- The Washington Times - Monday, April 1, 2002

Shares of McLean home builder NVR Inc. soared to an all-time high last week after the company forecasted better-than-expected quarterly earnings.
NVR announced its first-quarter earnings would likely exceed even the top end of analysts' estimates, which range from $6.42 to $6.65 a share, and said it expects net income for the year to rise 25 percent. NVR serves as the umbrella company for Ryan Homes, NVHomes, NVR Mortgage and NVR Building Products.
Shares of the company closed at $315.50 on the New York Stock Exchange Thursday, after hitting a 52-week high of $322.25 Tuesday. The markets were closed Friday for the holidays. The high followed NVR's attendance last Monday at a home-builders' conference sponsored by Credit Suisse First Boston.
At the conference, NVR outlined the strategies that have helped it become the nation's seventh-largest home builder and the dominant player in suburban Maryland and Northern Virginia. Analysts say the company's success comes from several key areas, including inventory. NVR generally operates with 90 percent of its properties occupied, and will only build on plots that are already developed and prepared for home construction. Furthermore, NVR controls all of its land lots through seller options, which analysts say greatly reduces the company's need for capital.
"Their investment in land development is minimal," says Mark Oline, an analyst with Fitch Inc. in Chicago.
NVR is looking to increase its presence nationwide, with a particular emphasis on the Mid-Atlantic region, where it already has a 9 percent market share.
Standard and Poor's upgraded NVR from "stable" to "positive" in early in March, touting the company's financial performance.
"NVR has a solid market position, an attractively structured and prudently managed inventory position, and very strong cash flow protection measures," Standard and Poor's said in a release.
NVR has managed to avoid a dip in stock price experienced by many of its competitors in the past month. Shares of Miami-based Lennar Corp. fell about 8 percent, while shares of Bloomfield Hills, Mich.-based Pulte Corp. dropped about 10 percent. But low interest rates have been a boon to home builders. The Commerce Department said last week that new home sales rose 5.3 percent in February. And the sales have clearly had an effect on the profits of home builders like NVR.
Lennar announced last week its first-quarter profit rose 40 percent, and sales went up 13 percent. Los Angeles-based KB Home, the nation's third-largest home builder, says its quarterly earnings jumped 65 percent.
Analysts say an eventual turnaround in the economy as a whole may mean the end of a holiday for NVR and its competitors. Analysts expect the Federal Reserve to raise the overnight bank-lending rate, which is currently at a four-year low. Furthermore, mortgage rates are already showing signs of increasing. Freddie Mac reported the 30-year rate rose to 7.14 last week, the highest in nearly three months.
Carl Steen, an analyst with Maria Fiorini Ramirez Inc. tells Bloomberg News that "As interest rates are coming up, it will be difficult to sustain" sales. But, other analysts say home sales could remain strong because interest rates, while rising, will still be considered low.
"[Housing] is still, by historical standards, pretty affordable," Mr. Oline says. "You're probably still going to have a pretty attractive environment for the home buyer."


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