Wednesday, November 11, 2015

Lawler: Large Home Builder Results, Q3/2015

by Bill McBride on 11/11/2015 04:16:00 PM

From housing economist Tom Lawler:

Below is a table showing selected operating statistics for publicly-traded home builders reporting results for the quarter ending September 30, 2015. I’ve included results for LGH Homes, a fast-growing home builder that focuses heavily – though not solely – on “entry-level” home buyers.

Note that Standard Pacific and The Ryland Group merged effective October 1, 2015, but the new company (CalAtlantic Group) provided operating statistics for the separate entities.

For all of these builders combined, net orders per active community were up 9% from the comparable quarter of 2015.

While several builders last quarter said that “resource constraints,” especially with respect to labor (labors, land development, and trades), had caused delays in home closings and may have adversely impacted sales, a few said that “labor” wasn’t much of an issue last quarter. D.R. Horton and LGI Homes were both in the latter camp, and both said or implied that their business strategies of building relatively more “spec” homes than the rest of the industry helped them by providing more steady work to contractors

  Net OrdersSettlementsAverage Closing
 Price ($000s)
Qtr. Ended:9/159/14% Chg9/159/14% Chg9/159/14% Chg
D.R.
Horton
8,4777,13518.8%10,5768,61222.8%$2892793.4%
Pulte
Group
4,0923,7798.3%4,3564,646-6.2%$3363340.6%
NVR3,2582,93611.0%3,6073,23611.5%$3803663.9%
The
Ryland
Group
1,9121,70712.0%2,0462,0181.4%$3393312.4%
Beazer
Homes
1,1701,173-0.3%1,8961,69511.9%$3222959.2%
Standard
Pacific
1,3261,15414.9%1,1651,250-6.8%$53748311.2%
Meritage
Homes
1,5671,5004.5%1,7121,52212.5%$3873588.1%
MDC
Holdings
1,1091,0812.6%1,0801,093-1.2%$42137013.6%
M/I
Homes
98889210.8%9949850.9%$3493209.1%
SubTotal23,89921,35711.9%27,43225,0579.5%$338$3263.7%
LGI
Homes
90855364.2%93455767.7%$186$16612.1%
Total24,80721,91013.2%28,36625,61410.7%$333$3223.3%


D.R. Horton provided information on the share of net orders and closings for each of its three “brands:” “Horton” (its “traditional” brand); Emerald (its high-end/”luxury” brand); and Express (its “entry-level” brand). Using these shares, here is a table showing selected operating stats from D.R. Horton by “brand.”

D.R. Horton Operating Stats by "Brand"
  Net OrdersSettlementsAverage Closing
 Price ($000s)
Qtr. Ended:9/159/14% Chg9/159/14% Chg9/159/14% Chg
Horton6,3586,2791.3%8,0387,9231.4%$305$2818.5%
Express1,865714161.4%2,221517329.8%$191$16913.1%
Emerald25414378.2%31717284.2%$554$5441.9%

The extraordinary growth in Horton’s “Express” brand in part reflects strong response from consumers to these lower-priced/smaller/fewer amenity homes, though it also reflects the sharp increase in the number of markets where Express homes are available (48 markets/15 states last quarter vs. 24 markets/8 states a year ago.) The sizable YOY increase in the average selling prices of Express homes partly reflects “true” price increase, partly reflects on average larger homes, and partly reflects the higher “price points” (on average) of the newer markets relative to the “older” markets.

LGI Homes also experienced extraordinary growth in net orders and home closings. Part of this jump reflected its expansion into more markets, but LGI Homes also showed a YOY increase in ne orders per community of 11.7%. As with Horton’s “Express,” the sizable YOY increase in the average sales price partly reflects “true” price increase, partly reflects on average larger homes, and partly reflects the higher “price points” (on average) of the newer markets relative to the “older” markets.

I’ll have more to say about LGI Homes in a later report.