M/I Homes, No. 21 on the 2006 Builder 100}, announced a net loss of $42.6 million for the second quarter (ending June 30). The public builder joins a long list of companies that have reported quarterly losses.
"As I mentioned earlier this month in our units release, we continue to face challenging conditions in most of our markets," says Robert H. Schottenstein, CEO. "Increasing inventory of new and existing homes, credit tightening, and weakening consumer sentiment have led to further price competition and margin compression. Notwithstanding these conditions, our business, excluding impairments and write-offs, produced gross margins of 22 percent and net income of approximately $7 million in the first half of 2007. We also reduced our owned lot count from 2006's year-end by 9 percent. We continue to employ a predominantly defensive operating strategy to manage through this downturn."
The Columbus, Ohio-based builder delivered 755 homes this quarter compared to 987 in same period of 2006, down 24 percent. New contracts for 2007's second quarter were 688, down 10 percent from 2006's second quarter of 764. The builder's backlog of homes have a sales value of $1.025 billion with backlog units of 2,889 and an average sales price of $355,000.
During M/I Homes' Tuesday afternoon teleconference, Schottenstein said enhancing the company's Website, delivering new products, and entering into the Chicago market are just a few of the third quarter goals.
Chicago, which will be a start-up operation, is a market Schottenstein describes as on of the strongest in the U.S. and an area that M/I Homes had its eye on for quite some time. He predicts that the company will open several communities within the next year.
According to Schottenstein, the company struggled in all of their Florida markets as well as in Indianapolis, Cincinnati, and Columbus. In the latter three, he attributed "poor job growth," while in the Sunshine State, cancellations (40 percent higher than the second quarter of 2006) and low sales (down 50 percent from this time last year), made its mark.
"Home building is a cyclical business," he said.
The good news for M/I Homes is that three of their markets did see "decent" growth: Charlotte, Raleigh and the Washington, D.C. region. All markets, he says, are doing better than they were at this time last year.
"Raleigh may be our strongest market," Schottenstein says. "Sales doubled and we are adding more communities."
The CEO added that Charlotte would also gain more communities in 2008.
Although Schottenstein would not forecast the end of the housing bubble, he did offer a vague prediction.
"From a planning standpoint, we do not see things getting better until the earlier part of 2009," he bluntly stated.