While Main Street seems to be suspicious of the rebound in the housing market, there is no doubt Wall Street is enjoying the renewed interest in real estate. In a year when stocks overall have performed well, the shares of publicly traded homebuilders have posted some of the biggest gains.
Consider the performance of Lennar Corp. The Miami-based builder, with three existing projects in San Diego, has seen its stock price increase from $12.75 at the beginning of the year to its current level near $35.
The move in the stock has followed the increase in sales and earnings. In the just completed quarter, Lennar delivered 3,655 homes, up 28 percent from the previous period. Net earnings rose to $87.1 million, up from net earnings in the same period a year ago of $20.7 million.
“The housing market has stabilized, and the recovery is well under way,” said Stuart Miller, CEO of Lennar.
“Low mortgage rates, affordable home prices, increased buyer confidence and an extremely favorable rent-to-own comparison are driving growth in each of our markets," Miller said. "Additionally, reduced foreclosures and declining distressed home inventory are further contributing to the improvement in the housing market.”
He acknowledged materials and labor costs are beginning to move higher, and the need to provide incentives to buyers is impacting costs.
KB Home, with projects in Carlsbad and Chula Vista, has also seen a rebound in sales and a corresponding move in its stock price. The shares started 2012 at $5.25 and have moved to $14.50 recently.
Revenues at KB Home during the three months ending Aug. 31, 2012, were up 16 percent to $424.5 million. The company sold 1,720 homes during the quarter, up 7 percent from the year-earlier period, and the overall selling price of $245,100 was 8 percent higher than a year ago.
“We are seeing dramatic improvement in California, where we are the state’s largest homebuilder, as the continued strengthening in the coastal markets is now spreading inland to Sacramento, the Central Valley and the Inland Empire,” KB Home CEO Jeffrey Mezger said.
At luxury homebuilder Toll Brothers, the results are equally as impressive, both in sales and stock performance. The shares began the year at $13.75 and have nearly tripled to the current price around $33.50. Toll has one existing project in San Diego.
“We are enjoying the most sustained demand we’ve experienced in over five years," CEO Douglas Yearley said. "Customers who have postponed buying for a number of years are moving into the market. With an industry-wide shortage of inventory in many markets, we are enjoying some pricing power.”
Yearley estimates Toll will deliver between 3,000 and 3,200 homes in fiscal year 2012. That compares with 2,611 homes in the previous four quarters. Revenues could be as high as $1.84 billion compared to $1.48 billion last year.
While price appreciation is certainly welcomed by the homebuilders, it will also have an impact on recent activity. The Commerce Department reported that new home sales in August actually declined as the restricted supply of homes for sale fell to just 141,000 units, the lowest level in history.
Cautious homebuilders remain hesitant to launch any new, massive construction projects until they can get a better grasp of how the upcoming elections will proceed and when the job market will kick into gear — the ultimate missing link in the recovery.
Press ESC | Close [X]
