Last week, stocks rallied and bond yields rose as investors became more sanguine about the consequences of the Brexit.
This week is relatively data-light. However, a slew of reports will interest real estate investors.
In May 2016, there were 5.5 million job openings—up 2% YoY (year-over-year). This is the lowest print since February.
Job cuts in the energy industry seem to be slowing as they fell 42% YoY. The real estate sector, especially home construction, is on an upswing.
Given the terrible growth in payrolls, we might see more flattening of wage inflation back towards the current inflation rate.
In June 2016, non-farm payrolls rose by 287,000. Non-farm payrolls easily topped Wall Street analysts’ estimate of 180,000.
Recently, Mario Draghi pushed European governments to do more in the way of fiscal stimulus. The Fed made similar arguments.
In May, housing starts were unchanged month-over-month at 1.2 million units. Building permits were flat at 1.1 million.
In May, the share of existing home sales attributable to the first-time homebuyer was 30%—an decrease from 32% in April. Historically, this was closer to 40%.
Construction spending fell 0.8% to a seasonally adjusted annual rate of $1.12 trillion in May from $1.14 trillion in April.
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 a year ago when it was 5.7%.
Mortgage purchase applications fell 3% in the week ending June 24, 2016. We’re at the tail end of the seasonally strong period for house purchases.
New home sales increased to an annualized pace of 551,000—up 8.7% from the same month last year. They were also down about 6% sequentially from April.
At the end of May, there were 2.15 million existing homes for sale. This represents a 4.7-month supply. A level of six to 6.5 months means a balanced market.
In the second quarter, KB Home’s gross margins decreased by 30 basis points YoY (year-over-year) to 15.5%. On a sequential basis, they were down 50 basis points.
KB Home’s net income came in at $15.6 million on a GAAP (generally accepted accounting principles) basis, as compared to $9.6 million in 2Q15.
For 2Q16, KB Home reported revenues of $811 million, which easily topped the Wall Street estimate consensus of $750 million. Revenues increased by 30% YoY.
While Lennar’s CEO, Stuart Miller, recognizes that 1.2 million units could be the new normal, it’s important to note that 1.5 million starts was the normal pace from 1959 to 2002.
Lennar (LEN) is pulling back its land purchase plans and looking to exit new land purchases quickly. It calls this “shortening duration.”
On June 21, 2016, Lennar (LEN) reported 2Q16 net earnings of $218.5 million, or $0.95 per share, compared to its net income of $183 million, or $0.79 per share, in 2Q15.