Note fro D.R. Horton’s earnings call this morning:
Horton reported earnings of $.32 per share, compared to expectations of $.49 per share. The miss was driven almost entirely by a ~$50M charge the company took related to the value of its land holdings in Chicago. The asset impairment is a reflection of the land being less than its carrying value on a discounted cash flow basis. In its simplest form, Horton could not build houses and generate positive cash flow on a material amount of land. This impairment charge is the only material charge taken by any of the large builders on land holdings since the housing recovery began.
Horton’s is facing the reality others won’t. Land is the riskiest of all the RE plays. Why would you build here? How many lake view condos can this market absorb? They start for one beds/studios around $300K. Small apartments near the lake or downtown rent for a bargain rate of $2400.00. Those same renters pay prices 10-20% higher than they would in the suburbs, along with higher taxes. It’s nuts.