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Lawler: More Homebuilder Results for Last Quarter

by Bill McBride

The nation’s largest homebuilders, including D.R. Horton, Ryland Group and PulteGroup, reported a very promising fourth quarter, offering a strong confirmation that the U.S. housing construction sector has turned the corner.

D.R. Horton, for instance, the nation’s largest homebuilder, reported net home orders that were 38.6 percent above the fourth quarter of 2011, with home cancellations down 15.4 percent, home deliveries up 25.8 percent, average sales price up 9.9 percent, and finally, an order backlog that was an incredible 61.5 percent above a year ago, with average sales prices for those units up 11.7 percent, according to economist Tom Lawler.

The following comments and table are from Lawler, and the table is for many of the public homebuilders as of Dec. 2012.

This shows that combined net orders for public homebuilders are up 37 percent compared to Q4 2011. As Lawler notes, the combined backlog is up 57.1 percent!

In a conference call discussing the company’s fourth quarter numbers, Ryland’s CEO, Larry Nicholson, said 2012 was its first profitable year since 2006, and the company anticipates a strong 2013.

“Our results for the fourth quarter represented a satisfying end to our first profitable year in six years,” Nicholson said. “We generated both our highest fourth quarter sales volume and biggest year-end backlog in five years, [and] we improved our operating margins by almost 500 basis points in the quarter compared to last year … We are pleased with our results for this quarter and for 2012, but are more excited about our future, thanks to the strategic positioning of the company and our potential to generate better results should the housing market continue its upward trend.”

From Lawler:

The combined order backlog of these companies at the end of 2012 was 26,638, up 57.1 percent from the end of 2011.

While not all builders comment on pricing trends, those that do have reported increased prices, “pricing power,” and/or lower incentives/price concessions.

As one builder noted, “being able to sell homes at a price that is higher than what it costs to build them is ‘sweet.’”

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COPYRIGHT 2013 CALCULATED RISK REPRINTED WITH PERMISSION

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