|By PR Newswire||
|August 23, 2013 09:30 AM EDT||
CHICAGO, Aug. 23, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Homebuilding, including Lennar Corp. (NYSE:LEN-Free Report), Meritage Homes Corp. (NYSE:MTH-Free Report), D.R. Horton, Inc. (NYSE:DHI-Free Report), The Ryland Group Inc. (NYSE:RYL-Free Report) and PulteGroup, Inc. (NYSE:PHM-Free Report).
The housing market has steadily made a comeback from the lows witnessed from the severe and widespread downturn. However, the housing momentum seen in 2012 and in the first half of 2013 seems to have moderated somewhat with the recent spike in mortgage rates, tight credit availability and a limited supply of land and labor.
In spite of the recently rising interest rates, they are still below historical levels and housing is still very much affordable. Thus, high affordability levels, increased rentals and historically low interest rates are driving the housing momentum. In addition, accelerating job growth and increasing consumer confidence are boosting demand for new homes.
Supply, however, is constrained by low home inventories, both for new and existing homes. A shortage of land and labor is restricting the construction of homes, both single and multifamily. Home prices have thus started to move up with market demand gaining momentum and supply remaining limited. In fact, rising home prices and thinning home inventories have created a sense of urgency among homebuyers who are now more anxious to buy a house before prices shoot up further.
Most homebuilding companies are resultantly witnessing a significant growth in both volumes and average selling prices (ASPs). New home orders, backlogs (number of homes under sales contracts at the end of the year) and homes delivered continue to climb year over year.
Moreover, improving homebuilding revenues combined with tight cost control and better overhead leverage (as volumes improve) are boosting margins for most homebuilders. Most homebuilders believe the housing momentum will continue into 2014.
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI), known as the homebuilder sentiment index, jumped 3 points to 59 in August from 56 in July. This was the fourth consecutive monthly increase in the index and was also the strongest increase in almost eight years. The jump in the index shows that the recent interest rate hikes have not dampened the housing recovery.
How Did the Big Players Perform This Quarter?
It was a mixed Q2 for the homebuilders. Among the big homebuilders Lennar Corp. (NYSE:LEN-Free Report) and Meritage Homes Corp. (NYSE:MTH-Free Report) beat the Zacks Consensus Estimate for both revenues and earnings. Both companies saw increasing demand and pricing in most housing markets despite rising interest rates.
While D.R. Horton, Inc. (NYSE:DHI-Free Report) and The Ryland Group Inc. (NYSE:RYL-Free Report) beat the Zacks Consensus Estimate for earnings on the back of pricing and margin gains, they missed expectations for revenue. Rising interest rates slowed down the order growth for DHI in the latter half of the quarter, which we believe hurt the top line.
PulteGroup, Inc. (NYSE:PHM-Free Report) was the worst performer this quarter, missing the Zacks Consensus Estimate for both earnings and revenues due to declining net order growth.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
SOURCE Zacks Investment Research, Inc.