PulteGroup Inc

Walmart (WMT) has a long history and strong brand name recognition. But is there reason to believe WMT stock could actually withstand an economic meltdown?

Northrop Grumman (NOC), which is an American global aerospace and defense technology company, was the S&P 500’s top loss on July 25.

Hershey (HSY) announced its fiscal 4Q17 results on February 1. Hershey’s revenue declined 1.5% YoY to $1.94 billion and missed the estimates by 0.97%.

According to Morgan Stanley Private Wealth Management’s Andy Chase, long-term fundamentals look strong with the recent pickup in economic activity.

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.

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.

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.

Planned job cuts rose 19% in July compared to June. However, they fell 57% YoY (year-over-year) in July.

There isn’t much in the way of market-moving economic data this week. One of the highlights will be the JOLTS job openings data on Wednesday.

Post Holdings (POST) issued junk bonds worth $1.75 billion on July 25. The senior notes were rated B3/B and carried a coupon of 5.0%.

The total US dollar-denominated issuance of high-yield debt stands at $56.9 billion YTD in 2016—29% lower compared to the same period in 2015.

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

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 (DHI) reported net income of $294.8 million, or $0.66 per share, for 3Q16.

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.

This week is relatively data-light. However, a slew of reports will interest real estate investors.

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.

The week after the jobs report usually doesn’t have much data—more or less, this week isn’t an exception. Earnings season kicks off this 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.

We do have some important economic data this week—personal income and spending, the third revision to first quarter GDP, and construction spending.

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.

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%.

Aside from employment, the most important indicator of economic well-being is wages.

In May 2016, non-farm payrolls rose by 38,000, which missed Wall Street analysts’ estimate of 160,000 by a wide margin.

The week ending May 27 was dominated by a big upward surprise in new home sales and a disappointing GDP revision on Friday.

In Toll Brothers’ North segment, the ASP (average selling price) rose from $630,000 to $705,000 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.

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.

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.

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

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.

Last week, bond yields rose to 1.84% on the FOMC minutes. Note the Fed has set up the Market for rate hikes several times in the past couple of years only to get cold feet at the last moment.

On Friday, May 27, we’ll get the second revision to 1Q16 GDP. Wall Street is forecasting the number to come in at 0.9%.

In March 2016, there were 5.8 million job openings—up 9% YoY. The number of job openings came in well above Wall Street analysts’ estimates.

The week ending May 6, 2016, was dominated by the jobs report on Friday. It was weaker than expected. The payroll growth was a measly 160,000.

There will be a few important data points to ponder this week including job openings, retail sales, and inventory data.

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.

In March, the share of existing home sales attributable to the first-time homebuyer was 30%—flat with February. Historically, this was closer to 40%.

Construction spending rose to a seasonally adjusted annual rate of $1.14 trillion in March from $1.13 trillion in February. Spending rose 8% YoY.

After an uneventful FOMC (Federal Open Market Committee) meeting last week where the Fed stood firm, all eyes turned to the jobs report this coming Friday, May 6.

D.R. Horton (DHI) has been reporting lower gross margins due to sticker shock. Home prices have been increasing, but wage growth has been stagnant.

D.R. Horton reported 2Q16 revenue of $2.7 billion—a 16% increase on a YoY basis and a sequential increase of ~14%. The revenue beat analysts’ expectations.

Over time, Pulte has lifted its gross margins and improved revenues. However, the stock has still lagged its peers, especially the S&P SPDR Homebuilder ETF (XHB).

The big event for investors will be the April FOMC meeting. Investors are assigning a 0% probability that the Fed will hike rates next week.

In February, the share of existing home sales attributable to the first-time homebuyer was 30%—down 2 percentage points from January and up 1% YoY.

Employment and wages are key indicators for the Fed  Aside from employment, the most important indicator of economic well-being is wages. Despite falling unemployment, one of the conundrums facing the current labor market is flat real or inflation-adjusted wages. Over the past decade, wages have more or less kept pace with inflation, but they haven’t increased. Before the financial crisis, much of […]

The jobs report was the highlight of the week. Payrolls increased by 215,000. The labor force participation rate inched up for the fifth month in a row.

The PCE Index is the Fed’s preferred inflation measure and has important policy implications. The latest data shows that the inflation is running below the Fed’s 2.0% target.

In the second quarter, Lennar’s (LEN) gross margins fell 190 basis points sequentially to 22.7%.

Housing starts rose from 1.12 million to ~1.18 million in February 2016. This was above Wall Street analysts’ estimates of 1.5 million.

Foreclosure completions rose by 5,000 units to 38,000 in January, according to CoreLogic. From 2000 to 2006, foreclosure completions averaged around 21,000 per month.

Fannie Mae puts out its monthly National Housing Survey. It measures consumers’ attitudes about housing and the economy.

There was a big fall in household formation in 2008. In 2005, household formation peaked at 1.9 million. By 2008, that number was just over 400 million.

The ratio of median home prices to median income ratio is 3.9x, well above the historical range of 3.2x to 3.6x.

For fiscal 1Q16, Toll Brothers’ earnings were $73.2 million, or $0.40 per share, down from its net income of $81.3 million, or $0.44 per share, a year ago.

US Treasury yields rose across the yield curve after upbeat consumer inflation data suggested that the Fed may hike interest rates earlier than expected.

Foreclosure completions fell by 1,000 units to 32,000 in December. Completions fell 23% year-over-year. However, 33,000 is still a relatively high number.

The equity sell-off continued last week. Personal incomes rose, but personal spending didn’t. Construction spending disappointed as well.

Treasury yields fell across the yield curve, except for three-month, six-month, and one-year Treasury bills, after the Bank of Japan introduced a negative interest rate.

PulteGroup’s (PHM) gross margins for 4Q15 came in at 23.5%, up 40 basis points on a year-over-year basis and down ten basis points from the third quarter.

With a rise of 7.6% YoY (year-over-year) to $224,000, December 2015 was the 46th consecutive month of YoY increases in median home prices.

All four major regions of the country witnessed substantial increases in home sales in December 2015. The charge was led by the Northeast and Midwest.

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.

Zoning restricts the freedom of property holders and REITs to use land however they want, given their specific development and investment interests.

Zoning protects existing property values by preventing incompatible uses of a property. It also protects residential properties from commercial 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.

Housing affordability took a beating in July 2015 after reaching its high in January 2013. The higher ratio of the home affordability index signifies relatively higher home affordability to buyers.

With the rise in property prices, housing affordability has become a growing concern in many markets of the country. High housing prices force people to the suburbs and rural towns to find affordable housing.

A home is usually the most expensive asset that consumers can hold, and owning a home is among their lifetime goals. The question arises—why can’t more people own a house despite the availability of so many properties in the market?

Foreclosure completions fell by 4,000 units to 33,000 in November, according to CoreLogic. Completions fell 19% YoY (year-over-year).

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.

In December 2015, non-farm payrolls increased by 292,000, easily topping Wall Street’s estimate of 200,000.

Treasury yields rose across the yield curve—except for one-month T-bills, three-month T-bills, and three-year T-notes—in the week ending December 31.

In the quarter ending September 30, construction spending as a percentage of GDP rose to 6.1%. This was a big rise from a year ago when it stood at 5.4%.

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 NAHB Wells Fargo Housing Market Index measures builder confidence, gauging how builders view current and future sales of single-family residences. It asks builders to characterize sales as good, fair, or poor.

After months of speculation regarding the much-anticipated interest rate hike, the FOMC meeting on December 16, 2015, finally ended investors’ wait.

US markets and investors might have taken the Fed’s interest rate hike positively, but it’s important to explore the future outlook of mortgage REITs.

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.

The US Treasury yield curve was flat for the week ended December 18, 2015, as short-term yields fell. Medium- to long-term yields rose after US interest rates rose by 25 basis points.

Lennar (LEN) reported net earnings of $281.6 million, or $1.21 per share—compared to its net income of $245.3 million, or $1.07 per share, a year ago.

According to the National Association of Home Builders (or NAHB), the housing market index fell by a single point to reach a level of 61.0 in December.

The price-to-sales ratios of Toll Brothers, D.R. Horton, NVR, PulteGroup, and M.D.C. Holdings are 1.5x, 1.1x, 1.3x, 1.1x, and 0.68x, respectively.

In the fourth quarter of 2015, Toll Brothers’ (TOL) gross margins, excluding interest and write-downs, fell to 22.3% compared to 26.8% a year ago.

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.

PulteGroup’s valuation is not expected to improve dramatically from here unless the company shows some improvement in its finances.

Housing starts rose from a downward-revised ~1.13 million to ~1.21 million in September 2015. This was above Wall Street estimates of just over 1.14 million.

The price-to-earnings ratios of NVR, D.R. Horton, PulteGroup, M.D.C. Holdings, and HFF are 21.17x, 16.91x, 13.77x, 24.16x, and 18.75x, respectively.

NVR rose by 2.3% to close at $1,590 per share as of October 20, 2015, its year-to-date price movement at 24.7%.

In September, non-farm payrolls increased by 142,000, missing the Wall Street estimate of 200,000. Private payrolls increased by 118,000, while government jobs rose by 24,000.

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.

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.

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.

Historically, construction spending has led economies out of recessions. This didn’t happen in the most recent recession, however, because of the overhang from the real estate bubble.

August payrolls in the private sector increased by 140,000, while government jobs rose by 33,000. Private services payrolls increased by 164,000 and manufacturing employment fell by 17,000.

Toll Brothers has exposure to some of the hottest markets, while avoiding some of the more downbeat markets like the most of the Midwest and parts of the Deep South.

Toll Brothers’ operating income increased to 12.4% of revenues compared to 12.3% in the third quarter and 12.3% a year ago. This is another example of the operating leverage that builders such as Toll Brothers have.

Toll Brothers reported that the average selling price for 3Q15 was $724,000, a 1.5% increase on a quarter-over-quarter basis and a 1% decrease on a year-over-year basis.

The drop in the rental vacancy rate suggests that owning a home still isn’t affordable for many people, despite an economic revival.