To The Moon

There's no question that homebuilder stocks went sluggish in 2022, tracking the performance of U.S. homebuilders $SPDR S&P Homebuilders ETF(XHB)$, it has dropped 30% in 2022.

The good news is XHB rise 15% in 2023, beat the $S&P 500(.SPX)$ ‘s 8% & $DJIA(.DJI)$ ‘s 2% the same time.

A batch of real estate data was released last week. At the same time, the latest financial report released by the largest home builder in the United States also seems to show that the US housing market is about to rebound. Are US home builder stocks ushering in their own investment opportunities?

Housing market data

March total housing starts

Data released by the Commerce Department last week showed that single-family housing starts rose 2.7% to an annualized rate of 861,000 units in March, but multi-family housing starts fell 6.7% to an annualized rate of 542,000 units. Additionally, single-family home building permits rose 4.1% to a five-month high in March, while total multifamily building permits fell 24.3%. Overall, total building permits fell 8.8% to an annualized 1.413 million units in March. Clearly, the weak rental market has impacted multi-family housing starts and building permits.

March housing sales

According to data released by the National Association of Realtors (NAR) last week, the median home sales price in the United States fell by 3.3% to $400,528 in March, the largest year-on-year decline since 2012. The median U.S. home sale price fell 1.2% in February, the first decline since 2012.

Total Existing Home Sales

According to data from the National Association of Realtors, the total number of existing home sales in the United States fell by 2.4% in March, after a sharp increase of 14.5% in February. The median existing home price fell 0.9 percent to $370,300 from $375,700 a year earlier. The median home price, which peaked at $413,800 last June, has fallen 9.2 percent over the past nine months. The inventory of existing homes for sale was 980,000 units, an increase of 1% month-on-month and 5.4% year-on-year. Also, the average days a home was on market fell to 29 days from 34 in February, showing that inventory remains tight.

Impact on Mortgage Rates

As key interest rates rise, mortgage rates follow suit. The average interest rate on 30-year fixed-rate mortgages will reach a high of 7.08% in October 2022, compared with 3.503% in October 2021. Since the beginning of 2023, this rate has fluctuated between 6% and 7%. However, mortgage rates have fallen for the fifth consecutive week, with the 30-year fixed-rate mortgage rate closing at 6.27% last week, compared with 6.28% the previous week. However, that mortgage rate rose to 6.39% this week, so home sales may continue to decline.

Largest U.S. homebuilder posts strong earnings

$D.R. Horton(DHI)$ , the largest home builder in the United States, released its second quarter report for fiscal year 2023 last Thursday, showing that the company’s earnings per share fell to $2.73 from $4.03 in the same period last year, a 32% drop, but higher than analysts Expected $1.93. Revenue fell 0.3% to $7.973 billion from $7.999 billion, but topped expectations for $6.452 billion. In addition, revenue in the first six months of fiscal 2023 increased to $15.23 billion, and it expects full-year revenue to be between $31.5-33 billion, above expectations of $28.41 billion.

Donald R. Horton, chairman of D.R. Horton, said that despite rising mortgage rates and inflationary pressures, demand picked up this quarter thanks to seasonal factors as well as stimulus measures and pricing adjustments. In addition, while high interest rates and economic uncertainty will persist for some time, the supply of affordable new and existing homes remains limited, while demographics remain supportive of housing demand. Shares of D.R. Horton soared 8.4% to a 52-week high of $110.37 after the earnings report was released.

On April 25th, PulteGroup Inc (NYSE: PHM) released its first quarter financial report.

$PulteGroup(PHM)$ announced today that its Board of Directors has approved a $1.0 billion increase to the Company’s share repurchase authorization. This increase brings the Company’s total share repurchase authorization to $1.2 billion.

Over the past decade, PulteGroup has returned over $6 billion to its shareholders through the payment of dividends and share repurchases.

$PulteGroup(PHM)$ based in Atlanta, Georgia, is one of America’s largest homebuilding companies with operations in more than 40 markets throughout the country. Through its brand portfolio that includes Centex, Pulte Homes, Del Webb, DiVosta Homes, American West and John Wieland Homes and Neighborhoods, the company is one of the industry’s most versatile homebuilders able to meet the needs of multiple buyer groups and respond to changing consumer demand. PulteGroup’s purpose is building incredible places where people can live their dreams.