Realty Check
#DIANAOLICK ON TWITTER
- Under Pressure, FHA Skews to Wealthier Home Buyers
- Huge Spike in Home Prices Is Not Real
- Investor Caution: Beware of Heat in Distressed Housing
- Foreclosures Move East as Hardest-Hit Markets Clear
- Foreclosures Fall...And That's a Bad Thing?
- After a Dip, Homebuilder Sentiment Surges Again
- Obama’s ‘Responsible’ Reno Homeowners: Are They?
- Mortgage Market Still Hampers Housing Recovery
- Bank of America Offers Principal Reductions to 200,000 Homeowners
- Short Sales: Necessary Compromise or Scamming the System?
MOST SHARED
- India's Tumbling Rupee Triggers Convertible Bond Turmoil
- Marubeni Nears $5 Billion-Plus Gavilon Deal
- Greece to Leave Euro Zone on June 18: Wealth Manager
- Olympus Expected to Settle With Former CEO Woodford
- Greece Pours $22.6 Billion Into Four Biggest Banks
- Asian Stocks Decline on Spanish Debt Woes
- Spain's Borrowing Costs Near Danger Level: Bailout Next?
- Draft EU Report Attacks Italy on Economy
- Facebook IPO Fiasco: 10 Things Underwriters Got Wrong
- European Firms Plan for Greek Unrest and Euro Exit
- A New Look at the ‘New Poor’
- Six Pack: Beer Buzz of the Week
- Greek Exit Could Trigger 50% Fall in Euro Stocks: Analyst
- Under Pressure, FHA Skews to Wealthier Home Buyers
- Big Stock Upside for Hudson City Deal: Analyst
- 5 High-Yield Stocks Ready to Boost Dividends
- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Option Bulls Take Another Shot on Idenix
- Spain's Debt Costs Near Danger Level: Is Bailout Next?
- US Markets Will Be Watching Europe—And Jobs Report
- India's Tumbling Rupee Roils Convertible Bond Market
- European Companies Plan for Greek Unrest and Euro Exit
- Japan's Marubeni Nears $5 Billion-Plus Gavilon Deal
- Public Pensions Faulted for Bets on Rosy Returns
- Greece to Leave Euro Zone on June 18: Wealth Manager
- Italy 2-Year Borrowing Costs at Peak Since December
- Euro Bond Wins Supporters, but Details Remain Vague
RSS FEED
» Help
Time for Homebuilder M&A?
Published:
Wednesday, 25 Aug 2010 | 12:02 PM ET
Text Size 
By: Diana Olick
CNBC Real Estate Reporter
CNBC Real Estate Reporter
 |
PhotosIndia.com | Getty Images |
I am going to talk about the theories that surround bad numbers like this one, specifically the potential for some homebuilder M and A. It started earlier this week with a note from Citi's Josh Levin. So we talked to him-one-on one to get a bit deeper into his take.
Why now, I asked, when the builders have been in trouble for a long time?
Levin: "For the better part of the year, the past eighteen months, most homebuilders thought the bottom was in, and that things were going to get better, but I think many management teams have changed their opinions and think we are in for a pretty tough slog. It is very difficult to be profitable in this environment — unless you are large and have scale — so I think that is where managements' heads are at this point."
Levin names Beazer [BZH Loading... ()
], Ryland [RYL
Loading...
()
] and Meritage [MTH
Loading...
()
] as potential takeovers and D.R. Horton [DHI
Loading...
()
], K.B. Home and MDC [MDC
Loading...
()
] as potential acquirers. Levin: "KB is a medium size builder that can't really be profitable unless its volumes pick up, so it makes sense for targets and acquirers to hook up together to try to increase their volume growth so they can leverage S,G, and A, and their overhead."
Not so fast, says home builder analyst Ivy Zelman. "I just don't see it happening. For the home builders, culturally, it's really hard to get to the finish line."
Zelman notes that Pulte and Centex were complimentary in their cultures, and that's what made the deal work so well for them. Despite Levin's contention that the big guys need bigger share to survive, Zelman says, "There is no rational near-term catalyst."
I'm not taking sides here, so all I'll say is where there's smoke...
Questions? Comments?
© 2012 CNBC, Inc. All Rights Reserved
Data is a real-time snapshot *Data is delayed at least 15 minutes
