Some companies like to take a ‘big bath’ by taking larger writeoffs sooner so they can show more profits later. That is, they don’t like to spread out the bad news.
KB Home announced Dec. 8 that it expects to take non-cash charges in its fiscal fourth quarter of between $235 million and $285 million to write down the value of its land holdings and an additional $90 million related to its abandonment of certain land-option contracts…
Dallas-based D.R. Horton Inc. took a pre-tax charge of $199 million to write down the value of land, options to purchase additional land, and pre-acquisition costs. Luxury homebuilder Toll Brothers Inc. took a pre-tax writedown of $115 million, a big jump from the $1.4 million charge the Horsham, Pa.-based company took in the same quarter last year.
Nevertheless, in another mystery of housing economics, the Standard & Poor’s 500 Homebuilding index has risen nearly 21% since late July after declining 33% during the first seven months of the year.
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Cbass 12.15.06 at 8:36 pm
I wonder what the homebuilders know that the rest of America can’t seem to grasp?
Ummm, how about the land is not worth as much now as it was 1yr ago, maybe even 2yrs +. The builders are primed for another big fall I think and that will erase the gains over the last few quarters. I am thinking I might buy in at that point? I don’t know.
All I can say for sure is at least the builders are aware of their situation.