.59.
For news on Lowe's and its rivals that could influence the earnings results, see BloggingStocks' Lowe's coverage.
Which is the better investment, Apple Inc. (NASDAQ: AAPL) or Bank of America Corp. (NYSE: BAC)? Most investors would take Apple's side. Even though there is some concern about the softness of iPod sales, almost no company has been more innovative over the last year in producing hot-selling new products. Unit growth prospects for the Mac and iPhone are the envy of the computer and handset industries.
Bank of America, on the other hand, is part of an industry where write-offs cannot seem to find a bottom. With housing and consumer credit getting worse, it is hard to predict how much more money center banks may have to show as losses in 2008.
But among the 20 most widely held stocks, so far this year, Bank of America has done the best, up 2.2%. Apple has done the worst, down 36.7 %.
The lesson here may be that the companies with the best commercial prospects may not aways do the best in the market, especially when they sport high valuations. A look at Apple's shares over the last year shows that they peaked in late December, up over 130% for the period. It did not take much in terms of a modestly weak forecast for the current quarter to start a bloody sell-off. Expectation had simply become too great.
At Bank of America, a look at the last year showed the stock had dropped almost 35% in mid-January. The shares are still way down for the period but the percentage drop is only 20% now. Wall Street seems willing to believe that most of the big write-offs are behind the bank and that bad news this year will be modest.
Apple may be asking itself if its actually good to be the company everyone thinks will do well.
Douglas A. McIntyre is an editor at 247wallst.com.
The New York Times reports that Japan's decade-long economic slump following the bursting of its 1980s economic bubble offers important lessons for the U.S. Of these, the most important one seems to be that banks and others exposed to bad loans should write them off fast and move on. It was Japan's unwillingness to bite the bullet that kept it stuck for a decade.
Last month, I compared Japan's negative interest rates to the ones we have now. But what caused the predicament that led Japan to cut its rates so much? In Japan, housing prices in the major metropolitan regions nearly tripled from 1985 to 1991, then proceeded to lose two-thirds of their value over the next 14 years. In the U.S., the price run up was less extreme: house prices rose 82% from November 2001 to their peak in June 2006. Since the peak, house prices have fallen 10% with 10% to 15% further to go.
Japan was slow to write-down its bad loans. That's because its industrial groups, or keiretsu, had tight links with banks, so when a bank got in trouble it was often quietly bailed out temporarily with loans or investments from other members of the corporate group. In the U.S., banks are quicker to take write-downs and so far we've used Sovereign Wealth Funds (SWFs) to recapitalize the banks.
The lesson we should learn from Japan is that the sooner we face reality, the sooner we can solve our problems and move on to the next period of growth. A larger question is whether we can grow without creating another bubble.
If you live in Philadelphia's Society Hill, Atlanta's Grant Park, or Dallas's University Park, (and if you're the type who doesn't pay much attention to what's going on in the world), you might be tempted to ask, "Housing slump? What housing slump?"
That's because you live in one of the most lucrative neighborhoods in the U.S., as listed by Forbes. Neighborhoods in 15 major metropolitan areas made the list because they experienced the greatest increase in home sales prices since 1990 -- between 300% and 4,000%. Many were downtrodden areas that benefited from an influx of development. A few others were already among the most upscale neighborhoods in the nation, and have thus far resisted the recent housing slump. For example:
Bucking the Florida real estate downturn is Miami Beach's City Center, with its mega-mansions with built-on docks. The 2006 median home sales price was $1.64 million, up 1,532% since 1990.
Chicago's Wicker Park benefited from an influx of young urban professionals and rehabbers. The 2006 median home sales price was $575,525, an increase of 1,870%.
San Francisco's Western Addition neighborhood is among the fastest growing in U.S. The 2006 median home sales price was $1.38 million, an increase of 522% since 1990.
New York's uptown neighborhood around 149th Street and Riverside drive features large brownstones and federal townhouses. Its 2006 median home sales price was $774,708, up 4,391%.
This post was part of AOL Money & Finance's Best & Worst of 2007 feature. The voting has now closed and readers have chosen the weak dollar and rising oil and gold pricesas the money story of the year. Be sure to let us know in the comments if you are pleased with this result.
As we approach the end of 2007, we now have a really tough question to answer. What is the Money Story of 2007? What are the candidates?
The Boom and Bust in Private Equity Buyouts
As we entered 2007, no one could imagine the activity with private equity firms around the world. Private equity firms were supposed to be the new Masters of the Universe, ushering in a new Gilded Age not seen since 1920s. We saw this with the initial public offering of the Blackstone Group, the premiere private equity group. This was followed by a series of public and semi-public offerings by other organizations, such as Apollo Group.
However, the new Roaring '20s was relatively short-lived with the credit crunch. This caused most merger activity, including corporate buyouts, to come to grinding halt. Blackstone Group (NYSE: BX) now trades substantially below its high price. Who could guess that private equity would experience a boom and bust all in the same year? However, before you dismiss private equity as an element of the past, remember that most of these firms still have substantial cash available ready to invest when conditions are ripe.
It seems like we just cannot bust out of the current housing slump we have been in this year. Today we got more negative news, as the National Association of Realtors reported that sales of existing homes fell by 8 percent during the month of September.
September's drop is the largest one-month decline since all the way back in 1999, and resulted in home prices dropping yet again. During the month, the average price for existing home sales fell to $211,700. With this price drop, we have now seen prices fall 13 of the past 14 months, putting prices 4.2 percent lower than the same period last year.
Every segment of the country felt the pain last month, with the Northeast taking the biggest hit as sales dropped 10 percent. The West saw sales drop 9.9 percent, the Midwest experienced a 7 percent decline and sales in the South fell by 6 percent.
On Thursday, home builder Lennar Corp. (NYSE: LEN) said that its fiscal second-quarter loss narrowed, as Wall Street had expected. KB Home (NYSE: KBH), on the other hand, reported Friday a larger-than-expected second-quarter loss due to weak sales and falling home prices, as well as write downs.
On Saturday, President Bush warned that the government must guard against 
Lowe's has 
As we approach the end of 2007, we now have a really tough question to answer. What is the Money Story of 2007? What are the candidates?
It seems like we just cannot bust out of the current housing slump we have been in this year. Today we got more negative news, as the National Association of Realtors reported that 
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