It's Like Beating a Dead Horse

Pummeling the same company over and over gets boring and uninteresting after a while; but the news keeps on coming:

"A shareholder advisory group urged Beazer Homes's board Tuesday to fire Chief Executive Ian McCarthy because of financial, legal and accounting problems that the homebuilder has faced in recent months."

"Beazer has been beset by turmoil in the housing industry that has caused its number of home closings to plunge. Internal problems at the company have exacerbated the situation."

"On Monday, it said it expects to record pretax charges of $230 million in its fiscal fourth quarter."

"It also said it cut 650 jobs, or 25 percent of its work force, in October and is suspending its quarterly dividend to reduce costs."

"The homebuilder said it is unable to provide a full, audited report of its results for the quarter ended Sept. 30, but wanted to provide some preliminary data to investors."

"The company is currently in the midst of restating financial results for several prior-year periods."

"In the midst of restating financial results for several prior-year periods" is not a good sign. Here's a recap of the Beazer problems. Nothing else needs to be said.

The Beazer Blunders Continue

Despite the recent sparseness of posting, any Beazer Homes story deserves attention. This time, recent Beazer troubles has forced the suspension of dividends:

"Beazer Homes USA Inc...has suspended its quarterly dividend in an effort to firm up its capital position."

This follows the news that Beazer was receiving default notices, which followed the rumor that Beazer was contemplating bankruptcy, which followed the news that Beazer was firing the Chief Accounting Officer for attempting to destroy documents, which followed the news that Beazer was involved in an FBI probe.

You got all that??

To make matters worse, there's a recent report from Beazer's CFO in which he said that negative publicity was increasing cancellations:

"Beazer Homes USA Inc. Chief Financial Officer Allan Merrill on Tuesday estimated half of the company's cancellations in the latest quarter were driven by turmoil in the mortgage markets, while the other half were the result of rumors the company was facing bankruptcy."

Are you sure Allan? It couldn't be because of items like this:

"I'm a new Beazer homeowner and it has been quite an unpleasant experience. The current housing market is doing quite a number on the value of my home. However, Beazer is doing quite another. Beazer is not only assisting in the falling value of my home, but Beazer is having a fire sale within my housing development in order to raise cash. Beazer is a total disgrace to the American public who brought their product. As a customer I feel disrespected and ignored. I would never puchase another Beazer home."

Could it???

Market Rally: Deniabull

Bloomberg is reporting that homebuilders could be a buy now:

"Lennar Corp. and D.R. Horton Inc., the two biggest U.S. homebuilders, advanced after Citigroup Inc. said the industry's 50 percent decline this year has made the stocks attractive. Citigroup led financial shares higher after the largest U.S. bank said it expects 'a normal earnings environment' in the fourth quarter and former Federal Reserve Chairman Alan Greenspan said the credit slump may be ending."

Homebuilders are not buys right now. Not with this.

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In the same day that Citigroup announces possible drops in future profits, the stock market surges with hopes that the credit crisis is over. Compare that with this:

"...the banks need to step into the confessional box and tell us just how much of the $2 Trillion drop in the value of US housing (so far) they are on the hook for. So far we’ve had a Billion here, a Billion there but the big boys have so far had their heads firmly in the sand and that means it’s time for a kick in the ass."

Ostriches, bulls...two names for the same animal? Currently, it seems that way.

KB Homes: The Future Looks Bleak

KB Homes reported third quarter numbers today, clocking in with a net loss of $35.6 million dollars. And then there was this from KB's CEO:

"We expect housing industry conditions to continue to worsen through the end of the year and into 2008"

In gloomier news, Seeking Alpha has a report based on the S&P/Case-Shiller indices indicating that homes prices should continue falling until at least 2011.

Homebuilder News: Bad and Worse

According to an article over at Seeking Alpha, Standard Pacific Corp is "America's worst homebuilder":

"SPF is going to lend its own shares to whomever buys the notes, so that the buyer can sell the stock short. I don't think SPF is long for this world."

This blog has called Standard Pacific Corp bad news for over three months:

"Standard Pacific is the percentage leader in terms of revenue coming from subprime customers. Furthermore, they only receive 51 percent of their revenue from prime borrowers."

"I recommend selling Standard Pacific because they're positioned to file bankruptcy before the housing bust runs its course. In addition to their subprime loan exposure, they're already losing money in a market that people are just now starting to call a "bloodbath". What will their bottom line show 18 months down the road??"

Recovery looks bleak for SPF.

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Lennar announced their third quarter numbers, and they were worse than expected:

"In a further sign of trouble for the battered housing and homebuilding markets, Lennar posted a much bigger-than-expected loss Tuesday for its fiscal third quarter, saying it has already slashed staff and plans further cuts."

"The nation's No. 1 homebuilder in terms of revenue, Lennar posted a net loss of $513.9 million, or $3.25 per diluted share, down from the net earnings of $206.7 million, or $1.30 per diluted share, in the year-earlier period."

Last quarter, Lennar announced a net loss of $244.2 million. The gap is widening. What happened? From Forbes:

"Lennar was dragged to the wider-than-expected loss after slashing prices on its homes and writing down the value of its land holdings. The company announced a loss on land sales of $344.7 million during the third quarter."

It's not that this information wasn't easy to predict:

"Lennar holds 9.1 billion dollars worth of inventory. Their respective inventories will continue to decrease in value as the housing bust runs its course and prices subside. Inventory makes up...77 percent of total assets for Lennar...As inventories decrease in value, so should the stock price"

Up next is KB Homes, who will report their third quarter numbers on Thursday. Last quarter, KB reported a loss of $174.2 million. What will their loss this quarter look like? $350 million?

Housing Market: More Bad News

How much worse will it get? Over the weekend, CNN Money ran an article about the future of home prices in the United States. It doesn't look good:

"Over the next few years, more than three-quarters of the nation's housing markets will suffer some decline in home prices. Many will experience double-digit hits in a forecast that has worsened considerably in recent months."

"According to an analysis conducted by Moody's Economy.com, declines will exceed 10 percent in 86 of the 379 largest housing markets. And 290 of the cities will experience price drops of 1 percent or more."

As home prices went up, Americans felt richer; when the opposite occurs, expect Americans to start feeling poor. Falling home prices affect consumerism in the US. The most important implication of a housing price drop is the possibility that it could trigger a decline in consumer spending. Considering the fact that consumer spending accounts for close to 70 percent of the economy, a decline would be a very damaging to an already fragile economy.

At this point in time, the situation is unavoidable. In many markets, home prices have climbed to levels that make affordability impossible for the majority of the population. The laws of supply and demand dictate that as prices decline, the demand (ie: quantity sold) increases. For the housing market to complete its recovery, home prices will need to correct.

One last thing to note is that declining home prices will contribute to the already declining book value of homebuilders; look for homebuilder stock prices to decline further.

Beazer Homes is in an Elevator (and it's only going down)

More bad news from Beazer Homes. First comes an FBI investigation regarding fraud within the company, which is followed by their Chief Accounting Officer quiting, which is then followed by rumors about bankruptcy; now, there are reports of Beazer Homes receiving default notices:

"Home builder Beazer Homes USA Inc said on Friday it received default notices related to senior notes from U.S. Bank, the trustee for the notes, sending its shares down as much as 13 percent."

"Beazer, which faces a deteriorating U.S. housing market as well as two separate probes related to its mortgage-origination business, said it believes the default notices are 'invalid and without merit.'"

Right. The notices are "invalid and without merit". It might seem like that if one is too ignorant to connect the dots. Beazer should be the first publicly traded homebuilder filing for bankruptcy.

The stock has lost two-thirds of it's value since I recommended selling it more than two months ago.

An Interesting Take...

From Brett Arends of The Street.com comes this rosy outlook of the housing market, homebuilders in particular: Homebuilders Finally Nearing the Bottom:

"Maybe I'm looking too hard for contrarian signs that the end of the slump is near. This could be a pause before another slide."

"But at times like these it is hard to keep in mind the obvious point that the shares on Wall Street are, obviously, a lot closer to the bottom than they are to the top."

What an astute observation! "The shares on Wall Street are...a lot closer to the bottom than they are to the top." Considering that there's a limit at the bottom (stocks can't be priced at $-1.00) and no limit at the top, it makes no sense to invest money based on literal numbers; rather, investments should be based on percentages.

The importance of this becomes obvious after examining one of the homebuilder stocks. DR Horton (DHI) peaked in July of 2005 at $42.82. Since then, the stock has lost 65.4 percent of its value, closing trading on September 5th, 2007 at $14.81. DR Horton is $28.01 away from the peak in 2005 and only $14.81 away from the ultimate bottom; it's true that "homebuilders [are] finally nearing the bottom". But suppose that someone invested in DR Horton at $14.81, only to see the stock fall to $7.00? Sure, it may have only been a loss $7.81 per share, but the percentage loss of 53 percent would rival the percentage loss seen from the summer of 2005 to this past week.

The example of DR Horton is representative of all of the publicly traded homebuilders. When comparing the charts seen here, courtesy of investertech.com, it becomes apparent that the homebuilder stock charts mirror each other in terms of percentage gains and losses.

Upon revisiting this topic next year, it will be interesting to see if Mr. Arends premonition becomes true, and perhaps it will, but a savvy investor would definitely stay away from homebuilder stocks in the upcoming months.

The Beazer Homes Rumor

There were some rumors flying around today about the possibility that Beazer Homes was about to file bankruptcy, citing claims that they've run out of cash and credit. Of course the company denied theses claims, but I think the rumors might hold more water than the homebuilder would like you to believe. If you'll recall, the company fired their Chief Accounting Officer last month for attempting to destroy records. If you've got an employee attempting to destroy records, you have got a serious problem. That why I recommended selling or short selling Beazer Homes last June 25th. But some investors took that news and interpreted it as a buy. You don't believe me? If you look at this chart of the stock's price over the last three months, you can see that there are are upticks on June 27th, July 6th and July 13th. It should be noted that the last date listed was Friday the 13th. I guess that's the way those investors who bought will interpret it as. Since then, Beazer has fallen hard. And why shouldn't they? There has been some serious turmoil in the company, possible attempts to defraud investors. It brings me back to the question: why was their Chief Accounting Officer attempting to destroy records? I made over fifty percent on my short sell, did you?

And then there's the story over at CNBC: "Options Report: Speculators Burned Chasing Beazer Rumors"

As Beazer shares tumbled to a low of $8.10 from an early trading day high of $14.01, the out of the money August 10 puts rose 30-fold from early trades of 10-cents to an intraday high of over $3 as implied volatility surged briefly to the 300% level. Once the rumors were refuted, and the stock rebounded, the puts quickly lost more than half their value from the spike-high of the day.

Any savvy investor would have dumped Beazer as soon as news emerged that they were dumping their Chief Accountant. Any time a company dumps a high level executive of finance or accounting for impropriety, you know the company has trouble. I realize that there are some risks involved with selling a company short, but when the news is right, it eliminates that inherent risk of infinite loss. So for all those investors out there who were "burned" chasing rumors, you should have chased the facts when they emerged one month ago.

NY Times: Homebuilders See Inventory Value Decline

On Friday, the NY Times posted a story explaining that the homebuilders have seen major declines due to a devaluation of inventories they hold:

"D.R. Horton, one of the nation’s largest home builders, posted a third-quarter loss after writing down the value of unused land and warned there was no recovery in sight for the troubled housing industry."

"Another home builder, Beazer Homes USA, which faces federal investigations of company practices and personnel, also said it swung to a loss in its fiscal third quarter after cutting prices to spur sales and taking charges to write down the value of unsold inventory."

My prediction has come to fruition. I reported this last month:

"Their respective inventories will continue to decrease in value as the housing bust runs its course and prices subside. Inventory makes up 73 percent of total assets for KB Homes, 77 percent of total assets for Lennar, and 83 percent of total assets for DR Horton. As inventories decrease in value, so should the stock prices."

This will continue to happen over plenty more quarters. The losses reported will get deeper and deeper and unlike my thoughts last month, some major homebuilders will file for bankruptcy. This has to do with the fact that homebuilders began forecasting future projections based on super-inflated numbers and made speculative bets based on those inflated numbers.

Of course there are those people who think it has nothing to do with fundamentals; rather, it has to do with psychology:

"'It's a psychological problem right now, more than anything else,' Hovnanian said on CNBC's 'Squawk Box.' 'Job growth is good. Interest rates are still really, really good. Demographics are good so it will come around.'"

"'We've been through these cycles many, many times before,' he continued. 'When it's bad everybody thinks it's going to be bad forever, and that’s not the case. It is going to come around.'"

I agree with Ara about the fact that it won't be bad forever, but I do think that there are some homebuilders that are extremely overextended. Ara insists that interest rates are low and job growth is good, but he fails to see two points:

(1) Job growth means nothing without wage growth. We can create millions of new jobs, but if they're all minimum wage jobs, then what's the point? It wouldn't bode well for the housing market unless they feel like making more subprime mortgage loans.

(2) Interest rates are at historical lows, but they're not low if you look at the last eight to ten years. The reason homebuilders and the housing market were able to persist after the recession at the turn of the century can be attributed to Alan Greenspan and his psycho-crazy idea of setting interest rates below the rate of inflation. He saved the economy temporarily, while putting off the major recession until later.

To recap, I think the recent housing downturn has more to do with fundamentals of the economy than it does with the psychology of the average prospective homebuyer. I think that the value of land will continue it's slide for years to come, creating lower book values for homebuilders who are overextended, which in turn creates downward pressure on homebuilder stocks. Don't miss out on this easy opportunity.

Homebuilders Tank; Dow(n) Jones

Two homebuilders reported earnings today. Unfortunately, they weren't earnings; they were losses. And they were much worse than people thought they'd be.

"For the three months ended June 30, the company posted a loss of $123 million, or $3.20 per share, compared to a year ago when it earned $102.6 million, or $2.37 per share." "The result was significantly worse than estimates on Wall Street, where analysts projected a loss of 32 cents per share, according to Thomson Financial."

Significantly? That's an understatement! The loss was 640 percent worse than analysts expected. It's frightening how far off the analysts expectations were. Millions of investors base their picks on what these analysts report.

What about DR Horton? From Yahoo:

"D.R. Horton Inc., posted a third-quarter loss Thursday as one of the nation's largest homebuilders wrote-down the value of unused land and warned there was no recovery in sight for the troubled housing industry."

"With the write-down charge, Horton said it lost $823.8 million, or $2.62 per share, in the quarter, compared with a gain of $292.8 million, or 93 cents per share, a year earlier."

"Analysts surveyed by Thomson Financial expected losses of 35 cents per share."

Analysts were 648 percent off with their DR Horton expectations. The evidence is here: people are vastly underestimating the severity of the housing downturn. The problem will still get worse before it gets better. The more days that pass, the more I think that the recovery won't happen in 2009. This could take many years to iron out.

The news helped to spark a 300 point drop in the Dow. Apple is the only stock I've seen rising. For now, the bears rule the world. Are you covered?

More Horrible Housing Numbers

The bad news in housing gets reported as if it's a surprise. Consider the headline: "Existing-home sales fall to 5-year low". Did anyone REALLY believe that sales wouldn't drop to that mark? Did someone think that housing would rebound? From the article:

"Sales of single-family homes plunged at a 30% annual rate in the second quarter, the steepest decline in 28 years, the National Association of Realtors said Wednesday. Sales of single-family homes were down 12% in June compared with a year earlier."

"Even with a significant 4.2% drop in the number of homes for sale, the supply remained at a 15-year high at 8.8 months' worth of sales."

Any of that information would have made much bigger headlines than the one Market Watch used. Sensational headlines, in fact. We saw the steepest decline in 28 years. DR Horton is reporting earnings tomorrow. Anyone wanna make any bets?

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Update 07/25/07 5:55 PM: It should also be noted that Beazer Homes is expected to announce earnings tomorrow as well. Analysts have pegged them to report a loss of 0.46 per share. Look for their stock to dive some more if they miss that expectation.

Jim Cramer Finally Gets the Memo

Mad money or just plain madness? Jim Cramer finally got the memo. I issued a couple memos a month ago. Had you sold/shorted when I told you to, you'd already be enjoying the following profits:

Beazer Homes: 31%
Lennar Homes: 19%
KB Homes: 17%
D.R. Horton: 9%
Standard Pacific Homes: 3%

Housing Market - No Bottom in Sight!

The homebuilder confidence index fell even further this month. From the NAHB:

"A surplus of unsold homes on the market, combined with ongoing concerns in the subprime mortgage arena and affordability issues associated with tightened lending standards and higher interest rates, continues to take a significant toll on builder confidence, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI declined four points to 24 this month, which is its lowest level since January of 1991."

(An index level of 50 indicates that half of those polled have a favorable view.) The article continues with the claim that house sales should increase later this year, with a continued rebound into the start of next year. I say they're crazy. We've yet to see the spike in mortgage rate resets, which will increase the already high default rate. This, in turn, will flood an already bloated level of supply. Plus, lending restrictions are tightening and will continue to do so, stifling demand. And what happens when the Fed finally decides to take care of the inflation problem? Interest rates will increase, further dampening the demand for homes.

Today's report from the NAHB looks frighteningly similar to last months index. I see a continuing trend. Homebuilders should look forward to 2009. That's their best bet.

S&P, Moody's to Downgrade Subprime Securities - World Stocks Falter

Well, it's about time. How long has it been since we've known about the risks? Months and months. Finally, the two credit ratings organizations are coming around:

"Credit ratings on 612 classes of residential mortgage-backed securities backed by U.S. subprime collateral have been put on CreditWatch with negative implications, S&P said. Beginning in the next few days, the agency said most of these classes will be downgraded."

"That covers about $12.078 billion in rated securities, or 2.13% of the $565.3 billion in U.S. RMBS rated by S&P between the fourth quarter of 2005 and the fourth quarter of 2006, the agency noted."

Meanwhile, in a related story:

"Moody's cut ratings on 399 subprime residential mortgage-backed securities, or RMBS, and said that it may downgrade another 32 because of higher than expected delinquencies on the underlying home loans."

I don't know how many more securities there are that are at risk, but I would bet there are more. Any literate investor should have known for weeks of the great risk associated with subprime mortgage securities; the looming interest rate reset will be devastating. Here's the simple picture:

"A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money."

"S&P's announcement is a death warrant for the subprime industry. No longer will mortgage brokers be able to help buyers lie their way into a home. Fewer stressed homeowners will be able to refinance their mortgage, thus extending and exacerbating the housing bust."

Unwinding this tangled mess is taking time; along the way, it will affect more than just the mortgage industry. Of course it has already hurt the homebuild sector. Higher foreclosure rates have contributed to a rising supply of homes; also, looser loans standards helped fuel a housing boom which assisted in creating future projections that were grossly inflated.
And the subprime mortgage fiasco has not and will not be kind to the banking industry. Depending on who's holding what, investors could be rewarded greatly for making the right bets.

Another sector that could feel the hurt is retail. Fewer homeowners refinancing mean less being spent at home depot or at the mall. We've already seen home depot's hurt. Bed Bath and Beyond has also lowered it's expectations in the last few weeks. The housing downturn might be blamed as the number one reason, but subprime is not far behind. And as the noose tightens around lending standards, the infusion of cash that has helped fuel earnings in retail will evaporate.

Today, just one day after flirting with a record close, the Dow faltered by more nearly 150 points. Following the Dow decline, Asian markets followed suit. Something will act as the catalyst initiating a world-wide economic slowdown. It could be subprime, it could be something else. All that needs to happen is for a spark to start the wheel spinning. The next couple weeks should give us a decisive answer.

DR Horton: New Home Sales Plunge 40%

The evidence keeps piling up. The housing market is headed for real trouble:

"The Ft. Worth, Texas-based company said net sales orders for its fiscal third quarter ended June 30 dropped to 8,559 homes valued at $2 billion, compared with 14,316 homes or $3.8 billion in the year-ago period."

"'Market conditions for new home sales declined in our June quarter as inventory levels of both new and existing homes remained high, and we expect the housing environment to remain challenging,' said D.R. Horton Chairman Donald Horton in a statement."

Yikes! DR Horton looks to be following in the steps of KB Homes and Lennar, although D.R. Horton has yet to post a loss. That should be coming later this month:

"Home builders have been taking land-related impairment charges during the housing slump, which are further hitting profit margins."

"Morningstar Inc. analyst Eric Landry in a research note said news that impairments would negate any profit 'isn't surprising, as Horton was among the most aggressive land buyers throughout the bubble years and is probably sitting on material amounts of land that doesn't pencil in today's lower-priced environment.'"

Given this information, I think D.R. Horton could end up in worse condition than KB and Lennar. Did you follow my advice and sell in June? If not, I'd say you still have a chance - the bottom hasn't dropped out yet.

Home Builder Inventory, Cash Flows, and Stock Prices

The most important number on any home builder's balance sheet is inventory, especially when the market turns south. The inability to sell houses can cause a cash flow crisis for even the most stable company, which leads me to an article found yesterday at Marketwatch:

"'Based on our detailed analysis of inventory trends, we do not think investors should be overly optimistic regarding the home builders' ability to generate cash flow in the next 12 to 18 months,' analysts Nishu Sood, Lou Taylor and Rob Hansen wrote in a lengthy report this week."

The article discusses the job of the analyst to determine which homebuilders have the largest inventories. They go a step further than I did here, differentiating between "standing inventory" and "remaining land investment". The former includes unsold homes already built and land in the process of being built on, while the later includes all other vacant land:

"'In arguing that standing inventories are generally less risky from a future cash-flow perspective, we contend that the much shorter time horizon of standing inventories implies a much higher probability of near-term conversion to cash,' the analysts said."

"'As a result of its dramatic decline relative to overall inventories, standing inventory went from being 52% of balance sheet-inventory at the first quarter of 2006 to only 34% at the first quarter of 2007,' the analysts observed."

The drop in standing inventories wasn't the result of selling it off. It was the result of declining market values of the properties. In other words, actual inventory didn't decline but the value of that inventory did.

"For example, if a builder purchased a lot for $200,000 that's now valued at $150,000, generally accepted account principles require the balance sheet to reflect that decline. The result is lower book value, which is used to determine a stock's valuation."

This is exactly the point I made here:

"Their respective inventories will continue to decrease in value as the housing bust runs its course and prices subside. Inventory makes up 73 percent of total assets for KB Homes, 77 percent of total assets for Lennar, and 83 percent of total assets for DR Horton. As inventories decrease in value, so should the stock prices."

The inflated price of real estate, particularly land for housing, has caused the price of homebuilder stocks to be equally inflated, which is precisely the reason I'm so bearish on them. Even now, the companies haven't accepted the fact that the downturn will be long and arduous:

"They have to spend significant time and money just to get land entitled and approved for building. 'Housing generally has momentum -- if the market turns, builders have to follow through on starts; they can't abandon things midway,' said Sood, the Deutsche Bank analyst.

'Does the builder assume the worst and walk away or does the builder hold out hope for a recovery and continue to invest in the project? We suspect that the latter scenario has been the more common one recently,' the analysts said in their report."

The homebuilders didn't learn the lesson from the early nineties. They're at it again; their heads in the sand, their divisions overbuilding, flooding the market with even more supply. Instead of doing that, they should be more focused on aligning supply with demand. Until they do this, supply will out pace demand and cash flow from operations will remain in the red.

KB's "Unexpected" Loss

For some, it was unexpected. For others, not so much. Earlier in the day, KB posted a quarterly loss of $174.2 million:

"The results 'reflect the current oversupply of new and resale housing inventory, a difficult situation compounded by aggressive competition and continued weak demand,' said KB Home Chief Executive Jeffrey Mezger in the earnings release."

KB Homes joins Lennar in posting their first loss since the housing market began to unwind. Lennar's losses were forty percent higher than KB's ($174.2 M versus $244.2 M), but were distributed over more shares. Lennar lost $1.55 per share versus $2.20 per share for KB Homes.

Beazer Fires Chief Accountant

Wow. Simply wow. Beazer Homes is in deep:

"Beazer Homes USA Inc., a homebuilder that's under investigation by the FBI for potential fraud, fired its chief accounting officer for violating the company's ethics policy by attempting to destroy documents."

The investigation is a result of offering mortgages to prospective home buyers based on expected future earnings, which is prohibited. It's bad enough for the company that they happen to be a homebuilder in a slumping housing market. Adding the fact that the company is under investigation and the fact that the CAO just got canned for attempting to destroy documents makes for a tough case. On top of all that, inventory makes up around eighty percent of Beazer Homes' assets.

This is an easy one - sell Beazer (BZH). The company closed trading today at $28.54, which is at the lower end of the 52 week range ($27.32-48.60). Still, after all is said and done, I think the stock will be trading closer to $20 than to $30.

Lennar's Losses

Surprise, Surprise. Earlier today, Lennar announced it’s quarterly earnings, a loss of $244.2 million:

“Lennar Corp. said Tuesday it swung to a quarterly loss, blaming impairment charges and growing inventories of homes for sale which are pushing prices lower and further squeezing margins.”

Last Wednesday, I suggested that the savvy investor might sell (or short) Lennar and other homebuilders, citing inventory as a major factor. If you haven’t yet, you still have a chance. There will be many more quarterly earnings reports painted red before the market recovers. Next up is KB Homes, which is supposed to report earnings on Thursday morning. We shall see.