Friday, April 24, 2020

Lawler: Excerpts from PulteGroup’s Conference Call

by Calculated Risk on 4/24/2020 11:23:00 AM

From housing economist Tom Lawler:

The edited transcript from the conference call is available here.

“In the first quarter, net new orders were up more than 30% over the prior year for both January and February. It's now old news when I say that, with the virus spreading rapidly and governments implementing shelter-in-place restrictions, homebuying demand slowed dramatically as March progressed. To appreciate the magnitude of the slowdown, in the first full week of March, our net new orders exceeded 800 homes. In the final full week, this number dropped to just 140. As a result, our March 2020 orders in total were down 11% from March of 2019. From orders being up 30-plus percent to being down 11% in just a few weeks is unlike anything we have experienced before.”

“Given how the U.S. economic slowdown intensified as we moved into April, it is no the month, we have sold approximately 920 homes on a gross basis, excluding cancellations. The underlying trend is that buyer traffic to our website, and in turn, our communities has decreased materially. This is obviously a very small sample size, but directionally, we are running a little below 50% of the pace in the first quarter, with the most recent trends generally stable to up slightly.”

“Through the first 3 weeks of April, we've had 360 backlog units canceled, which represents only 3% of homes in backlog.”

Note that if PuleGroup’s gross orders were 920 in the first 3 weeks of April, and cancellations were 360 in the first 3 weeks of April, net orders in the first three weeks of April were just 560, or more than 30% lower than net orders in just the first week of March alone!

While the company didn’t give further information about the weekly pattern of orders or cancellations, it would appear as if net orders in April could be down by about 65% from the monthly average pace of the first quarter.