Soft earnings and new home sales data hit homebuilders

The ITB is lower by 1.5% and the XHB by 0.7% with earlier earnings misses from Pulte (PHM -1.5%) and D.R. Horton (DHI -5%). and just-released disappointing new home sales data weighing. Also reporting this morning was M/I Homes (MHO -3.2%), and that company beat estimates.

June single-family new home sales of 406K fell 8.1% from May's rate of 442K (which was revised down from 504K). Expectations for June sales were 479K.

The supply of new homes rises to 5.8 months at June's sales pace from 5.2 months previously.

Other names: Lennar (LEN -1.6%), Ryland (RYL -2.3%), Standard Pacific (SPF -2%), Hovnanian (HOV -0.9%), Toll Brothers (TOL -2.2%).

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Comments (15)
  • capitolp
    , contributor
    Comments (716) | Send Message
    Not buying housing in the summer, must be the Solar Vortex. It just can't be the Economy.
    24 Jul 2014, 10:29 AM Reply Like
  • bbro
    , contributor
    Comments (11234) | Send Message
    There are 31 million people employed between the ages of 35-44....Over the last 50 years there has been no recession to start unless the New Homes Sold to Number of Employed
    35-44 years old ratio has gone above at least 2.7%,,,,currently this ratio is 1.3%
    24 Jul 2014, 11:49 AM Reply Like
  • The Last Boomer
    , contributor
    Comments (1069) | Send Message
    This is a good way to look at this but it begs a few questions. Why aren't the employed young people buying homes? I have a sample of one: my daughter who is getting married this summer. She is a banker, he is a doctor. Both well paid, secure jobs. They bought a small apartment in a vibrant urban area. I did the opposite: bought a bigger house further out of the city. The problem is that I don't see any young people where I live. We need them to start buying big suburban houses; instead they are buying or renting small urban dwellings. If this is a real trend, I am not sure we'll ever go back to what is considered "normal" levels of home sales.
    24 Jul 2014, 12:08 PM Reply Like
  • bbro
    , contributor
    Comments (11234) | Send Message
    I agree with you....It is highly unlikely we will see the highs made 8 years ago
    (which was 4.0%) but the current level of 1.3% is very very low historically...
    over the last 50 years there have been 12 years in which this ratio was below
    2.0%. 6 years of those 12 years have been in the last 6 years.
    24 Jul 2014, 12:45 PM Reply Like
  • mobyss
    , contributor
    Comments (2630) | Send Message
    "The problem is that I don't see any young people where I live. We need them to start buying big suburban houses; instead they are buying or renting small urban dwellings"


    Younger people will buy "big suburban houses" when the value is right. At this point, it is more economical to buy the small urban place than the big house. When all factors are considered, the suburban house will "win out" when its price is low enough, so you can deduce that they are mostly overpriced right now.
    24 Jul 2014, 12:47 PM Reply Like
  • Tomal
    , contributor
    Comments (2485) | Send Message
    how can young people buy house when we are riddled with student debt? I have around $35000 debt and I graduated in 2012. I will never purchase a house with my current debt load. I would prefer to live by renting in the city.
    24 Jul 2014, 01:01 PM Reply Like
  • Lakeaffect
    , contributor
    Comments (1478) | Send Message
    Post #1: "Over the last 50 years there has been no recession to start unless the New Homes Sold to Number of Employed 35-44 years old ratio has gone above at least 2.7%"


    Post #2: "6 years of those 12 years have been in the last 6 years."


    Taking the two posts together would be saying that a new recession won't start because the 2008 recession never really ended?


    A soaring equity market which survives only on ZIRP funded buybacks is not an good indicator of economic recovery.
    24 Jul 2014, 01:02 PM Reply Like
  • James Sands
    , contributor
    Comments (2725) | Send Message
    What about record revenues and profits from all transportation-related companies (rail, truck, packaging co.)? Does that serve as an economic indicator? Many companies/industries are doing quite well, as are many households.


    Interest rate levels are what is spurring corporate growth, when interest rates go up, then pressure will be felt by both consumers and companies.


    However, there is also a fine line between corporations and an average household. A corporation is managed to succeed or it will eventually get eliminated. Many households do not have a structure in place to manage their assets and budgets/expenses like a corporation (some would never choose to if it were done for them).


    Significant events always lead to impacts to different generations too. The Depression created many penny-pinching tactics from those affected for good reason. The recent recession in 07/08 has similarly left a bad taste in risk appetites for assets in general through perceived risk.


    There is a lot of money on the sidelines still despite the stock market rally and it is no surprise that housing demand is not surging even with low rates for five years. However, people continue to by both staple and discretionary goods. Auto sales continue to climb, smartphones/tablets are consumed daily, congestion gets worse each day in dense metropolitan areas and the travel industry is healthy.


    To me, it is a question of priorities. Spending money will always be a priority for most households versus investing in asset classes. Building wealth is something that is done over a lifetime. Instant gratification holds the day in today's world. Preference and choice cannot be discounted from the household to corporate level.
    24 Jul 2014, 02:24 PM Reply Like
  • bukdow
    , contributor
    Comments (860) | Send Message
    When you are young and solvent you want to live in a vibrant city. When you get around 33 years old and start thinking about kids, thats when you buy the big house in the suburbs with the good schools and safe, quiet bucolic neighborhoods. At least thats what I did.
    24 Jul 2014, 03:41 PM Reply Like
  • june1234
    , contributor
    Comments (4473) | Send Message
    Back in 06 they were building and selling twice the amount of homes they are today. Its not complicated. Prices are high, investors largest single group that have been buying cutting back, first time home buyers shut out, credit tight , too many still underwater. 2 of the top 3 categories in monthly job numbers remain restaurants and retail, no help there
    24 Jul 2014, 12:15 PM Reply Like
  • Clayton Rulli
    , contributor
    Comments (3424) | Send Message
    Renting is minimal risk while buying now is a definate risk. People are still scared of another drop in prices. Plus, you need a nice down payment nowadays, something many people even with jobs dont have. Down payment requirement is convenient for banks... now people CANT walk away if they get too far underwater. People dont want to chance it
    24 Jul 2014, 02:19 PM Reply Like
  • DrGarnicus
    , contributor
    Comments (118) | Send Message
    Good point.
    24 Jul 2014, 02:46 PM Reply Like
  • convoluted
    , contributor
    Comments (2480) | Send Message
    We can't paint all young adults with one brush (although it does seem tempting at times). I recall my finance professor (c. 1972) saying that buying a home would be impossible for most college grads due to inflation.
    Most people in that generation have bought and sold several homes. I don't have kids so I'm left to observe. A compare/contrast suggests a fundamental shift in domestic objectives/behavior-which consists of numerous factors-postponing marriage, women deciding to have kids and raise them alone i.e. w/o a father, more kids living with their parents well into their twenties (and even thirties), a divorce rate that has run at some 50% for decades, concern about job mobility during early career and tougher lending standards.
    This is a marked departure of extraordinary magnitude, particularly when one evaluates sentiments emanating from the end of WWll and remaining somewhat intact until this century. I think too that the first decline in median income since WWll, combined with bleak job prospects and unbelievable student debt burdens, stifles any real enthusiasm for taking on even more responsibility. Hell, if I'm 28, living at home and working a couple of low paying jobs-the absolute last thing on my mind is buying a house. This is the first time in the modern era that this country has encountered this problem. This will tend to get worse because corporations are shedding employees as fast as possible-and the traditional engine of employment-small business, is becoming nothing but a historical artifact.
    Not my intent to be negative-I would like to see younger people getting good jobs, buying houses, joining the country club, etc-but, on average, that life-style is increasingly becoming out of reach.
    24 Jul 2014, 02:50 PM Reply Like
  • Marc_Hav
    , contributor
    Comments (5) | Send Message
    Once inflation starts kicking in then buying a house makes more sense again.
    Just wait until the Fed stops QE(3) and starts raising rates.
    24 Jul 2014, 03:41 PM Reply Like
  • awakeinwa
    , contributor
    Comments (693) | Send Message
    existing home sales was solid. new home sales are a different beast.


    these are lagging indicators. with existing home sales so strong, I daresay new homes carry an overly high price premium and people are arbitraging the two.


    home prices are too high at the moment. this is the expected process by which prices will get slashed starting with new homes
    24 Jul 2014, 04:22 PM Reply Like
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