India’s Rate Cut Could Revive the Struggling Real Estate Sector
The real estate sector was elated by the Reserve Bank of India’s (or RBI) decision to cut interest rates.
The US PHSI (Pending Home Sales Index) tracks contracts that have been signed and are waiting to close. It fell 1.40% to 109.4 in August 2015.
New home sales increased to an annualized pace of 552,000—up 5.7% from 522,000 in July. Sales are now up by 21.6% from a year ago.
The NAHB Wells Fargo Housing Market Index measures builder confidence. It has been increasing steadily since 2009, but at a faster rate in 2015.
In August 2015, existing home sales were an annualized 5.31 million. In July, existing home sales were 5.58 million. On a YoY basis, they’re up 6.2%.
Permits for single-family residences overall rose to 699,000 in August, falling only in the Northeast. Multi-family permits increased to 471,000.
Housing starts fell from a downward-revised ~1.16 million to ~1.13 million in August 2015. This was below Wall Street estimates of just over 1.16 million.
According to KB Home’s income statement for 2Q15, the peers are ahead of KB Home based on the net profit margin, EPS, PE ratio, and PBV ratio.
KB Home (KBH) has a market cap of $1.34 billion. After the earnings report in 3Q15, KB Home rose by 1.04% to close at $14.60 per share.
The peers are way ahead based on the gross profit margin and PE ratio. Based on EPS, the current ratio, and the PBV ratio, Bed Bath & Beyond is ahead.
Bed Bath & Beyond reported net revenue of $2,995.469 million in 2Q15—a rise of 9.38% compared to net revenue of $2,738.495 million in 1Q15.
New home sales data helps track the sale of new single-family houses and provides an outlook on future homebuying trends.
Lennar targets first-time, move-up, and active adult homebuyers. The average sales price of a Lennar home last year was $326,000, which puts Lennar toward the lower end of price points.
Lennar (LEN) reported net earnings of $223 million, or $0.96 a share, compared to its net income of $179 million, or $0.78 a share, a year ago.
Last year, Lennar’s second-quarter gross margins were 25.2%, which was a drop of 90 basis points. Lennar is focusing on the high-end first-time homebuyer and the move-up market.
Lennar’s homebuilding revenue increased 22% to $2.2 billion from $1.8 billion in the third quarter of 2014.
According to the Federal Housing Finance Agency (or FHFA), house prices increased by 0.6% in July.
Lennar outperformed its peers based on the net profit margin, EPS, and PBV ratio. The ETFs outperformed Lennar based on the PE ratio and the PBV ratio.
Lennar (LEN) has a market cap of $10.36 billion. Lennar’s YTD (year-to-date) price movement has a mixed performance with ups and downs.
US existing home sales dipped 4.8% to 5.31 million in August, which is below the consensus estimate of 5.50 million.