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News & Moves: October 10, 2008
News on the people and events that shape the home building industry.
The malaise of the housing industry has now spread to the supply side of the housing industry with the Chapter 11 filing of a well-known wood window manufacturer: Hurd Windows & Doors of Medford, Wis.
Hurd is caught up in the bankruptcy of parent Monarch Holdings of Ortonville, Iowa, a filing brought on by the high cost of lawsuits against a Monarch millwork subsidiary. But it seems likely the housing slump still played a major role. (Neither Hurd president Dominic Truniger, nor David S. Mulcahy, sole owner of Monarch, returned calls from Housing Giants.)
Industry insiders say the pain of the housing downturn, now three years old, is widespread among manufacturers caught in a squeeze between builders (who can't sell houses, and certainly can't raise home prices) and their own materials and transportation costs, pushed up by the energy crisis. “Nobody is immune,” one supply-side executive told us. “Every manufacturer is closing plants and laying off people. The smaller, privately-held manufacturers — like Hurd — are probably the most stressed.”
Meanwhile, even the largest builders are beginning to exit markets, even though most hate the idea of such reductions in “footprint.” No. 13 Taylor Morrison Homes recently merged its Sacramento and San Francisco Bay divisions. And Dallas-based Centex Corp., No. 3 in Professional Builder's Giant 400 rankings with $9.2 billion in 2007 housing revenues, pulled out of Denver.
“The decision to wind down operations in Denver reflects our efforts to increase relative strength and share in markets that offer the best returns over time,” Centex director of public relations Eric Bruner told Housing Giants. “Denver's always been a skinny-margin market,” says housing industry consultant and HG columnist John Burns. “That's not very attractive to the big builders right now, especially when Denver's land prices are not coming down much.” — Bill Lurz
Douglas F. Gansler, Maryland Attorney General, filed charges against Smart Development/Premiere Homes. The home builder is charged with violating the Consumer Protection Act. The charges allege Premiere Homes, based in Rockville, Md., had a termination clause that would allow the company to terminate contracts without liability if it failed to build the promised homes. According to the Office of the Attorney General, the company used this termination clause to cancel contracts after one year, when housing prices rose, and refused to build unless consumers signed new contracts agreeing to pay a higher price for the same house.
Eric A. Wittenberg, president and CEO of McStain Neighborhoods, based in Denver, has stepped down to cut costs after seven years, the company announced. Tom Hoyt, the company's founder and chairman, has taken over Wittenberg's responsibilities.
Former KB Home Chief Executive Bruce Karatz will pay about $6.7 million in compensation and interest to KB Home and a $480,000 penalty to the U.S. Treasury, reports The Los Angeles Times. The SEC accused Karatz of partaking in a scheme to back-date stock options and failed to disclose them.
Ryland Homes' Jacksonville, Fla., division added two new members to its team. Richard Perkins is the division's vice president of sales and marketing. Perkins comes to the company with more than 20 years of experience. Recently, he worked at Pulte Homes/Del Webb in Ocala, Fla., where he grew the company's revenue from $51 million to more than $164 million. The Jacksonville division also hired John Blanton to be its new assistant controller. Previously, he was a senior lead auditor for Physician Sales and Service of Jacksonville, Fla.
The Arizona government has put up a list of home builders in the state that are bankrupt or have foreclosed homes in their communities. The list includes Engle Homes and Woodside Homes, the Salt Lake City-based builder who is filing for Chapter 11 bankruptcy.
Anthony Accetta, a former prosecutor turned private fraud investigator based in Colorado, tells KMGH-TV in Denver he predicted the financial meltdown eight years ago. Pulling from his experience of mortgage fraud from the 1970s, he explains what we can do to keep this from happening again.