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Housing Starts Were Lower in December
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Housing Starts Rose Due to Single-Family Construction
It was another positive month for housing starts due to reconstruction efforts in hurricane-battered areas. In November, housing starts rose 3.3%.
Households Think It’s a Good Time to Buy a Home
According to the latest report from NAR, existing home sales have risen 2% to a seasonally adjusted annual rate of 5.48 million in October.
Housing Market: What a Rise in Building Permits Signals
In October 2017, building permits were at a seasonally adjusted rate of 1.297 million—an increase of 5.9% from the reading of 1.225 million in September.
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.
Is the Drop in September Building Permits Cause for Concern?
In September 2017, building permits were at a seasonally adjusted annual rate of 1.215 million—a fall from August’s 1.272 million and 4.3% below September 2016.
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.
Top Gainers in the Consumer Sector: October 2–6, 2017
Constellation Brands announced its results for fiscal 2Q18 on October 5 before the market opened. Its EPS rose 39.5% to $2.47—compared to $1.77 in 2Q17.
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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.
How Did Building Permits Turn Out in July?
Overall, building permits for single-family residences fell from 738,000 to 711,000 in July. Multifamily permits rose from 386,000 to 411,000.
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.
Understanding the Implications of Strong Housing Data
The U.S. Census Bureau published the July housing data on August 16. The release was well above market forecasts. Housing starts rose by 2.1% to 1,211,000.
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.
Hourly Earnings Increased 2.6% Year-over-Year in July
Average hourly earnings rose $0.08 month-over-month in July 2016 and 2.6% year-over-year to $25.61.
July Payrolls Stayed Strong
In July 2016, non-farm payrolls rose by 255,000. Non-farm payrolls easily topped Wall Street analysts’ estimate of 185,000.
Investor Takeaways from the July ADP Non-Farm Payrolls
ADP published the ADP non-farm payrolls for July on August 3. It acts as a prelude to the Bureau of Labor Statistics’ Final NFP (non-farm payroll) numbers.
Public Construction Spending Falls
In the quarter ending June 30, 2016, public construction spending fell to 1.5% on a month-over-month basis.
Putting Housing Starts into Perspective
In June, housing starts rose to an annualized rate of 1.2 million from 1.1 million the month before. Building permits rose from 1.1 million to 1.2 million, as well.
Where’s the First-Time Homebuyer?
In June, the share of existing home sales attributable to the first-time homebuyer was 33%—up 3 percentage points from May.
Construction Spending Fell in June
In June 2016, private construction fell 0.6%, and public construction fell 0.6% month-over-month.
Construction Spending Falls as a Percentage of GDP
In the quarter ending June 30, construction spending as a percentage of GDP slipped to 6.1%. Over the past 50 years, the average has been closer to 8.4%.
Why Did Investment-Grade Bond Yields Fall?
Investment-grade bond yields fell last week. Foreign investors found US corporate bonds appealing due to negative yields in other major developed nations.
New Home Sales Not the Only Reason for the Bullish Housing Market
In June 2016, existing home sales reached an annualized ~5.6 million. In May, existing home sales were ~5.5 million.
Housing Indicators Show Homebuilders Enjoying Good Times
The NAHB Wells Fargo Housing Market Index peaked at 71 during the height of the housing bubble in late 2005.
Homebuilders Not Totally Swayed by the Uptick in Building Permits
Overall, permits for single-family residences rose slightly from 731,000 to 738,000. Multifamily permits rose from 389,000 to 405,000.
How the Hot Rental Market Contributed to Housing Starts
In June 2016, housing starts rose from 1.1 million to ~1.2 million. We also saw increases in both single-family and multifamily starts.
D.R. Horton Guides Higher for Remainder of 2016 and 2017
D.R. Horton (DHI) sounded relatively optimistic on its conference call. It was clearly happy with the most recent quarter despite the stock price reaction.
First-Time Homebuyers Affect D.R. Horton’s Gross Margins in 3Q16
Like most of the other builders, D.R. Horton (DHI) has been reporting lower gross margins due to sticker shock.
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.
D.R. Horton Delivers Strong Revenue Growth for 3Q16
D.R. Horton (DHI) reported 3Q16 revenue of $3.1 billion, a 10% increase on a YoY (year-over-year) basis and a sequential increase of ~17%.
PulteGroup Unveils the Second Part of Its Value-Creation Strategy
PulteGroup announced the second phase of its value creation strategy—reducing costs, reducing land investment, and increasing share buybacks.
PulteGroup Reports Increased Earnings
PulteGroup (PHM) reported net income of $118 million or $0.34 per share. This beat Wall Street analysts’ estimate of $0.33 per share.
Why Did PulteGroup’s Gross Margins Fall?
PulteGroup’s (PHM) gross margins for 2Q16 came in at 21.5%—down 40 basis points year-over-year and 180 basis points from the fourth quarter.
PulteGroup Reports a Big Jump in Revenues
PulteGroup (PHM) reported 2Q16 revenues of $1.8 billion—a 41% increase from a year ago. Revenues increased in home sales and financial services.
Upbeat US Inflation and Retail Sales Data Raise Hopes of Rate Hike
The consumer price index (or CPI) rose 0.2% in June after posting a similar gain in May while CPI excluding food and energy prices (or core CPI) rose 0.2% month-over-month.
Foreclosure Inventory Is Back to October 2007 Levels
In May, the total foreclosure inventory fell 25% from a year ago to 390,000 homes. It takes us back to the levels in late 2007.
Job Cuts Rise in June, Still Lower for This Year
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.
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.
Can Investors Keep Forecasting the Final Non-Farm Payroll Correctly?
ADP’s June non-farm payroll numbers indicated an increase of 172,000 jobs in the private sector. ADP’s non-farm payrolls have been mostly accurate.
Central Bankers Push for Fiscal Stimulus
Recently, Mario Draghi pushed European governments to do more in the way of fiscal stimulus. The Fed made similar arguments.
Why Were Housing Starts Flat in May?
In May, housing starts were unchanged month-over-month at 1.2 million units. Building permits were flat at 1.1 million.
First-Time Homebuyer Falls to 30% of Existing Home Sales
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%.
Why Did Construction Spending Disappoint in May?
Construction spending fell 0.8% to a seasonally adjusted annual rate of $1.12 trillion in May from $1.14 trillion in April.
Construction Spending Has Been Falling as a Percent of GDP
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 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.
Housing Market Update: New Home Sales Increased in May
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.
Why Did Existing Home Sales Rise in May?
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.
Understanding the Fall in KB Home’s 2Q16 Gross Margin
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.
What Happened to KB Home’s Earnings in 2Q16?
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.
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.
Lennar Recognizes the Huge Housing Deficit
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.
How Lennar Adapts to Different Phases of the Housing Cycle
Lennar (LEN) is pulling back its land purchase plans and looking to exit new land purchases quickly. It calls this “shortening duration.”
Did Lennar Beat Wall Street’s Earnings Estimates in 2Q16?
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.
Lennar’s Gross Margin Falls, but Guidance Remains for 2016
In 2Q16, Lennar’s (LEN) gross margin rose 40 basis points sequentially to 23.1%. In 2Q15, the company’s gross margin was 23.8%.
How Much Did Lennar’s Revenue Rise in 2Q16?
In 2Q16, Lennar’s ASP (average selling price) rose 4% to $362,000 from $348,000 during the same period last year.
Homebuilder Earnings Will Be the Highlight of the Week
This week, there are some important real estate data points with existing home sales, new home sales, and the FHFA House Price Index.
Foreclosure Completions Rose by 1,000 Units in April
Foreclosure completions rose by 1,000 units to 37,000 in April 2016, according to CoreLogic. Completions fell 23% year-over-year. It’s a relatively high number.
FOMC Meeting Is the Highlight of the Week Ahead
This week contains some important data with housing starts, industrial production, and retail sales. The FOMC meeting will be the highlight on June 14 and 15.
Announced Job Cuts Fell in May
Planned job cuts fell 27% in May year-over-year. They fell 53% from April.
Average Hourly Earnings Rose in May
Aside from employment, the most important indicator of economic well-being is wages.
May Payrolls Were Exceptionally Weak
In May 2016, non-farm payrolls rose by 38,000, which missed Wall Street analysts’ estimate of 160,000 by a wide margin.
Dull Week between the Jobs Report and the FOMC Meeting
The week after the jobs report doesn’t have much data. This week isn’t an exception. The next big event is the June FOMC meeting in just under two weeks.
Central Bankers Push Governments for More Fiscal Stimulus
A common theme from central bankers these days is that while they can stimulate more, they’re reaching the point of diminishing returns.
Why Did Housing Starts Rise in April?
In April, housing starts rose to an annualized rate of 1.2 million from 1.1 million the month before. Building permits rose from 1.08 million to 1.13 million.
Share of Homes Going to the First-Time Homebuyer Rose in April
In April, the share of existing home sales attributable to the first-time homebuyer was 32%—an increase from 30% in March.
Why Did Construction Spending Disappoint in April?
Construction spending rose to a seasonally adjusted annual rate of $1.1 trillion in April from $1.2 trillion in March. Spending rose 4.5% YoY.
Regulations Are Making Affordable Starter Homes Hard to Build
The amount of regulations and taxes instituted over the past ten years increased the cost of building. It’s difficult to build starter homes that are affordable.
Do US Economic Indicators Support a Rate Hike?
US economic growth was revised to 0.8% in the second reading of GDP for 1Q16 compared to the previous month’s 0.5%.
US Stock Indexes Rose as the US Economy Recovered
Upbeat new home sales data boosted investors’ sentiments about US economic recovery, causing US equity indexes to rise from May 17 to May 24, 2016.
Did Toll Brothers’ Earnings per Share Rise in Fiscal 2Q16?
After Toll Brothers reported fiscal 2Q16 earnings on May 24, 2016, its stock rose by $2.41 to close the day at $29.51.
Does Toll Brothers Expect Its Gross Margin to Expand in 2016?
In fiscal 2Q16, Toll Brothers’ (TOL) gross margin, excluding interest and write-downs, rose to 25.7% compared to 25.3% a year ago.
Is Pricing Growth Stalling for Toll Brothers?
Toll Brothers (TOL) reported that its ASP (average selling price) for fiscal 2Q16 was $855,500, a drop of 2% on a quarter-over-quarter basis.
Toll Brothers Reports a Big Increase in Revenues in Fiscal 2Q16
Toll Brothers (TOL) reported fiscal 2Q16 revenues of $1.1 billion. Deliveries in the second quarter rose 31% in dollar terms and 9% in units.
Why Did Treasury Yields Rise Last Week?
US Treasury yields rose across the yield curve for the week ended May 20, 2016. This came as minutes of the FOMC April meeting raised the probability of a rate hike in June.
Inside the Existing Home Sales Increase in April
In April 2016, existing home sales reached an annualized 5.47 million rising by 6% YoY over March, when existing home sales were 5.36 million.
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.
Do April’s Housing Permits Point to Growth Ahead?
Overall, permits for single-family residences rose slightly from 725,000 to 736,000 in April.
The Truth about Housing Starts in April 2016
In April 2016, housing starts rose from 1.1 million to ~1.2 million, which was above Wall Street analysts’ estimate of 1.1 million.