Standard Pacific (SPF): Housing Has Hit Bottom

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The case for housing and home building stocks may be this simple. When smart money comes into the industry, the bottom should be near. Unless smart money has an idiot fringe, an outpost of stupidity with a big check book.

Standard Pacific (SPF), one of the home builders on the organ transplant list, got some good news today. The $530 million from MatlinPatterson Global Advisers is a god send. According to Reuters, "The investment was more than three times the company’s market value before the shares jumped on the announcement."

The deal sounds too good to be true for current stockholders. Senior and subordinated debt in the deal both convert above the share price when the deal was set.

The inventory of homes on the market is, according to recent data, at its highest level since 1988. S&P says that home prices are off 14% over the last year. But, the Commerce Department reports that new home sales are up. The conflicting data makes the map of the housing economy look like a plate of spaghetti.

Even with its run-up to $3.38 today, SPF is still down from its 52-week high of $22.17, which is hardly a recovery.

Douglas A. McIntyre