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Category: Homebuilding

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KB Home earnings fall, but orders increase

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Los Angeles home builder KB Home posted lower earnings in the fiscal fourth quarter compared with a year earlier as the company sold fewer homes in higher cost areas. But another development signaled some cause for optimism: New orders for homes from the company grew.

The company reported net income of $13.9 million, or 18 cents a share, for the three months ending Nov. 30. That compared with $17.4 million, or 23 cents, during the same period a year earlier.

"We believe these results demonstrate our success in adapting to current market realities and positioning our business for the future,” Chief Executive Jeffrey Mezger said in a statement.

Revenues in the fourth quarter grew 6% over the previous year to $479.9 million, and net orders increased 38% to 1,494. For all of 2011, the company widened its net loss to $178.8 million. That compared with a 2010 loss of $69.4 million.

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Photo: Associated Press

New construction up sharply in November

New construction on homes and apartments increased sharply in November, a bright spot for the beleaguered U.S. real estate market
New construction on homes and apartments increased sharply in November, a bright spot for the beleaguered U.S. real estate market.

New housing starts last month rose 9.3% over a revised October estimate and were up 20.1% above November 2010. Homes and apartments were built at a rate last month that would produce 685,000 new units this year, when adjusted for seasonal variations, according to the Commerce Department.

The gains were largely driven by the volatile apartment sector, meaning the uptick could reverse itself. Single-family housing starts in November were up 2.3% over October, though down 1.5% over November 2010. Homes were built last month at a seasonally adjusted annual rate of 447,000 units.

"This was a good report," wrote economists Patrick Newport and Michelle Valverde of the consultancy IHS Global Insight. "The single-family market is finally getting off the mat and ... the multi-family segment is continuing to make small strides. ... [W]e should expect good housing start numbers in the upcoming months."

Starts were at their highest level in 19 months. Month over month, starts were up 22.6% in the West, 3.15 in the South and 53.8% in the Northeast. Starts were down 18.2% in the Midwest.

The number of building permits issued to builders also showed improvement, with new permits up 5.7% over October and 20.7% above the November 2010 rate. Permits were issued at a seasonally adjusted annual rate of 681,000 units.

"By historical standards, home-building activity is still very depressed, but at least it appears to be on an established upward trend,” Paul Diggle, property economist with Capital Economics, wrote in a note.

The new-home market this year has suffered worse than the one for previously owned homes as foreclosures continue to provide stiff competition for newly built properties.

New-home builders have turned to developing models for multi-generational families and touting their green credentials to distinguish themselves from foreclosure properties –- often competing against the very models they built during the boom years as little as four years ago.

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Photo: A home under construction in Buckingham, Pa. Credit: William Thomas Cain / Getty Images

Stalled Hollywood condo project reborn as luxury rentals

Avenue
A failed Hollywood condominium development that once symbolized the housing market collapse has been reborn as a $120-million upscale apartment and retail complex.

Construction on the former Madrone came to a halt around the end of 2009 even though the shell of the project was mostly complete. Developer John Laing Homes filed for bankruptcy and the scaffolding-swathed husk of the Madrone was left to weather the elements behind locked gates.

One of the original investors in the project, Resmark Cos., took over and restarted work in July 2010 on what is now known as the Avenue. The just-completed complex on La Brea Avenue south of Hollywood Boulevard has 180 units in three buildings connected around a raised courtyard.

Several housing developments intended to be condominiums before the housing bust have been converted to apartments, but Resmark took the unusual step of making the Avenue’s rental units more luxurious than the Madrone condos were intended to be, Chief Executive Robert N. Goodman said.

Among the improvements are more expensive built-in appliances, interior finishes such as floor tiles and a grander lobby. Rents will be in the range of many mortgages: One-bedroom units start at $2,750 a month, reach $4,900 for three bedrooms and hit $9,000 for a penthouse.

“We expect to rent to younger, affluent professionals who are making a lifestyle choice and prefer to be a renter and not a buyer,” Goodman said.

Tenants for the ground-floor retail spaces have not been signed yet, he said, but Resmark hopes to land businesses such as a restaurant and a coffee bar that would appeal to residents.

John Laing Homes took a substantial loss on the project, Goodman said. Resmark took over the construction loan “at a fairly significant discount,” he said, and will end up spending $80 million on the project that took a total of $120 million to complete. The California Public Employees' Retirement System is also an investor.

The Avenue has a fitness center, pool, fire pit, concierge and a residents-only dog run.

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Photo:  The Avenue apartment complex in Hollywood.  Credit: Francine Orr / Los Angeles Times

Apartments under construction at Wilshire and Barrington

Barrington Wilshire Rendering

Construction of a six-story apartment building got underway last week at Wilshire Boulevard and Barrington Avenue in West Los Angeles, one of the area’s major intersections.

The property, formerly anchored by a liquor store and shoe store, was one of the most underutilized sites in West Los Angeles, said Ken Kahan, president of California Landmark, the Los Angeles company building the $35-million complex.

The apartment building called the bw replaces the previous plan for the site, a 28-story condominium building approved in 2004. Condo values and sales fell in the economic downturn, however.

“A high-rise condominium tower does not work in today’s market,” Kahan said.

Set to open in August 2013, the bw will have 78 units expected to rent for $2,200 to $4,000 a month. The design by Los Angeles-based PK Architecture calls for a rooftop garden, modernist lobby and a gym.

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Image: The planned bw apartment complex at Wilshire and Barrington. Credit: California Landmark

Construction of new homes increases, except in West

RanchoHomes

Construction of single-family U.S. homes appeared to pick up last month, but not in the West.

Single-family homes were started at a rate of 434,000, a 5.1% increase over the prior month.

The increase follows news of an increase builder sentiment. Economists called the jump in new single-family-home starts a positive sign, as the nation's beleaguered real estate market was at least showing life.

"This was a good report," Patrick Newport, U.S. economist with IHS Global Insight, wrote in a note Thursday. "It has supporting evidence that the single-family market is finally getting off the mat and that the multi-family segment is continuing to make small strides, and that we should expect good housing starts numbers the rest of this year."

Overall housing starts -- including the volatile apartment building sector -- fell in October 0.3% over the prior month, to a seasonally adjusted annual rate of 628,000. The decline was attributed to a drop in apartment building construction.

The West was the only region that did not see an increase, falling 16.5%. Starts were up 17.2% in the Northeast, 9.7% in the Midwest and 1.6% in the South.

Another measure of housing activity considered less volatile than starts, permits issued, also showed new building gaining ground last month. New permits in October were at a seasonally adjusted annual rate of 653,000, 10.9% above September and 17.7% above October 2010.

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Photo:  Suburban homes under construction in Rancho Cucamonga. Credit: Getty Images

 

New home construction surges in September; recovery still elusive

Homes under construction in Southern California

New residential construction surged 15% in September, turning in its best performance in 17 months, though economists warned that a housing recovery has yet to take hold.

While new construction is key to getting the economy going, much of the new building came from the apartment sector, which can be very volatile. Many economists also noted that permits pulled for new construction, also an important measure of builders’ plans for the future, declined in September.

Nevertheless, the news of the increase cheered investors on Wall Street as well as several housing analysts who follow the numbers closely.

“A strong residential construction number is a welcome relief for an economy struggling to hang on to expansion and a hopeful harbinger of better days to come,” Celia Chen, a housing economist with Moody’s Analytics, wrote in a research note Wednesday morning. “Caution, however, needs to be taken in interpreting the surprisingly strong top-line housing starts for September.”

Builders started new residential units at a seasonally adjusted annual rate of 658,000 in September, a 15% increase over the prior month and up 10.2% from the same month the year before, according to the U.S. Commerce Department.

Single-family homes were built at a rate of 425,000 units, which is only 1.7% above a revised August estimate, meaning the bulk of the increase came from the building of structures with five or more units.

News of the increase in new home starts came one day after builder confidence in the market rose, according to a closely watched index that measures builder sentiment. The National Assn. of Home Builders/Wells Fargo Housing Market Index jumped by four points to 18 in what was the biggest one-month gain since April 2010, when a tax credit for buyers was fueling purchases. Sentiment remains pretty dismal, however, as a number above 50 indicates more builders view conditions as good than poor.

“A stagnant economy and labor market has meant that housing recovery over the past year has been painfully slow, but we do believe that housing is gradually healing and recovering,” Nishu Sood, a home-building analyst with Deutsche Bank, wrote in a research note Wednesday.

Despite that cautious optimism, economists also pointed to the housing permits number released Tuesday by the Commerce Department, which signaled a more mixed picture for housing. New residential building permits were issued at a seasonally adjusted annual rate of 594,000 units, which is 5.0% below the revised August rate, though still up 5.7% from September 2010.

“We would warn against getting too excited as the fundamental picture has not changed; household formation is still too low and the excess supply is still too high to warrant a major rise in home building,” read part of an analysis by Capital Economics.

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Photo: Homes under construction in Southern California. Credit: Getty Images

KB Home's loss widens, but orders for new homes rise

KBHome Los Angeles-based home builder KB Home's loss widened slightly in the third quarter as the nation's housing market continued to show weakness, though the company said orders for new homes increased.

The company reported a net loss of $9.6 million, or 13 cents per share, for the quarter ended Aug. 31. That compared with a net loss of $1.4 million, or 2 cents per share, for the third quarter of 2010.

KB Home's revenue was $367.3 million in the third quarter, down 27% from $501.0 million during the year-earlier period.

One bright spot: The company said that its orders for new homes jumped 40% to 1,838 from 1,314 in third quarter of 2010.

"We achieved encouraging operational and financial results in the third quarter despite the ongoing difficult housing environment," KB Home CEO Jeffrey Mezger said in a statement.

Home builders are facing intense pressure as investors rich with cash and first-time buyers compete for bargains. Those buyers have mostly been buying foreclosures and other so-called distressed properties.

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Photo: KB Home says that despite widening losses, orders for new homes rose 40% in the third quarter. Credit: Associated Press

 

UCLA: Dismal outlook for California's inland areas

InlandEmpire-AP

In their quarterly analysis of California's economic prospects, UCLA researchers are particularly downbeat on the outlook for inland areas that were powered for years by growing populations and booming housing markets.

Areas such as the Inland Empire and the San Joaquin Valley are unlikely to rebound until the latter part of this decade -- in large part, UCLA says, because there is so little need for new homes to be built.

(Here's a thumbnail synopsis of the UCLA report.)

Home construction was propelled by two broad forces during boom times, according to UCLA.

First, demand for reasonably priced homes from people who worked in urban or coastal areas but couldn't afford to buy there. Second, demand from people moving in from other states in search of promising job prospects.

Both trends are reversing, according to the report released today by UCLA's Anderson School of Management.

Though homes in Corona and Lancaster are certainly cheaper than a few years ago, so are homes in urban and coastal communities. And given the fear over gas prices, many workers are choosing to buy homes closer to where they work.

Also, some people in inland areas who have lost a home to foreclosure are less likely to rent another home there, according to UCLA. Instead, they'll simply rent apartments closer to jobs or family.

And given the dim job prospects in inland areas, fewer people are expected to migrate to California, according to UCLA. Unemployment rates in inland areas are among the highest in the country -- hardly a lure for out-of-staters seeking better lives.

"Inland California labor markets are, at least visually, less attractive than those in Texas, Utah or Virginia," according to the UCLA report. "An unemployed autoworker in Ohio or construction worker in Nevada [are] not likely to decide to move to Stockton or Ontario in search of a job when all the information available suggests that Dallas, Salt Lake City and Newport News provide better prospects," wrote Jerry Nickelsburg, a UCLA senior economist.

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Photo: A sign advertises a 2009 auction of a foreclosed home in the Inland Empire. Credit: Associated Press.

 

Barry Minkow heads back to prison

Minkow in church office, February 2009 Bloom berg Sandy Huffaker

Barry Minkow's twisting road through life will carry the former San Fernando Valley teen tycoon back to prison Wednesday to serve his second sentence for securities fraud.

In an email to The Times, Minkow said federal prison authorities had ordered him to begin his five-year sentence at a Lexington, Ky., facility that "from the outside looks like Leavenworth Penitentiary" rather than the minimum-security prison camp he had hoped for and a judge had recommended.

Minkow burst onto the national stage in the 1980s after starting ZZZZ Best, a carpet-cleaning company, in his parents' garage in Reseda. He wound up spending more than seven years in prison after it was revealed that ZZZZ Best was a sham built on credit-card fraud and fabricated work orders.

Expressing remorse, he reinvented himself as head pastor at San Diego's Community Bible Church and founded the Fraud Discovery Institute, a detective shop that set out to expose Ponzi schemes and corporate wrongdoing.

But in March he pleaded guilty to one count of conspiring to damage Lennar Corp. by attacking the Miami-based home builder in reports he acknowledged were filled with falsehoods. He had been hired by a San Diego County developer whose partnership with Lennar in Rancho Santa Fe had soured.

Minkow told U.S. District Judge Patricia Seitz in Miami that he had become addicted to narcotic painkillers he used to treat his migraine headaches, finally kicking the habit when he realized he was under criminal investigation.

He also told the judge that abusing steroids as a teenage weight lifter had rendered him unable to produce sperm or testosterone, saying he needs constant treatments to limit his body's production of the female hormone estrogen.

Seitz granted his request to be placed in a prison program for treating addiction. She also recommended that Minkow be placed in a work camp at Maxwell Air Force Base in Alabama, but the federal Bureau of Prisons decided camp wasn't appropriate.

"The Feds found a way to be a bit punitive and put me in an 'administrative medical facility' which houses inmates of all levels," Minkow said in his email.

His attorney, Alvin Entin, said the decision was made because of "mental issues" as well as Minkow's "physical problems." 

In any case, Minkow said, "I deserve it and will be fine."

He noted that the prison is much nearer to the small town in Tennessee where he has lived recently with his wife and two adopted sons.

"Lisa and the boys will have a much easier time driving three and a half hours rather than eight hours to Maxwell," Minkow said.

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Photo: Barry Minkow in his church office, 2009. Credit: Bloomberg / Sandy Huffaker

Southern California home sales and prices fall again in July

Home sales in Southern California fell to their lowest level for a July in four years -- though the decline from a year earlier was the smallest in 13 months. The median price was down 4% to $283,000.

The drop in sales from June was more pronounced, especially for houses that cost more than $500,000, as the job market sputtered, economic uncertainty intensified and some potential homebuyers got cold feet, real estate information service Dataquick said.

A total of 18,090 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in July. That was down 11.9% from 20,532 in June and down 4.5% from 18,946 in July 2010, according to San Diego-based DataQuick.

“The latest sales figures look a bit worse than they really are, given this July was a fairly short month, but they still suggest some potential homebuyers got spooked,” said John Walsh, DataQuick president. Azusa “Reports on the economy became increasingly downbeat and, no doubt, some people fretted over the possibility the country would default on its obligations.”

Prices also continued to slide. The median, the point at which half the homes sold for more and half for less, has declined year-over-year for the past five months. It has been unchanged or lower than a year earlier each month since last December, when it posted a 0.3% annual increase.

“If there’s a shred of good news in the data it’s that last month’s sales weren’t much worse than a year earlier,” Walsh said. "For the first time in many months, we get an apples-to-apples comparison to year-ago sales, given that in July 2010 the market lost its crutch -- federal homebuyer tax credits.”

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Photo: Homes under construction in Southern California. Credit: Getty Images

 

Warner Center apartments sell for $133 million

In one of the largest property sales in Los Angeles County since the real estate boom of the mid-2000s, a new Warner Center apartment complex has changed hands for nearly $133 million.

Wesco, a joint venture sponsored by Essex Property Trust, bought the 438-unit Millennium Warner Center from developer Warner Center Apartments, real estate brokerage Institutional Property Advisors said.

Millenniumsmaller (2) Although commercial property sales have slowed substantially since the boom, top-quality buildings in good locations with reliable income from tenants are drawing buyers willing to pay prices that match those of the peak years, industry observers said.

“There is tremendous demand for newer, Class A assets in core California markets, and these opportunities are few and far between,” said broker Stan Jones of Institutional Property Advisors.

Millennium Warner Center, which opened in December, is less than 60% leased but absorbing 40 to 70 units a month, he said.

“Given the intense buyer demand and leasing momentum, investors are willing to assume the lease-up,” Jones said.

Monthly rents in the complex at 21201 Kittridge St. run from $1,565 to $3,350.

-- Roger Vincent

Photo: Millennium Warner Center opened in December.   Credit: Institutional Property Advisors 

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