Standard Pacific Corp (NYSE:SPF) is specific with expansion goals
Standard Pacific Corp (NYSE:SPF) announced that it bought around 3,000 home-sites in Florida and North and South Carolina, from Centerline Homes and its affiliates. This includes around 30 existing communities or those that are being developed in these areas. The Irvine, California-based homebuilder says that this is an exciting acquisition for them as it boosts the company’s growth strategy. With this acquisition there will be an increase in SPF’s land supply, community count as well as its target move-up position in numerous important markets. These include, Charlotte, Central and South Florida and North Carolina. It seems like SPF is not only healthy but is also in expansion-mode but fact of the matter is that the housing market is not really sprinting ahead at 100 kms per hour.
How can homebuilders survive?
For publicly-traded U.S homebuilders, who wrote off over $34B during the 2007 housing bust that carried-through to 2010, some have found a chink in the armor- diversification. However, this is not something that necessarily sits well with investors. A diversification move can be interpreted in different ways. It could indicate that the company’s core business is faltering, which as a matter of fact, is actually the case with certain builders.
Another factor is that though the economy is looking up and the fog seems to be lifting from the housing market, not many are really rushing to buy a new home. In the long term, not too many homebuilders can actually gain any market share from private builders. The latter can be financed only by local banks. However, the more looming question is will the housing market be able to action a complete U-Turn and move back into the high-gear that it had been running in, before the recession rumbler-strips jarred it?
The brighter side…
The brighter news is that a large number of homebuilders have pretty strong balance sheets and that some like Standard Pacific Corp (NYSE:SPF), even have ample liquidity to acquire new land. Some might also invest in new businesses. So, exactly how can these companies get more lucrative returns on investment for capital? For those homebuilders who are sitting on cash, maybe diversification is the way to go.