Builders Centex, KB Home write down $793 million
Centex Corp. and KB Home said Tuesday that they would report disappointing quarterly results because a slumping U.S. housing market forced them to write down a combined $793 million of property.
Centex, the nation’s third-largest home builder, will book $450 million in the fiscal third quarter to reflect reduced land values and to abandon options to buy property, the Dallas-based company said.
Los Angeles-based KB Home, announcing charges in line with its previous estimates, said it will take $343 million in property charges in the fiscal fourth quarter.
Separately, IndyMac Bancorp Inc., the second-largest independent mortgage lender, said Tuesday that fourth-quarter earnings fell “substantially below” its own forecast because of “deteriorating” conditions in the home-loan market.
The Pasadena-based company now expects to report profit of 97 cents a share Jan. 25, down from a range of $1.30 to $1.40, Chief Executive Michael Perry told shareholders.
Home construction companies are canceling contracts and taking impairment expenses for their property holdings after facing the worst housing market in 15 years. Nationwide sales of new houses tumbled 18% in 2006 to 1.05 million, the biggest contraction since 1990.
“Once they’ve reported the fourth quarter, I think the bulk of land options charges will be behind these companies,” said Alex Barron, a home-building analyst with JMP Securities in San Francisco.
“We can expect to see further write-downs over the next six to 12 months” on developments, he said.
The majority of Centex’s land write-downs were in markets that had the greatest price appreciation in recent years, such as California, Washington, D.C., and Florida, the company said.
Shares of Centex fell $1.55, or 2.9%, to $51.61. Shares of KB Home eased 13 cents to $49.22.