Friday, January 9, 2009

KB Home Posts Another Loss, Lennar plunges

KB Home posted a $307 million loss on "improved margins and lower write-downs."  While that is a huge improvement over last year, when the homebuilder punted $772.7 million, it's still hard to celebrate those "improving margins" when you're still posting a sizable loss.  Furthermore, the company's revenue declined 56%, new home deliveries slid 52% and the average selling price declined by 6.3%.  CEO Jeff Mezger called the downward pressure on the home-building industry and overall economy "unprecedented."  But why shouldn't an unprecedented boom be followed by an unprecedented bust?  
Meanwhile, as KB Homes stock took a small beating this morning, Lennar's stock was getting hammered by a disproportionate amount.  Could there be some news?  Sort of.  The Fraud Discovery Institute released the Top 10 Red Flags for Fraud at Lennar.  Personally, I've never heard of the Fraud Discovery Institute, but a formidable name like that and a quote claiming that Lennar's joint ventures are a "ponzi" scheme, certainly made my trigger finger itchy.  I'm not sure how many of the red flags were actually new revelations to Lennar's shareholders or those who like to short the stock (yours truly, on occasion), but perhaps the use of the word "ponzi" in a Bloomberg headline woke everyone from their non-farm-payroll induced apathy.  For 2009, "ponzi" is the new "toxic assets."  Prepare yourselves to hear it used prolifically in reference to everything.  Thanks, Bernie Madoff.   


Anonymous said...

Sadly, the "new wave" homebuilders like Lennar, Toll, Pulte, etc. tend to use extremely cheap materials in constructing their homes. (One of the Lennar redflags in this report mentions cheap Chinese drywall for instance) I have friends and family who are experiencing broken pipes, leaks, etc. within the first couple years of owning their newly constructed homes. I suspect that homes built in the 60's and earlier did not have these problems so early in their lifespan. I believe as more and more people experience these problems, they will stray away from newer construction long after the housing bottom has come and gone.

Anonymous said...

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