Friday, April 26, 2013

Lawler: Selected Results (and Comments) from Large Publicly-Traded Builders for Last Quarter

by Calculated Risk on 4/26/2013 01:46:00 PM

From economist Tom Lawler: Selected Results (and Comments) from Large Publicly-Traded Builders for Last Quarter; Consensus is Strong Spring Selling Season, Increased Pricing Power, Though Big Differences in Net Order Growth across Builders

Below is a table showing results on net home orders, home settlements, and average closing sales price for large publicly-traded home builders who have released results for the quarter ended March 31st, 2013. (These results include “discontinued operation”.)

Net order growth varied significantly across builders, to a large extent reflecting growth/margin strategies. E.g., PulteGroup’s average community count last quarter was down 14% from a year ago, reflecting its emphasis on “price, margin realization, and effective management of land assets” rather than growth, though it did increase its planned investments in land and development (see below), while other builders increased their community counts. NVR’s “sub-par” net order growth came despite a double-digit increase in its average community count.

The combined order backlog of these six builders on March 31, 2013 was 30,082, up 42.2% from last March.

 Net OrdersSettlementsAverage Closing Price
Qtr. Ended:3/31/133/31/12% Chg3/31/133/31/12% Chg3/31/133/31/12% Chg
D.R. Horton7,8795,89933.6%5,6434,24033.1%$242,548$219,48110.5%
PulteGroup5,2004,9914.2%3,8333,11723.0%$287,000$261,00010.0%
NVR3,5103,15711.2%2,2721,92418.1%$330,400$304,6008.5%
The Ryland Group2,0521,35751.2%1,31584855.1%$277,000$254,0009.1%
Meritage Homes1,5471,14435.2%1,05275938.6%$314,000$269,00016.7%
M/I Homes1,04776437.0%62750723.7%$284,000$249,00014.1%
Total21,23517,31222.7%14,74211,39529.4%$277,580$252,39110.0%

Here are a few select excerpts from some of the company’s press releases (NVR’s press release generally has no “color” comments.

Pulte: ‘“The stronger demand which the housing industry saw throughout 2012 has carried into the spring selling season of 2013. We experienced higher traffic in our communities with buyers feeling a greater sense of urgency given the combination of limited product inventory and rising prices found in many markets throughout the country. Within this environment, and aligned with our focus on generating higher returns, we continue to emphasize price, margin realization and effective management of land assets. Our successful execution of these strategies can be seen in the higher selling prices and improved margins achieved across each of our primary brands.

‘“Given the operational gains demonstrated by our strong first quarter results, and our expectations for an ongoing recovery in new home demand, we have again increased our authorized investment in land and development for 2013 and 2014 to $1.4 billion annually. The incremental investment, which amounts to approximately $200 million in each year, will be made using the defined and disciplined process we put in place more than 18 months ago.”

‘The higher average selling price reflects price increases implemented by the Company and a shift in the mix of closings toward move-up homes which carry higher prices.’

Ryland: For the first quarter of 2013, sales incentives and price concessions totaled 7.9 percent of housing revenues, compared to 10.9 percent for the same period in 2012.

Meritage: ‘"Housing demand is greater than the supply of homes available for sale in many of the areas where we operate, causing home prices to increase," Mr. Hilton explained. "To meet the higher demand, we opened 24 new communities during the first quarter and also grew our active community count to its highest point in almost four years. In addition, our 9.5 orders per average community for the quarter was a 27% increase over 2012 even as we raised prices in many communities. As a result, we received orders for 35% more homes for a 69% increase in total order value compared to the first quarter of 2012. We are pricing our homes and limiting the number of lots we're releasing for sale in some communities to better manage our order volumes relative to our production capacity, and to maximize our profit from those communities."’

M/I Homes: ‘With housing conditions continuing to improve, we are optimistic about our business and look for continued growth.’

D.R. Horton: ‘Donald R. Horton, Chairman of the Board, said, “The spring selling season is off to a strong start at D.R. Horton, with robust demand driving higher sales volumes and favorable pricing, which is reflected in the 14% increase in our average selling price. (LEHC note: this refers to the average net order price; the average sales price on homes closed last quarter was up 10.5% from a year ago.) We are in an excellent position to continue to meet increased sales demand and aggregate market share with 15,800 homes in inventory and 175,000 lots owned or controlled under option contracts, of which 58,000 lots are fully developed.’