Lennar Corp

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.

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.

The Thomson Reuters/University of Michigan Consumer Confidence Index is a leading indicator for the U.S. economy The Thomson Reuters/University of Michigan Consumer Confidence Index is an important indicator of the consumer’s perception of the U.S. economy. Similar to other consumer confidence measures, it asks consumers about their views on the current economic conditions and their […]

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.

Housing has been a bright spot in the US economy. But over the past month, housing stocks haven’t been performing well. ITB, a housing-focused fund, has fallen 4.7%.

The National Association of Homebuilder Sentiment Index is a closely-watched measure of future building activity The National Association of Homebuilders Sentiment Index measures the confidence of homebuilders. It gauges builder perceptions of current and future sales of single family residences and asks them to characterize them as “good,” “fair,” or “poor.”  It also asks the […]

Distressed Home sales are tracked by CoreLogic in their monthly Market Pulse Distressed Sales and shadow inventory are closely related. Distressed sales include Real Estate Owned (REO) and short sales. REO sales are generally foreclosures, while short sales are below the current outstanding debt on the property. Distressed supply will put a damper on pricing as […]

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

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 […]

Retail sales data gives analysts insight into the strength of the consumer Consumption is the biggest driver of the U.S. economy and accounts for 70% of GDP. Consumption has been relatively subdued since the recession began, as Americans have boosted their savings rate and spent only on essentials. The real estate bubble drove consumption in […]

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.

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.”

Unlike some of the other builders, KB is a turnaround story. The company believes its strategic focus on first-time and move-up homebuyers is finally beginning to pay off.

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.

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.

In June 2016, private construction fell 0.6%, and public construction fell 0.6% month-over-month.

Overall increases in business activity and consumption are starting to drive more business for homebuilders.

Last week, we had two important data points with the FOMC minutes from the December meeting and the Employment Situation report on Friday.

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.

The Richmond Fed Manufacturing Survey looks at business conditions in the Fed’s fifth district, which covers Washington, DC, Baltimore, Richmond, and Charlotte.

This series focuses on industrial and manufacturing releases that will affect the real estate sector. Since homebuilders are highly cyclical, housing analysts watch the manufacturing data closely.

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.

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.

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%.

New home sales jumped 11.6% in December from a month ago to a seasonally adjusted annual rate of 481,000.

Buyers are reluctant to pay higher prices, and builders have to offer incentives, which reduces margins. Lennar’s higher margins will not be sustainable.

The Producer Price Index measures inflation at the wholesale level Analysts have typically taken inflation at the wholesale level to predict inflation at the consumer level. In a normal business environment, producers pass these increased costs to consumers, which would decrease disposable income if wages didn’t rise accordingly. Investors consider a little inflation a good thing. […]

D.R. Horton’s EBITDA margin was at 10.1% as on March 2015, much better compared to 2.3% for fiscal 2011.

Foreclosure starts are closely watched by investors, realtors, and homebuilders alike because they forecast future housing supply.

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’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 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 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.

The 7.4% year-over-year (or YoY) gain resembles the gains we saw during the bubble years. On a month-over-month basis, the increase was only 1.2%. It was decent. The prices for ex-distressed sales increased 6.8%. Prices are still 11.9% below their peak in April 2006.

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.

The ten-year bond is the basis for all mortgage pricing Long-term interest rates are priced off the benchmark long-term bond, which is the ten-year Treasury. These days, the ten-year bond reacts to economic data through the Federal Reserve’s asset purchase program, also known as quantitative easing (QE). As a general rule, economic data that shows […]

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.

The Bloomberg Consumer Comfort Index rose to -28.3 for the week ending June 23 The Bloomberg Consumer Comfort Index is a weekly sentiment index that covers three critical variables: respondents’ perception of the state of the economy, their evaluation of their personal finances, and whether it’s a good time to purchase goods and services. The […]

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.

Corelogic puts out a quarterly report on aggregate home equity in the U.S. Corelogic’s Home Equity Report analyzes changes in home equity from a number of different perspectives. Home equity can be used to predict default rates, and we saw a large number of strategic defaults early in the housing bust as professional investors realized […]

The Institute of Supply Management index assesses the state of manufacturing in the New York City Metropolitan Area The Institute of Supply Management (ISM) New York Purchasing Manager’s Index (PMI) is similar to the ISM PMI , however, it covers the New York City area. The ISM PMI looks at various business indices, like new […]

There was no discussion of the “speed limit” issue in the July FOMC minutes. This is generally a “cyclical versus structural unemployment” issue.

Homebuilders are in a better position than the smallest construction firms in that they have easy access to credit.

The Institute for Supply Management Index assesses the state of manufacturing in the United States. The Institute for Supply Management Purchasing Manager’s Index (ISM PMI for short) is similar to the other regional PMI indices, however, it covers the entire country. The ISM PMI looks at various business indices, like new orders, production, employment, supplier […]

Increases in foreclosure activity correlate with lower home prices because distressed properties tend to trade at a discount to non-distressed properties.

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.

The MBA Purchase Index decreased 6.9% in the week ended December 12, 2014, despite a strong bond market rally.

The homeownership rate rose precipitously during the housing bubble. This was due to several reasons.

ETFs present another investment avenue. Apart from pure homebuilder ETFs, there are many other ETFs that offer exposure to homebuilders.

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.

The Chicago Fed National Activity Index measures whether the economy is expanding on, above, or below its historical trend.

Construction spending is a major driver of job growth in the U.S. economy The Construction Put in Place Survey is released monthly by the Census Bureau that measures the total dollar value of construction work done in the U.S. It covers both the public and private sector and includes new structures as well as improvements […]

Low household formation numbers over the past five years will drive homebuilder demand going forward Since the financial crisis began, demand for new construction has fallen, as household formation numbers have dropped. The low household formation numbers have been driven by a poor economy—not by demographics. This represents pent-up demand that must be satisfied in […]

Housing starts are a critical predictor of future homebuilder sales Housing starts are released jointly by the Census Bureau and the Department of Housing and Urban Development. Analysts use the information to anticipate future production for homebuilders, future demand for raw materials, and labor costs. This data will even affect the forecasts for home-related retailers, […]

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.

Up until January, industrial production and manufacturing production had been accelerating, so it is premature to draw any major conclusions from one disappointing report.

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.

The Federal Reserve includes formal economic forecasts like GDP in the minutes from its Federal Open Market Committee (or FOMC) meetings.

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.

Historically, construction spending has led economies out of a recession.

Ellie Mae is a software provider that aggregates mortgage origination activity Ellie Mae (ELLI) puts out a monthly Origination Insight Report which provides monthly data and analysis from a sample of closed loan applications that flow through their Encompass 360 Mortgage Management Software. In many ways, it is similar to the way Automatic Data Processing […]

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.

The National Association of Homebuilders (NAHB) Sentiment Index came in at 58—the highest reading since July 2005, and only the third time since the bust that more homebuilders considered conditions to be more “good” than “poor.”

This report will probably hold the hawks on the Fed at bay and allow them to continue to maintain ultra-low interest rates. That said, the bond market has been pricing in a tapering of quantitative easing.

The MBA Purchase Index fell by 0.4% last week, which is somewhat surprising given that rates fell and even refinances rose.

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.

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.

The Thomson Reuters/University of Michigan Consumer Confidence Index is a leading indicator for the U.S. economy The Thomson Reuters/University of Michigan Consumer Confidence Index is an important indicator of the consumer’s perception of the U.S. economy. Similar to other consumer confidence measures, it asks consumers about their views on the current economic conditions and their […]

The ten-year bond is the basis for all mortgage pricing Long-term interest rates are priced off the benchmark long-term bond, which is the ten-year Treasury. These days, the ten-year bond reacts to economic data through the Federal Reserve’s asset purchase program, also known as quantitative easing (or QE). As a general rule, economic data that shows […]

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.

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.

After a stormy week, bonds have a lot of data to navigate Last Friday’s jobs report punctuated what should have been a relatively dull week with a holiday in the middle. The 10 year bond sold off on the number, increasing the yield from 2.5% to 2.74%. We will see Monday if that move was overdone. […]

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 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.

Following the collapse, we saw starts average around 687,000 units per year, with a low of under half a million.

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.

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.

Foreclosure starts are a leading indicator of future housing supply and pricing Foreclosure activity is closely watched by investors, realtors and home builders alike because they provide a forecast of future housing supply. Foreclosure timelines can vary widely by state, depending on whether a foreclosure needs to be approved by a judge. The large foreclosure […]

Next week is all about the FOMC (Federal Open Market Committee) meeting The FOMC meets on Tuesday and Wednesday, and we should have the announcement on Wednesday afternoon around 2:00 p.m. Taper? By how Much? Which securities? The Fed will also release its forecast of economic activity. The Fed has been consistently over-optimistic on economic […]

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%.

On February 5, Jefferies upgraded Lowe’s (LOW) to “buy” from “hold” and raised the target price to $129 from $81.

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 […]

The CoreLogic Index is a widely followed index of real estate values. Unlike the other major indices—like Case-Shiller or Radar Logic—CoreLogic separates distressed sales from non-distressed sales.

The MBA Purchase Index is an important index that forecasts housing activity The Mortgage Bankers Association (MBA) index of purchase activity measures application activity, not loans made. The Mortgage Bankers Association samples roughly 75% of all mortgage activity in the U.S., and its indices are key indicators for the real estate finance market and home […]

Back to part 4 Mark-to-market issues The Fed does actually have a profit and loss statement and it is a line item on the Federal Budget. Since quantitative easing began, the Fed has profited from this activity as it has pushed up prices through its own buying. As it stops purchasing MBS and Treasuries, it […]

The NAHB Wells Fargo Housing Market Index measures homebuilder sentiment has been increasing steadily since 2009. Recently, it’s started to accelerate.

The upcoming week has some important economic data, like housing starts and industrial production, but the FOMC meeting will dominate. Further tapering is more or less assured. The taper should completely finish by the end of the year.

The Thomson Reuters/University of Michigan Consumer Confidence Index is a leading indicator for the U.S. economy The Thomson Reuters/University of Michigan Consumer Confidence Index is an important indicator of the consumer’s perception of the U.S. economy. Similar to other consumer confidence measures, it asks consumers about their views on the current economic conditions and their […]

Lennar’s management noted that “New orders in the quarter rose 23% over the prior year, with increases in each of our segments.”

The Institute of Supply Management index assesses the state of manufacturing in the United States. The Institute of Supply Management (ISM) Purchasing Manager’s Index (PMI) is similar to the other regional PMI indices, however it covers the entire country. The ISM PMI looks at various business indices like new orders, production, employment, supplier deliveries, inventory, […]

Increases in Gross Domestic Product (GDP) is a measure of economic growth Gross domestic product is what is referred to generally as “the economy.”  It is the sum of consumption, investment, and government spending. Another way to think of GDP is the output of goods and services produced by labor and property in the U.S. […]

Industrial production is a bellwether of economic activity Industrial production is a good top-down macroeconomic indicator that helps forecast the labor market, final demand, consumption, and inflation. While manufacturing is no longer the primary driver of the U.S. economy, it still influences the economy to a large degree—particularly for unskilled workers. U.S. manufacturing has been […]

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.

Every week, the Mortgage Bankers Association (MBA) puts out an index of mortgage application activity Mortgage applications are relevant to a number of industries—from banks to non-banks, to mortgage REITs to homebuilders. This series will break down the different indices and help you learn what insight you can glean from them. If you’re a bank, […]

Yesterday, the Federal Reserve ended its March FOMC meeting and decided to continue to reduce asset purchases.

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.

Credit eased during the quarter, but it was primarily associated with commercial real estate and commercial or industrial lending.

The return of the first-time homebuyer is the missing link to a more normal housing market. Household formation numbers have been depressed since the Great Recession began.

Housing starts are a critical predictor of future home builder sales Housing starts are released jointly by the Census Bureau and the Department of Housing and Urban Development. Analysts use the information to anticipate future production for home builders, future demand for raw materials, and labor costs. This data will even affect the forecasts for […]