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New home construction report -- worse than it looks

Posted by: Prashant Gopal on July 17, 2008

A survey of builders released yesterday indicated that builder confidence in the new-home market in July hit a new low for the third-month in a row.

The National Association of Home Builders/Wells Fargo Housing Market Index in July dropped to the lowest level since the series measuring builder confidence began in 1985.

Today, a report on June housing starts seemed — at first — to make the builders seem like an overly pessimistic lot. U.S. housing starts surprised analysts by jumping 9.1% to an annual rate of 1.066 million in June.

But the Commerce Department made clear Thursday that the jump in permits and starts was caused by a change in the New York City’s building code. Builders were rushing in June to apply for building permits before more strict construction codes were put in place.

So, it makes more sense to look at the single-family home construction data. Single-family housing starts in June dropped 5.3% and permits fell 3.5%.

Patrick Newport, U.S. Economist for Global Insight, said the figures are pretty dismal but not surprising. Single-family permits were falling by 5% a month six months ago. So a 3.5% drop is a bit of an improvement.

It will likely be some time before builders have something to cheer about. Newport points out that builders are having more problems financing projects with the tight credit market and the looming collapse of some regional banks.

“They will have problems getting credit to put up new homes and that may delay any recovery,” Newport said. “The recovery could come late this year or early next year but it may be further out than that.”

Reader Comments


July 23, 2008 9:14 PM

There is a whole other side to the residential building industry that never gets reported on: on-your-lot home building. While the market is no where near what it was a year or two ago, this business model of the builders who build on the customer's lot (like Schumacher Homes) aren't as affected. These kinds of companies do not require large amounts of capital to fund land and building investment in the hopes of finding the customers. Many of the more traditional business models have started using the build-on-your-lot business model at least in part during these troubling times. It's not to say that this model is unaffected by the current market- but main concern is the difference between appraisal values and loan values for new homes.

Brian Patton, CCIM

July 28, 2008 10:26 PM

Housing crisis looks to be in full mode. I agree that the good news is that it's in full mode...that means we will be out of the woods soon. I recently heard two economists speak on this issue lately. My notes from their speech are located at this link in blog format. let me know what you think.

Rob Wagoner

August 15, 2008 12:36 PM

Since mid 2005 builders have been getting leaner and leaner. Now they are still looking at ways to cut more cost. One way they are doing this is by switching from traditional mass marketing to a more personalized individual marketing. They are relying more on new versions of word of mouth than advertising. Builders that survive the downturn are going to be even stronger when times are good again.

Phil Collins

August 21, 2008 11:49 AM

Hamptons Luxury Homes Reports Significant Revenue Increase for Second Quarter of 2008 and Remains Profitable in a Difficult Economic Environment

Bridgehampton, NY (August 15, 2008) – Hamptons Luxury Homes, Inc. (OTCBB:HLXH), a construction services company that builds and renovates multi-million dollar estate homes in the Hamptons area of Long Island, New York, reported another quarter of comparative revenue growth and profitability, marking the sixth consecutive profitable quarter for the company during a period when many within the industry have encountered difficult times.

For the quarter ended June 30, 2008, Hamptons Luxury Homes reported contract and service revenues of $3,554,324, a 91% increase over comparable 2007 second quarter contract and service revenues of $1,863,236. The Company also reported income before taxes of $443,558 for the three months ended June 30, 2008, compared to income before taxes of $250,196 for the like quarter one year ago. As a result of a tax expense accrued during the 2008 quarter, the Company’s net income for the quarter ended June 30, 2008 was $177,958 compared to last year’s $187,196, or less than a penny per share for both quarters.

For the six month period ended June 30, 2008, the Company reported contract and service revenues of $6,311,718, a 122% increase over contract and service revenues for the comparative six month period in 2007 of $2,841,975. Income before taxes was up 94% for the six month period, with $630,218 reported for the 2008 period compared to $324,460 for the six month period one year ago. Net income for the first six months of 2008 was $302,718 or $0.01 per share, as compared to net income of $261,460 or less than a penny per share for the first six months of 2007, an increase of 16% year over year.

Frank Dalene, Vice President and Chief Financial Officer of Hamptons Luxury Homes, said: “Even in a very difficult economic climate, we continue to see our results reflect the initiatives that were enacted over a year ago to expand our core and ancillary businesses and focus on increased revenue and profitability. Our increase in revenue during the quarter was due to an increase in construction activity for the period resulting from our increased sales and marketing efforts. Furthermore, we ended the quarter with cash of $912,760 compared to $123,648 at the end of 2007. We also have working capital of approximately $1.2 million as of June 30, 2008 compared to $912,000 at the end of 2007. .”

The Company also reported that it has backlog and committed contracts of approximately $6.5 million of work as of August 7, 2008 that it believes will result in positive cash flow for the next 12 months. Additionally, the Company said it has approximately $15.5 million of bids outstanding, although, Dalene cautioned, that there can be no assurance that all or any of such bids or other potential work will result in contract commitments. Both of these figures are higher than the reported backlog and bids outstanding reported in the Company’s Form 10-Q for the first quarter of 2008.

Full results for the quarter are reported in Hamptons Luxury Homes’ 2008 second quarter Form 10-Q filed with the U.S. Securities and Exchange Commission on August 14, 2008. The Form 10-Q is available at the SEC’s website: and at the Company’s website:

Hamptons Luxury Homes, Inc. ( is a regional construction services company that builds and maintains custom homes, luxury vacation homes and ultra-luxury estate homes throughout the eastern end of Long Island, New York, with its principal offices located in Bridgehampton, New York. The Company’s wholly owned subsidiary, Telemark Inc. is a nationally recognized and award winning ultra-luxury homebuilder. The Company maintains an industry leading reputation for construction of luxury vacation homes from foundation to completion, with values ranging up to $60 million. Hamptons Luxury Homes combines ultra-high quality materials with superb old-world craftsmanship to create the ultimate in luxury homes with outstanding aesthetic appeal. Already a recognized and well-established entity in the exclusive environs of the Hamptons on Long Island, the company intends to expand into similar luxury markets in the United States. The Company's other wholly-owned subsidiaries include: Telemark Service and Maintenance, Inc., which provide ongoing property management, maintenance and service; Bridgehampton Lumber Corp., supplying building material and an independent dealer of The Barden & Robeson Corporation; DWD Construction Services, Inc. which performs construction administration and advisory services in connection with the construction of homes and business development of major commercial projects. Telemark, Inc. is a 50% partner in Architectural Woodwork of the Hamptons, LLC, which manufactures and installs custom millwork, custom cabinetry, custom built-ins and furniture. The Company owns a 10% interest in Northway Island Associates, Inc., a company planning the development of a multi-facetted entertainment resort complex in St. Lawrence County, New York. DWD Construction Services is presently acting as the Owner’s Representative for Northway Island Associates.

Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3B-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including without limitation, statements regarding the potential future plans and objectives of the company, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.

Contact: Bev Jedynak
Martin E. Janis & Company, Inc.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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