Monday, April 23, 2012

Lawler: Early Builder Reports Point to “Pretty Decent” Spring Selling Season, Contest Questions

by Bill McBride on 4/23/2012 02:47:00 PM

From economist Tom Lawler:

NVR Inc, the fourth largest US home builder in 2010, reported last week that net home orders in the quarter ended March 31, 2012 totaled 3,157, up 31.4% from the comparable quarter of 2011. The company’s sales cancellation rate, expressed as a % of gross orders, was 10.3% last quarter, down form 12.3% a year ago. Home closings totaled 1,924 last quarter, up 17.7% from the comparable quarter of last year, while the company’s order backlog on 3/31/12 was 4,909, up 33.2% from last March.

D.R. Horton, the largest home builder in the US, reported today that net home orders in the quarter ended March 31, 2012 totaled 5,899, up 19.3% from the comparable quarter of 2011. The company’s sales cancellation rate, expressed as a % of gross orders, was 22% last quarter, down from 25% a year ago. Home closings totaled 4,240, up 20.6% from the comparable quarter of last year, while the company’s order backlog on 3/31/12 was 6,189, up 17.2% from a year ago.

Chairman of the Board Don Horton noted that the company’s strong sales pace had “continued through the first of April.”

There are been few scattered reports from other, smaller home builders that the current spring selling season has been significantly better than last year, The Ryland Group, PulteGroup, Meritage Homes, and M/I Homes report earnings and operating results for the quarter ended 3/31/12 on April 26.

The Commerce Department’s February report on new SF homes showed YTD new SF home sales (not seasonally adjusted) up by just 8.2% from the comparable period of 2011. The March new SF home sales report is due out tomorrow. While correlations between builder reports and Census new SF sales are not that strong, right now I’d guess that there is significant “upside surprise” to tomorrow.

SettlementsNet OrdersBacklog
3/20123/20113/20103/20123/20113/20103/20123/20113/2010
D.R. Horton4,2403,5164,2605,8994,9436,4386,1895,2816,314
NVR1,9241,6341,9193,1572,4032,9404,9093,6854,552
Combined6,1645,1506,1799,0567,3469,37811,0988,96610,866
YOY % Chg19.7%-16.7% 23.3%-21.7% 23.8%-17.5%


CR Note: There has probably been some shift to the larger builders, and that would suggest the Census reported increase in new home sales would be lower than the large builders report. The March New Home sales reported is scheduled to be released at 10 AM tomorrow, and the consensus is for an increase in sales to 318 thousand Seasonally Adjusted Annual Rate (SAAR) in March from 313 thousand in February.

For those playing the prediction contest:

Last 10 Posts