DR Horton Inc
Mortgage rates fall as bonds sell off, affecting homebuilders
The average 30-year fixed-rate mortgage rose 12 basis points as the ten-year yield rose 10 basis points, and TBAs sold off. With the refinance boom over, originators are overstaffed.
Why consumers are more conservative about housing than the pros
In the latest survey, consumers expect home prices to rise by 2.9% over the next 12 months. This is flat month-over-month and down 100 basis points year-over-year.
Lennar reports increases in units and prices in 2nd quarter 2014
For the second quarter, Lennar reported $1.64 billion in revenues. This is an increase of 29% year-over-year. Homebuilding revenues increased 28%, to $1.6 billion from $1.3 billion in the second quarter of 2013.
Why mortgage rates have been flat with the bond market, at 4.17%
The average 30-year fixed-rate mortgage was flat at 4.17%, as the ten-year yield rose 1 basis point, while TBAs rallied. With the refinance boom over, originators are overstaffed
Does the economy need a government spending shot in the arm?
Do we need a new New Deal? Construction spending doesn’t have to be simply residential (or private construction). Public construction also matters (however, it’s less than half of private construction dollars). The use of federal construction dollars to increase demand in the economy has been an issue of tremendous debate, with one side believing that […]
Why construction spending pulls back in June
Construction spending is just off its post-recession high, but it’s still depressed—current levels equate to mid-2003 spending levels—construction spending peaked at $1.2 trillion in March, 2006.
Must-know: Can the government do something for the economy?
There has been a tug-of-war between the left-wing prescription of using the government to cushion the blows of a difficult economy and the right’s version of “let the markets clear.”
Consumers are tempering their home price appreciation expectations
The 2.3% home price expectation is much lower than the 6%–7% forecast we’re seeing out of the National Association of Realtors and the mid single-digit forecast we’re seeing from most Wall Street professionals.
D.R. Horton’s Gross Margins Fall Slightly
Like most other builders, D.R. Horton has been reporting lower gross margins due to sticker shock. Home prices have been increasing, but wage growth has been stagnant.
Construction Spending Fell in June
In June 2016, private construction fell 0.6%, and public construction fell 0.6% month-over-month.
Must-know: Why mortgage rates rose slightly as bonds sold off
Mortgage rates are the lifeblood of the housing market, which is why the Fed began conducting quantitative easing (or QE) in the first place. Lower rates allow homeowners to refinance.
Manufacturing activity keeps improving in the Mid-Atlantic region
The Richmond Fed Manufacturing Survey looks at business conditions in the Fed’s fifth district, which covers Washington, DC, Baltimore, Richmond, and Charlotte.
Foreclosure Completions Drop In October
Since foreclosures represent a process that may or may not wind up with the bank owning the home, foreclosure completions are a better indicator of foreclosure activity than foreclosure starts.
Wage Growth Could Be Picking Up
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.
Investor outlook: Consumer price inflation meets the Fed’s target
This report will probably hold the hawks on the Fed at bay and allow them to continue to maintain ultra-low interest rates. The Fed wants to see annual inflation of about 2%.
Why did new home sales surge in December?
New home sales jumped 11.6% in December from a month ago to a seasonally adjusted annual rate of 481,000.
Why Are Lennar’s Higher Margins Unsustainable?
Buyers are reluctant to pay higher prices, and builders have to offer incentives, which reduces margins. Lennar’s higher margins will not be sustainable.
What Does D.R. Horton’s EBITDA Margin Say?
D.R. Horton’s EBITDA margin was at 10.1% as on March 2015, much better compared to 2.3% for fiscal 2011.
Wages Dipped Slightly in December: Here’s Why
Average hourly earnings fell by 1 cent on a month-over-month basis in December 2015 and were up 2.5% year-over-year to $25.24. Average weekly hours were flat at 34.5.
D.R. Horton Maintained Its Gross Margins
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.
The Jobs Report: This Week’s Highlight for REIT Investors
We’ll get a lot of important economic data this week, and the biggest release will be the jobs report on Friday.
Mortgage Rates Are Not Buying The Rally Yet
The average 30-year fixed-rate mortgage decreased six basis points to close at 3.92%. The ten-year bond rose and yields decreased by 15 basis points.
The Jobs Report Is the Highlight of This Short Week
The bond market will be most sensitive to the jobs report, particularly to wage inflation. REITs such as MFA Financial will also focus on the jobs report.
Index of Leading Economic Indicators takes a breather in August
The Index of Leading Economic Indicators (or LEI) is a business cycle indicator. It’s based on 11 different economic statistics—average workweek, initial jobless claims, new orders, building permits, unfilled durable goods, commodity prices, consumer expectations, stock prices, and money supply.
Must-know: Inflation remains well-contained at the consumer level
Inflation is a double-edged sword. The Fed (or Federal Reserve) likes to see a little inflation because it’s associated with rising wages. But deflation causes a lot of economic problems, especially for the Fed.
How D.R. Horton plans to address the first-time homebuyer
D.R. Horton CEO Donald Tomnitz said that the first-time homebuyer will drive the next leg in the sector and has been underserved in this recovery.
A Closer Look at the August 15 Drop in Housing Starts
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.
The FOMC Leaves The Big Question About Jobs Unanswered
There was no discussion of the “speed limit” issue in the July FOMC minutes. This is generally a “cyclical versus structural unemployment” issue.
Seasonality Trumps The Bond Market Rally
The MBA Purchase Index decreased 6.9% in the week ended December 12, 2014, despite a strong bond market rally.
Why you should invest in homebuilder ETFs like XHB and ITB
ETFs present another investment avenue. Apart from pure homebuilder ETFs, there are many other ETFs that offer exposure to homebuilders.
Must-know: Will the government help the first-time homebuyer?
Between low prices and low borrowing rates, the first-time homebuyer should have been set. However, lenders greatly tightened credit standards and many first-time homebuyers found themselves shut out of the mortgage market.
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.
A decline in manufacturing causes industrial production to fall
Up until January, industrial production and manufacturing production had been accelerating, so it is premature to draw any major conclusions from one disappointing report.
Pending Home Sales Rose Annually, but They’re Falling Monthly
According to the National Association of Realtors, US pending home sales rose marginally at 0.1% in December versus a 1.1% fall in November 2015.
Must-know: Why home-price appreciation is leveling off
In July, home prices increased 0.1% month-over-month. They’re up 4.4% year-over-year (or YoY). Prices are now within 6.5% of their April 2007 peak. They correspond to the levels in July 2005. Real estate values drive consumer confidence and spending. They have an enormous impact on the economy.
How Zoning Regulations Impact City Development
Zoning is the way that governments supervise land development and the kinds of uses each individual property may be directed toward for the public interest.
Why construction spending is so important to the economy
Historically, construction spending has led economies out of a recession.
Why these 5 states saw the highest home price appreciation
Home prices rebounded 0.8% in December after easing 0.1% the month before. Excluding some monthly volatility, home prices have been in an uptrend.
Purchase applications fall as we enter the seasonally slow period
The MBA Purchase Index decreased 2.6% last week in response to strong bond market sell-off and a holiday-shortened week. We’re entering the seasonally slow period for the real estate sector, which pretty much lasts as long as football season.
Manufacturing production drops due to bad winter weather
Manufacturing output fell 0.8% after increasing 0.3% in December. The output for utilities rose 4.1% in January on cold weather in the Northeast.
New Home Sales Fell 6.80% in June: ITB Fell 2.20%
Existing home sales in the US recorded a 482,000 annualized figure in June—compared to 517,000 recorded in May. It failed to meet census expectations of 550,000 units.
Mid-Atlantic manufacturing remains sluggish, bad news for NVR?
The Richmond Fed Manufacturing Survey looks at business conditions in the Fed’s fifth district, which covers Washington, DC, Baltimore, Richmond, and Charlotte The Richmond Fed Manufacturing Survey is sent out to companies in the Mid-Atlantic states and covers current business conditions, shipments, new orders, backlog, and inventory. It’s similar to the other surveys put out […]
Inflation continues to come in below the Fed’s target: What does this mean? A double-edged sword?
Inflation is a double-edged sword. The Fed (or Federal Reserve) likes to see a little inflation because it’s associated with rising wages. But deflation causes a lot of economic problems, especially for the Fed.
Must-know: Current housing starts from a historical perspective
Following the collapse, we saw starts average around 687,000 units per year, with a low of under half a million.
Investing in Lennar through Homebuilder ETFs
Lennar sees allocation in major sector-specific homebuilder ETFs such as the SPDR S&P Homebuilders ETF (XHB). XHB has a 3.36% stake in Lennar.
Could margins for homebuilders like Toll Brothers contract?
Manufacturing activity is a good sign for job growth, which has been the Achilles’ heel of this recovery. Although manufacturing isn’t the driver of the economy that it used to be, it still matters.
Consumer credit increases in August, good for homebuilder stocks
Consumer credit increased $13.6 billion (or 5.4% annualized) in August, as non-revolving credit increased 8.0% and revolving credit fell 1.2%.
Behind Homebuilder Sentiment So Far in May
The NAHB Wells Fargo Housing Market Index measures homebuilder sentiment has been increasing steadily since 2009. Recently, it’s started to accelerate.
Why are we seeing broad-based house price gains across the US?
The Federal Housing Finance Agency Housing Price Index for March was released on Tuesday, May 27. This release also included quarterly data comparisons for Q1 2014.
KB Home Just Reported Strong Revenue Growth for 2Q16
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.
A bond market sell-off greets Yellen’s first FOMC announcement
Yesterday, the Federal Reserve ended its March FOMC meeting and decided to continue to reduce asset purchases.
Mortgage rates fall despite a bond market sell-off
Over the past several months, mortgage rates and the ten-year bond yield stopped correlating. Last week, this trend broke as the two variables lined up once again.
Why did pending home sales rebound after a slow start to 2014?
Given that the first-time homebuyer is still in a difficult financial situation with a weak job market and high student loan debt, homebuilders are focusing more on the move-up buyer.
How to Invest in D.R. Horton through ETFs
D.R. Horton sees allocation in major homebuilding sector-specific ETFs like the iShares Dow Jones US Home Construction Index Fund (ITB).
How Does Lennar Compare to Its Peers?
Lennar showed mixed results compared to its peers based on the PE and PBV ratios. The ETFs outperformed Lennar based on the PE and PBV ratios.
Lennar Keeps Reporting Big Increases in its Revenue
For the first quarter of 2015, Lennar (LEN) reported $1.6 billion in revenue. This is an increase of 21% year-over-year.
Manufacturing Production Increased In November
Manufacturing output increased 1.1% in November. Durable goods’ production increased 1%. Auto-related manufacturing increased as well. Business equipment increased 1.2%.
Housing starts increase in September to 1.018 million
Most builders—like Lennar (LEN), PulteGroup (PHM), D.R. Horton (DHI), and KB Home (KBH)—noted that traffic was beginning to decline. Buyers experienced sticker shock.
Introduction to the Fannie Mae National Housing Survey
Homebuilders use data from the Fannie Mae survey to measure consumers’ attitudes toward future home price appreciation. This affects attitudes about risk-taking.
Must-know: Why did construction spending tick up in April?
Construction spending rose to a seasonally adjusted annual rate of $953.5 billion in April from $951.6 billion in April. Spending is up 8.6% year-over-year.
Construction spending is very important for the economy
If residential home prices begin to level off, then the builders will have to increase units to drive the top line. This will be bullish for the economy because it will put a lot of people to work.
Housing Starts Have A Long Way To Go To Reach Normalcy
Following the collapse, we saw starts average ~687,000 units per year with a low of under half a million. That’s a tremendously depressed level.
Will foreclosure completions’ 1,000 unit rise affect builder stocks?
Foreclosure activity is closely watched by investors, realtors, and homebuilders alike because it forecasts future housing supply.
Mortgage Applications Increased Prior to Regulatory Change
Mortgage applications increased 25.5% for the week ending October 2, 2015 against a decrease of -6.7% in the previous week.
Labor Market Ended 2015 with Strong Payroll Growth in December
In December 2015, non-farm payrolls increased by 292,000, easily topping Wall Street’s estimate of 200,000.
Declining energy prices may not be enough to maintain margins
Manufacturing activity is a good sign for job growth. Job growth has been the Achilles’ heel of this recovery. Although manufacturing isn’t the economic driver it used to be, it still matters.
Foreclosure Starts Drop: Good News For The Builders
The overall drop in foreclosure activity over the past year is good news for homebuilders. Currently, gross margins are experiencing seven-year highs.
Putting Construction Spending Into Economic Perspective
We’ve seen big increases in average selling prices out of homebuilders such as Lennar Corporation (LEN), Toll Brothers Inc. (TOL), D.R. Horton, Inc. (DHI), and Pulte Homes, Inc. (PHM).
Building Permits Fall In November As Skilled Labor Becomes An Issue
Building permits and housing starts data are released jointly by the Census Bureau and the Department of Housing and Urban Development.
Manufacturing Activity Continues to Chug Along
We’re seeing energy-intensive industries relocate back to the US. This will do wonders for the employment picture. It will provide good-paying middle-class jobs—which this country desperately needs.
Why foreclosure starts tick up in September
The large foreclosure pipeline in the judicial states is one reason why prices are still weak in the northeast. Homebuyers don’t focus solely on existing supply.
Construction spending falls again, a negative for the economy
Construction spending is just off its post-recession high, but it’s still depressed. Current levels equate to mid-2003 spending levels.
The week ahead: Jobs plus Annaly and other mortgage REIT earnings
We have a big week ahead, with a slew of important economic data and earnings from the mortgage REIT sector. The biggest REIT will be Annaly Capital reporting on Wednesday.
Earnings Preview: Lennar Homes
Lennar Corporation (LEN) is a large, relatively diversified homebuilder with a broad geographic footprint. The company focuses on the non-luxury segments.
Purchase Applications Increase As Low Rates Get Homebuyers Active
The Mortgage Bankers Association (or MBA) Purchase Index increased 23.6% in the week ended January 9 as global bond markets rallied.
Consumers are less bullish on home prices than the pros
Most people didn’t believe the declines early in the bear market, so we shouldn’t be surprised that people don’t believe we’re in a bull market for homes.
New York manufacturing activity decreases from a multi-year high
The General Business Conditions Index showed that manufacturing continued to expand in New York, but at a slower rate than the month before. 31.4% of respondents reported better conditions, while 16.7% reported worse conditions—the net result was 14.7%. This was a decrease from last month.
Home prices’ double-digit appreciation continues, driving builders
It’s important to for investors to understand how real estate prices affect mortgage REITs like Annaly (NLY), American Capital Agency (AGNC), and Redwood Trust (RWT) as well as homebuilders.
Could New Home Sales Continue to Rise?
The US Census Bureau and Department of Housing and Urban Development report monthly data on the number of new homes sold in the United States.
Why the Fall in April New Home Sales Isn’t a Reason to Worry
As per the recent report, new single-family homes (XHB) sold in April were at a seasonally adjusted rate of 662,000 units.
Should Housing Investors Worry about Declining Building Permits?
An increase in the number of building permits in any given month is a signal for increased activity in the housing sector (DHI) in the future.
What to Make of the March Increase in Building Permits Issued
The US Census Bureau and Department of Housing and Urban Development report monthly data on building permits issued in the United States.
Why a Rebound in March Housing Starts Isn’t Satisfying the Sector
The volatility in housing starts data remains elevated. Housing starts in March were reported to have risen 1.9%.
What to Make of the Drop in Building Permits Issued in February
The decrease in building permits spanned across the sectors in February.
What’s behind the 7% Fall in February Housing Starts?
Just as markets were celebrating the stellar 9.7% increase in housing starts in January, the February data proved to be a damper for that enthusiasm.
Why Building Permits Didn’t Change in December
For 2017, 1,263,400 housing units have been authorized by building permits—a 4.7% increase from 1,206,600 housing units in 2016.
Should Investors Be Concerned about Fewer Building Permits?
In November 2017, housing units (XHB) authorized by building permits were at a seasonally adjusted rate of 1.298 million—a decrease of 1.4% from October.
Analyzing Housing Starts in October 2017
In October 2017, housing starts rebounded sharply from the slump in September. October housing starts beat the market’s expectations.
The Truth about Housing Starts in September 2017
In September 2017, US housing starts fell from an upwardly revised August number of 1.183 million to 1.127 million units—a negative surprise.
Why Eric Rosengren Is Worried about US Unemployment Rate
Eric Rosengren, president of the Federal Reserve Bank of Boston, warned about the jobless rate being below the natural full employment estimate of 4.7%.
Homebuilder Sentiment Improved in August
The NAHB Wells Fargo Housing Market Index, which measures homebuilder sentiment, peaked at 71 during the height of the housing bubble in late 2005. It bottomed out at 8 in early 2009.
Did Housing Starts Rise Again in July?
In July, the Northeast saw housing starts jump from 116,000 to 134,000, while starts rose from 171,000 to 175,000 in the Midwest.
Why Did Foreclosure Completions Rise in June?
In June, the total foreclosure inventory fell 26% from a year ago to 375,000 homes. This works out to be about 1% of all homes with mortgages.
Job Cuts Rose in July but Fell Sharply on an Annual Basis
Planned job cuts rose 19% in July compared to June. However, they fell 57% YoY (year-over-year) in July.
For Now, D.R. Horton Avoids Fallout from Declining Energy Prices
D.R. Horton (DHI) reported net income of $294.8 million, or $0.66 per share, for 3Q16.
Why Many Homeowners Think It’s a Good Time to Sell
Fannie Mae’s monthly National Housing Survey asked respondents if it’s a good time to buy and sell a house. They’re more confident that it’s a good time to sell.
Homebuilder Earnings and Housing Data on Tap this Week
This week is relatively data-light. However, a slew of reports will interest real estate investors.
Why Wage Inflation Could Be Picking Up
Given the terrible growth in payrolls, we might see more flattening of wage inflation back towards the current inflation rate.
June Payrolls Rebound after a Dismal May
In June 2016, non-farm payrolls rose by 287,000. Non-farm payrolls easily topped Wall Street analysts’ estimate of 180,000.
Mortgage Purchase Applications Fell Last Week
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.