There was a glimmer of hopeful news in some January, February numbers released by Standard Pacific Corp. showing a serious slowing in cancellation rates for the California-based builder.
While new home orders were down19 percent for the first two months of 2007 compared to 2006, the cancellation rate was down to 24 percent, even better than the 26 percent rate in the same time frame of '06 and a huge improvement over the 43 percent rate for the fourth quarter of last year.
There were also signs in the numbers that significant discounting can move homes in this market. Orders were up 40 percent year-over-year in California, where the company instituted a "more aggressive pricing strategy." Those buyers must think they're getting a good deal because cancellation rates were also down to 15 percent in California compared to 35 percent in the same period last year and 32 percent during Q-4 of last year.
California's order numbers weren't strong enough to completely pull the company's total orders out of a funk because both Florida and Arizona were still weak, the report says. The company did not share specific order numbers from those two states.
Cancellations in those two trouble spots were both higher year-over-year in January-February, but "down meaningfully" from the '06 fourth quarter. Again, the company provided no exact numbers.
Orders were also up slightly in the Carolinas, but down in Texas, Standard Pacific reports.
The report elicited a positive analysis from the Homebuilding and Building Products research team at JP Morgan, which issued a note to investors stating that the Standard Pacitic release "follows another solid data point on February, that of KBH [KB Home] commenting on its 2/13 4Q call, that with only two weeks to go, Feb.-qtr-end orders fell only 10% vs. 4Q's -38%, and can rates returned to a more normal 32% vs. 4Q's 48%. Accordingly, we reiterate our positive sector stance and continue to see encouraging signs heading into the Spring selling season."