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Tuesday, January 28, 2014

Lawler: D.R. Horton sales up slightly year-over-year

by Calculated Risk on 1/28/2014 03:06:00 PM

From housing economist Tom Lawler:

D.R. Horton, the largest US home builder, reported that net home orders in the quarter ended December 31, 2013 totaled 5,454, up 3.7% from the comparable quarter of 2012, and up “contra-seasonal” 5.7% from the previous quarter’s weak level. The average net order price last quarter was $275,600, up 10.3% from a year ago. The company’s sales cancellation rate, expressed as a % of gross orders, was 23% last quarter, up slightly from 22% a year ago. Home deliveries totaled 6,188 last quarter, up 19.4% from the comparable quarter of 2012, at an average home sales price of $263,542 up 11.6% from a year ago. The company’s order backlog at the end of last year was 7,684, up 5.0% from the end of 2012, at an average order price of $275,052, up 14.4% from a year earlier. The company said that its average community count last quarter was up 13% from the comparable quarter of 2012.

Horton noted in its press release that its weekly sales pace “accelerated” in January. In its press conference, officials noted that the strong home price gains last year reflected both increased pricing power in most of its markets and a higher mix of larger homes and sales to “move-up” buyers. Officials said that of the purchase mortgages closed by Horton’s mortgage subsidiary last quarter, 41% were to first-time home buyers, down from 50% in the comparable quarter of 2012 – suggesting that sales to first-time home buyers were weak last quarter.

According to officials, Horton’s gross margin last quarter was at its highest level since 2006. Officials were “very optimistic” about the 2014 “spring” (really winter/spring) selling season, and said that they were “well-positioned” from a community count and “spec inventory” position to take advantage of strong sales. Based on these expectations officials said they expected to “hold” these exceptionally high margins, but officials noted that home price gains in 2014 were likely to be much more modest in 2014. Given Horton’s elevated margins and “strong” spec inventory position, weaker-than-expected sales over the next few months could lead to flat to slightly lower home prices.

In response to a question in the Q&A session, a Horton official noted that home prices in Phoenix, which increased about 25% last year, had begun to “plateau,” and the official expected prices in Phoenix this year to be flat to slightly down.

At the end of December Horton owned or controlled 175,000 lots, down slightly from 177,300 at the end of 2012, but up significantly from 120,600 at the end of 2011.
emphasis added