Analyzing the New Deal: Do We Need a New One?
Historically, the use of public construction dollars has been the big lever that the government uses to stimulate the economy. This dates back to the New Deal.
In March, housing starts fell to an annualized rate of 1.1 million from 1.2 million the month before. Building permits fell from 1.2 million to 1.1 million as well.
In March, the share of existing home sales attributable to the first-time homebuyer was 30%—flat with February. Historically, this was closer to 40%.
Construction spending rose to a seasonally adjusted annual rate of $1.14 trillion in March from $1.13 trillion in February. Spending rose 8% YoY.
In the quarter ending March 31, construction spending as a percentage of the GDP was flat at 6.2%. This was a big rise from 5.7% a year ago.
D.R. Horton was relatively optimistic on its conference call. It was clearly happy with the most recent quarter. It re-affirmed and updated its guidance for 2016.
D.R. Horton (DHI) reported net income of $195.1 million, or $0.52 per share, for 2Q16. On a YoY (year-over-year) basis, the net income rose 32%.
D.R. Horton (DHI) has been reporting lower gross margins due to sticker shock. Home prices have been increasing, but wage growth has been stagnant.
D.R. Horton reported 2Q16 revenue of $2.7 billion—a 16% increase on a YoY basis and a sequential increase of ~14%. The revenue beat analysts’ expectations.
Over time, Pulte has lifted its gross margins and improved revenues. However, the stock has still lagged its peers, especially the S&P SPDR Homebuilder ETF (XHB).
PulteGroup (PHM) reported net income of $83 million, or $0.24 per share, which beat the Wall Street estimate of $0.20 per share.
PulteGroup (PHM) reported 1Q16 revenues of $1.4 billion, which topped Wall Street’s estimate of $1.3 billion. But not all is as rosy as it seems.
In March 2016, building permits fell to 1.1 million from 1.2 million.
The NAHB (National Association of Home Builders) Wells Fargo Housing Market Index measures homebuilder confidence.
In March 2016, existing home sales were an annualized 5.3 million.
Housing starts fell from ~1.2 million to ~1.1 million in March 2016, which was below Wall Street analysts’ estimates.
Last week was dominated by several real estate–related and housing data points. Housing starts and building permits were disappointing.
The highlight last week was weak inflation data. Import prices, the producer price index, and the consumer price index were much lower than expected.
In terms of economic data this week, we’ll get housing starts, building permits, existing home sales, the NAHB Housing Market Index, and the FHFA House Price Index.
Fannie Mae’s monthly National Housing Survey measures consumers’ attitudes about housing and the economy.