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Strategies & Market Trends : Real estate and credit file cabinet - please read rules befo

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From: Ramsey Su	4/18/2006 12:11:15 PM
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DHI earnings conf call. No surprises in the numbers as they have all been previously reported. conf call highlights: Numerous questions on cancellations. Historical cancellation rate: 17-19% Current cancellation rate: low 20s, around 22% Reason; incentives by them and competitors "encouraged" buyers to go on sideline. Interest rate higher pushed out some buyers. Spec buyers really long gone. Bullish analysts such as S Kim was suggesting that this is a one time event. My take is that it will continue and accelerate if price pressures are still down and incentives going up. Margin: 22% has always been DHI's company target so anything above that good. Now it is 25.3% so it is excellent. On one hand, dhi said they want to improve that by 10 basis point, then they said 24ish would be good, then they said it may be hard to achieve if current conditions prevail. I think they are setting themselves up for warnings later. Share repurchase: they did not buy any last qtr but it sounded like they will buyback this qtr. Land purchase: previous target had been 25% growth but will now slow down to 10-15% range. control 400k lots now as 4.5 yr supply. This could be where they find the money to buy back shares. 26% ARM, 23% IO, not a big deal either way. 25-35% of DHI's starts are specs, without buyers. That could be interesting next qtr. since they can deliver in about 90 days from scratch. Level of incentives: they have a target of 58k homes this year. sounds like they are going to use incentives accordingly to achieve that goal. Median (not sure if I heard median or medium) home for them nationwide is $245-$250K.

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