Pending Home Sales Remained Flat in October
According to the National Association of Realtors, the US pending home sales index, or PHSI, rose 0.2% in October to 107.7 from the revised reading of 107.5 in September 2015.
New home sales increased 10.7% in October to 495,000 compared to 447,000 in September 2015. It was near the consensus estimate of 499,000.
Total housing inventory fell 2.3% to 2.1 million existing homes available for sale in October 2015 as compared to the prior month. Inventory fell 4.5% YoY.
Housing is steadily becoming a bright spot for the US economy. The iShares US Home Construction ETF (ITB) has risen 3.9% over the past month, as of November 23.
The respective PE ratios of Williams-Sonoma and peers Bed Bath & Beyond, Restoration Hardware, and Mattress Firm were 20.0x, 10.4x, 38.4x, and 32.6x.
The two housing sector stocks, D.R. Horton and Tempur Sealy International, rose 25.9% and 43.8%, respectively, over the past year as of November 18, 2015.
Among last week’s pertinent economic data was the JOLTs jobs report, which came in near a 15-year high. Bond yields fell 6 basis points last week after spiking on the jobs report.
In economic data this week, we’ll see some important housing-related numbers, including mortgage delinquencies, mortgage foreclosures, housing starts, and building permits.
In the second quarter of 2015, foreclosures fell to 2.1% of outstanding loans, according to the Mortgage Bankers Association.
Foreclosure completions rose by 19,000 units to 55,000 in September. Completions have fallen 18% YoY (year-over-year).
In its guidance for 2016, D.R. Horton expects closings in the range of 39,500–41,500 for the full year. Revenues are expected to be $12 billion–$12.5 billion.
D.R. Horton (DHI) reported net income of $238.9 million, or $0.64 per share, for the fourth quarter of 2015. On a YoY (year-over-year) basis, net income rose 43% from $166 million, or $0.45 per share.
D.R. Horton’s gross margins held steady at 19.9% in the fourth quarter of 2015. However, they fell on a YoY (year-over-year) basis from 20.5% in the fourth quarter of 2014.
D.R. Horton (DHI) reported 4Q15 revenues of $3.1 billion, a 28% increase on a YoY (year-over-year) basis and a sequential increase of about 8%.
Toll Brothers outperformed its peers based on the price-to-sales ratio. The ETFs outperformed Toll Brothers based on the price movement, PE ratio, and PBV ratio.
Toll Brothers (TOL) has a market cap of $6.1 billion. After the preliminary 4Q15 earnings report, it fell by 1.2% to close at $34.44 per share as of November 9, 2015.
The iShares Dow Jones US Home Construction ETF invests 2.7% of its holdings in TRI Pointe Group. The ETF tracks a market-cap-weighted index of companies.
TRI Pointe Group has a market cap of $2.2 billion. After the 3Q15 earnings report, it rose by 5.6% to close at $13.3 per share as of November 6, 2015.
Average hourly earnings rose by 9 cents on a month-over-month basis in October and were up 2.4% YoY (year-over-year) to $25.20. However, wage growth is still barely outpacing inflation.
In October, non-farm payrolls increased by 271,000, easily topping the Wall Street estimate of 185,000.