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Thread: Home Builders

  1. #1
    Airbladepnh Guest

    Default Home Builders

    I'm starting this thread to discuss trading home builders.

    Disclosure: I'm long ITB, DHI, PHM but shorts are welcome to contribute if they have good data.

  2. #2
    Airbladexvm Guest


    Housing Start vs Completions Re: Home Builders

    I've done some digging into housing starts versus housing completions. I was initially intrigued by the fact that completions have outpaced starts since Mar '06. So I called the number listed on the web site that published the Commerce Departments numbers (http://www.census.gov/const/www/newresconstindex.html) and a very helpful person provided some perspective... housing starts outpace housing completions for extended periods during economic expansion. The person sent me a table of data going back to the 60s and sure enough, the periods when starts outpace completions can last for several years. For example, starts were consistently higher that completions from 1992 to 2006.

    I created a a chart plotting the numbers back to the 60s (see attached) and noticed a few interesting things.
    1/ Annualized housing start for June10 were 549,000. The average number of annualized housing starts since 1968 is 1,531,000. The US is building ~1 million less homes a year than it's 40+ year average.
    2/ After lagging completions since Mar '06, housing starts look primed to retake the lead. It appeared as if this the lines were going to cross in Mar '10 but the housing credit seems to have skewed results, probably due to home builders prioritizing completions to lock in sales before the housing credit expired.

    Taken in isolation, this would support a bullish case for builders (Disclosure: I'm long ITB, DHI, PHM).

    Apart from a spike in interest rates or unemployment, can anyone think of a good reason why starts might continue to lag completions in the next 6 to 12 months?

  3. #3
    Airbladetnf Guest


    can anyone think of a good reason why starts might continue to lag completions in the next 6 to 12 months?

    Yes, 1) the economy and 2) the lack of money from the lending instutions for potential home buyers.

  4. #4
    Aiuxsiriquola Guest


    DR Horton reported quarterly earnings today.
    - Revenue up 51% to $1,378.3m compared to $914.1m in fiscal Q309
    - Earnings, excluding impairments & write offs $80.8m ($50.5 + $30.3) compared to -$31.5m (-$142.3 + $110) in fiscal Q309

    According to the Department of Commerce, link below, annualized new home sales were down slightly for comparable periods (April-June 2010/2009).

    So DR Horton seems to have outpaced the industry by a wide margin.

  5. #5
    Akiporteced Guest


    RealtyTrac released foreclosure numbers for July.

    There were a few grim sound bites from James Saccacio, CEO of RealtyTrac;
    - "July marked the 17th consecutive month with a foreclosure activity total exceeding 300,000"
    - "near-record levels of bank repossessions, which increased on a year-over-year basis for the eighth straight month"
    RealtyTrac's Rick Sharga told MarketWatch News Break that "foreclosures may not peak until 2011".

    If you look at the trend and year-to-year comparisons, the picture looks considerably brighter, see charts below.

    RealtyTrac's management is biased, whether they know it or not. Their core business is providing a database of foreclosures. As foreclosures subside, so does RealtyTrac's revenues.

    Anybody out there think we'll see a month in 2011 with foreclosures over 367,056 (current record, March 2010)?



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