Friday, May 06, 2005

Home Builder Gambles Profits On Land

Pulte Homes released some first quarter figures today showing the land grab continues. "Net cash used in operating activities for the quarter ended March 31, 2005, amounted to $264.7 million, compared with $117.8 million for the year ended March 31, 2004. The increases in net income for both years were offset primarily by significant investments in land necessary to support the continued growth of the business." Net income was $218 million; most of these firms have bet their record profits on even more land.

"At March 31, 2005 and December 31, 2004, our operations controlled approximately 362,200 and 343,400 lots, respectively. Approximately 164,400 and 158,000 lots were owned, and approximately 136,600 and 125,800 lots were under option."

The statement revisited the companys' near death experience in Las Vegas last year. "During October 2004, we lowered pricing in Las Vegas. Since the price reductions took effect, our communities in Las Vegas have experienced increased traffic. Net signups for the three months ended March 31, 2005 were 835 homes, a decrease of 27% or 311 units from the same period in 2004, but an increase of 183% or 540 units from the three months ended December 31, 2004."


At 11:58 AM, Blogger John Law said...

so even they don't think land prices will fall?

At 12:01 PM, Blogger goleta said...

This is similar to what happened when the stock market peaked around Y2K. Many people made lots of money when they knew it's a bubble and sold their stocks before the peak, but the bubble didn't pop soon enough and they started to suspect their own judgement and thought it might really be a new economy that they would be priced out of the tech stocks if they don't get into the market again.

At 12:25 PM, Anonymous kailuabruddah said...

What's a "normal" Price-to-Book ratio of HBs?

And how low can it go once the downtrend begins?

(Of course, much of that "Book Value" no doubt is land - or at least optionable land - so this could get interesting)


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