For the Housing Industry to Bounce Back, Foreclosures Must Slow Down
May 28th, 2009
Foreclosures have become the hallmark of the US housing industry. As unemployment peaks and the economy stumbles through the deepening recession, the real estate shows no signs of recovery. It will be quite some time before the industry rebounds. This was revealed by a spokesperson of Pulte Homes Inc. The company has only partially been able to recover from the losses. For the real estate to bounce back on the growth track, foreclosures must slow down.
The company CEO Richard J. Dugas Jr.said, that everyone is waiting for the first sign of recovery. It is like taking a walk through the long dark tunnel and waiting for the first signs of light. Dugas says there are a few favorable signs of an industry recovery but it would take some time for the economy to come out of the slump.
Pulte Homes has made a loss of $514.8 million for the first quarter ending March 31. Last year, it made a loss of $696.1 million. In this quarter, revenues had plummeted by 59 per cent to around $587 million. The revenue was $1.4 billion last year. With rising unemployment the housing market is in the dumps Home prices are on the decline and foreclosures have become very common. It is not only the middle class who are losing ownership of their houses, even the rich are not able to pay for their sprawling mansion and ranches.
Pulte has been focusing on preserving cash and managing stock so that it can return to profitability soon. It is important for a company to build on its cash reserves if it wants to stay in the black. Pulte is trying hard to achieve that and in the last quarter it had $1.75 billion as cash.
However, the company was not able to build a sufficient number of homes. The number of homes built during the quarter came down by 55 per cent. The average selling price was also down 11 per cent to $263,000. But the situation could change soon with the talks of a tie-up between Pulte and Centex. This merger will create USA’s largest homebuilder. It is slated to happen in the third quarter. Dugas feels that Centex will be the right partner for Pulte. The duo will be able to steer the industry out of the crisis. The CFO, Roger Craig expects the real estate to bounce back in 2011.
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