Thursday, July 26, 2012

Lawler on Builder Results

by Calculated Risk on 7/26/2012 11:58:00 AM

From economist Tom Lawler:

The Ryland Group, the 8th largest US home builder in 2011, reported that net home orders in the quarter ended June 30th, 2012 (including discontinued operations) totaled 1,415, up 32.9% from the comparable quarter of 2011. The company’s sales cancellation rate, expressed as a % of gross orders, was 20.0% last quarter, down from 20.7% a year ago. Home deliveries totaled 1,149, up 30.0% from the comparable quarter of last year, at an average sales price of $253,000, up 3.3% from a year ago. The company’s order backlog at the end of June was 2,289, up 39.1% from last June.

Pulte Group, the 2nd largest US home builder in 2011, reported that net home orders in the quarter ended June 30th, 2012 totaled 5,578, up 32.1% from the comparable quarter of 2011. Home deliveries last quarter totaled 3,816, up 5.0% from the comparable quarter of last year, at an average sales price of $268,000, up 8.1% from a year ago. The company’s order backlog at the end of June was 7,560, up 30.9% from last June. The company attributed the increase in average sales prices to a favorable mix of home closings, improved pricing, and “value creation efforts.”

Meritage Homes, the 10th largest US home builder in 2011, reported that net home orders in the quarter ended June 30th, 2012 totaled 1,353, up 48.7% from the comparable quarter of 2011. The company’s sales cancellation rate, expressed as a % of gross orders, was 13% last quarter, down from 15% a year ago. Home deliveries last quarter totaled 1,042, up 21.7% from the comparable quarter of last year, at an average sales price of $270,000, up 5.0% from a year ago. The company’s order backlog at the end of June was 1,611, up 62.1% from last June.

M/I Homes, the 16th largest US home builder in 2011, reported that net home orders in the quarter ended June 30th, 2012 totaled 826, up 30.1% from the comparable quarter of 2011. The company’s sales cancellation rate, expressed as a % of gross orders, was 16% last quarter, down from 20% a year ago. Home deliveries last quarter totaled 625, up 5.9% from the comparable quarter of last year, at an average sales price of $259,000, up 14.1% from a year ago. The company’s order backlog at the end of June was 1,168, up 40.2% from last June.

So far five large public home builders have reported results for the quarter ended 6/30/2012, and with the exception of NVR net orders were above “consensus” and sales cancellation rates were down. In addition, all builders reporting so far have reported increases in average sales prices and higher margins from a year ago. While part of the sales price gains are probably “mix” related, in general it appears as if in most parts of the country home builders last quarter were able to sell comparable-type homes at “effective” (including sales incentives/discounts) prices higher than a year ago. This jives with other “incoming” home price index data.

CR Note: Here is a summary from Lawler of some stats reported by publicly traded home builders for last quarter.


SettlementsNet OrdersBacklog
 6/126/116/106/126/116/106/126/116/10
PulteGroup3,8163,6335,0305,5784,2224,2187,5605,7775,644
NVR2,4752,2073,3542,6142,4682,5595,0483,9463,766
The Ryland Group1,1498851,5051,4151,0659592,2891,6461,368
Meritage Homes1,0428561,2071,3539109001,6119941,044
M/I Homes6255907908266356021,168833748
Total9,1078,17111,88611,7869,3009,23817,67613,19612,570
YoY % Change11.5%-31.3% 26.7%0.7% 33.9%5.0%

Note the large YOY change in order backlog, which is likely to translate into solid gains in SF housing starts and overall SF construction spending in the third quarter of this year.

Standard Pacific Homes, the 13th largest US home builder in 2011, reports results after the market close today. D.R. Horton, the largest US home builder in 2011, reports results tomorrow. MDC Holdings, the 11th largest US home builder in 2011, reports results on July 31st. And Beazer Homes, the 9th largest US home builder in 2011, reports results on August 3rd.

Results reported by home builders so far, however, suggest that the new SF housing market last quarter was considerably stronger than “consensus,” and right now I expect that the eight-month string of upward revisions to Census’ preliminary estimates for new SF home sales will continue in next month’s report.

CR Note: This was from housing economist Tom Lawler.