In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Friday, March 21, 2014

Lawler on Lennar: Orders up 10.1% YoY; Prices, Margins Up Sharply; Saw “Volumes Returning,” But Not from First-Time Buyers

by Calculated Risk on 3/21/2014 03:01:00 PM

From housing economist Tom Lawler:

Lennar Corporation, the third largest US home builder, reported that net home orders in the quarter ended February 28, 2014 totaled 4,465, up 10.1% from the comparable quarter of 2013. The company’s community count was up 13% YOY. Home deliveries last quarter totaled 3,609, up 13.3% from the comparable quarter of 2013, at an average sales price of $316,000, up 17.5% from a year ago. The company’s order backlog at the end of February was 5,662, up 15.0% from last February.

In its conference call, a Lennar official noted that while in the previous quarter the company had seen evidence of weaker sales, more recently there were “clear signs that volume is returning to the market.” The official said that net orders “improved sequentially” during the quarter, but when asked for more information the official said that this “sequential increase” was “normal” for the time of year. An official said that the company had seen a “bit of a slowdown” in home price increases in “most” (though not all) markets. In response to a question on competitors, an official said that competition “has heated up a bit” and some competitors have been a bit more aggressive in offering sales incentives to increase sales, but that so far such competitive pressure was “not significant.”

In a Q&A on first-time buyers, an official said that the company’s land/lot acquisitions had prepared the company to meet increased first-time buyer demand “should that market return,” implying that demand from first-time buyers remained very weak.

Lennar was extremely aggressively acquiring land/lots over the last two years – Lennar owned or controlled 153,776 lots at the end of last November, up about 20% from November 2012 and up 38% from November 2011. An official said that the company’s land/lot inventory was sufficient to meet planned home deliveries in both 2014 and 2015.

Here is a summary of net home orders for the three-month period ending in February for three large home builders.

Net Home Orders
3-mo period ending:2/28/20142/28/2013% Change
KB Home1,7651,6715.6%

So far builder results have been “mixed,” and while most are optimistic, most also say it is too early to gauge the “success” of the “spring” home selling season (which actually begins well before spring.) There appears to be a consensus, however, that demand from first-time buyers remains very low.