Morning Report – Homebuilder earnings 4/24/14

Posted on April 24, 2014 by Brent Nyitray

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Markets are up this morning after earnings reports and a good durable goods number. Bonds and MBS are down.
Durable goods came in at 2.6% in March, better than the 2% Street estimate. Initial Jobless Claims increased to 329k.
Pulte announced better than expected earnings, but orders are down 6% from a year ago. Net new orders are down 2%. Average selling prices increased 10% to 317,000 and gross margins increased to 23.8%. They reported that the spring selling season is off to a good start, and demand accelerated throughout the quarter. Michigan apparently did well, and demand is strong in Texas, Florida, and the Carolina. Demand is weak in Washington DC and New England. We saw confirmation of DC weakness from NVR. Perhaps prices simply rose too far too fast there. Pulte is more of an entry-level homebuilder, so that is encouraging. The first-time homebuyer has been the missing piece of the puzzle.
D.R. Horton announced even better numbers than Pulte, with new orders up 9% in units and 20% in dollar value. Gross Margins increased 210 basis points to 22.5%. Average selling prices increased 10% to 278,900. They reported that market conditions remain favorable, but the strength and improvement varies significantly over local markets. D.R. Horton in based in Texas, but operates over a big geographic area.
Finally, Ryland reported orders increased 6%, ASPs increased 18%, and gross margins increased to 21.1%. Ryland is based in Southern California and operates in 17 states.
So, for all the fears that homebuilder earnings would be terrible, so far, so good. We have heard from Lennar, KB, Pulte, DR Horton, NVR, and Ryland. Only NVR missed. That said, the weak order growth does seem to indicate that the big increases in ASPs and gross margins may be in the past. Very hard to reconcile these good earnings reports with that awful new home sales number yesterday.
Apple delighted the crowd with a better than expected earnings and a 7 for 1 stock split. I remember the ads for stock split beepers back in the late 90s in Barron’s. A company would announce a stock split, a page with the ticker is sent to your beeper, and you quickly go to your E*Trade account and buy the stock. No analysis required. Heck, you don’t even have to know what they do. Typical bubble thinking. Similarly, I remember the guy who sold me my Volvo station wagon in 2006 was speculating in condo rights. Hopefully he found a seat when the music stopped.
FWIW, it seems like the half a trillion market cap seems to be where companies stall out (both XOM and MSFT flirted with that level before petering out) and Apple is trading at $491B pre-open.

Filed under: Morning Report |

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53 Responses

  1. lmsinca, on April 24, 2014 at 8:40 am said:

    Looks like things are chugging along for your recovery summer Brent!

    FRIST

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  2. yellojkt, on April 24, 2014 at 8:51 am said:

    Here is the NYT liberally quoting everyone’s favorite cattle rustler:

    “I want to tell you one more thing I know about the Negro,” he said. Mr. Bundy recalled driving past a public-housing project in North Las Vegas, “and in front of that government house the door was usually open and the older people and the kids — and there is always at least a half a dozen people sitting on the porch — they didn’t have nothing to do. They didn’t have nothing for their kids to do. They didn’t have nothing for their young girls to do.

    “And because they were basically on government subsidy, so now what do they do?” he asked. “They abort their young children, they put their young men in jail, because they never learned how to pick cotton. And I’ve often wondered, are they better off as slaves, picking cotton and having a family life and doing things, or are they better off under government subsidy? They didn’t get no more freedom. They got less freedom.”

    I hate it when the lamestream media smears an American hero by sticking a microphone in his face and waiting for him to say something racist.

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    • ScottC, on April 24, 2014 at 10:44 am said:

      jnc:

      From Coates on Bundy:

      A couple days ago Jonathan Chait asserted that modern conservatism is “doomed” because it is “rooted in white supremacy.” The first claim may or may not be true, but there’s little doubt about the second.

      Do you believe that?

      That is the past that Cliven Bundy believes “the Negro” to have been better off in. He is, regrettably, not alone.

      For all practical purposes, I’d bet he is. I suspect the number of people who would make such a claim is vanishingly small relative to the overall population, or even just the population of self-proclaimed conservatives.

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  6. yellojkt, on April 24, 2014 at 9:41 am said:

    jnc,
    I do remember that episode. It was great documentary work.

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  7. jnc4p, on April 24, 2014 at 9:48 am said:

    Coates’ critiques are worth reading.

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  8. yellojkt, on April 24, 2014 at 10:06 am said:

    Coates’ critiques are always worth reading.

    Fixed that for you.

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  9. quarterback, on April 24, 2014 at 10:39 am said:

    The difference in the media is that the NYT et al never go out and stick a mic in front of moronic and hateful liberals and publish it. Heck, they wouldn’t even touch the truth about Trayvon.

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  10. quarterback, on April 24, 2014 at 10:42 am said:

    Coates often says things worth reading. After the first paragraph of his commentary on Bundy, however, there’s no need to keep reading. He is more ignorant and prejudiced than the people he is tarring with a broad brush. Saved me from reading the rest of his nonsense, though.

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  11. quarterback, on April 24, 2014 at 10:43 am said:

    Sticking a microphone in front of Trayvon wouldn’t have done much good. Dead men tell no tales.

    No need. He had recorded himself for posterity.

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  12. Brent Nyitray, on April 24, 2014 at 10:46 am said:

    There are no moronic and hateful liberals, bagger… Only goobers are hateful and moronic.

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  13. quarterback, on April 24, 2014 at 10:49 am said:

    Should we eagerly await Coates’ column about how liberalism just can’t quit white supremacy? He could easily string together any number of racist and demeaning comments from liberals a lot more prominent than Bundy.

    Yeah, he’ll get right on that.

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  14. yellojkt, on April 24, 2014 at 10:53 am said:

    I suspect the number of people who would make such a claim is vanishingly small relative to the overall population, or even just the population of self-proclaimed conservatives.

    I hope you are right, but that is a really, really low bar to clear. However, the number of slavery apologists out there is not zero. There is this guy from CPAC a few years ago:

    Michele Bachmann has also seen the upside of involuntary servitude.

    http://www.forbes.com/sites/oshadavidson/2011/07/08/michele-bachmann-salutes-the-upside-to-slavery/

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    • ScottC, on April 24, 2014 at 11:04 am said:

      Michele Bachmann has also seen the upside of involuntary servitude.

      I’ve got no brief for Bachmann, but reading the links demonstrates that this, too, is a complete misrepresentation.

      edit: corked by qb

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  15. quarterback, on April 24, 2014 at 10:56 am said:

    If you honestly believe that this is what qb’s comment suggested, you are too stupid to bother with

    Nothing yello says is honest. Hence, I didn’t even bother with that bit of dishonesty.

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  16. quarterback, on April 24, 2014 at 11:02 am said:

    And yello thus again proves my point before I even made it.

    If I ever respond again to anything yello says, someone remind me to ignore him. What a despicable individual.

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  17. I'm Now Kevin's Biatch, on April 24, 2014 at 11:04 am said:

    Name a belief that you think is wrong that has zero believers?

    I’m a racist, btw, loud and proud. What else ya got?

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  18. jnc4p, on April 24, 2014 at 11:07 am said:

    “ScottC, on April 24, 2014 at 10:44 am said:

    jnc:

    From Coates on Bundy:

    A couple days ago Jonathan Chait asserted that modern conservatism is “doomed” because it is “rooted in white supremacy.” The first claim may or may not be true, but there’s little doubt about the second.

    Do you believe that?”

    Nope. But that’s a pretty common meme on the left these days. Coates usually states the position better than most others. Keep in mind that Coates also made this observation as well which apparently has escaped every other commentator on the left:

    “Maher then proceeds right into the “voting against your interests” thesis, which I’ve always thought was a case of asking the wrong question. It proceeds from the notion that the pursuit of money is the only real “interest.” This is an approach suited to liberals mostly interested in venting their frustrations. It’s all so paternalistic and incurious.”

    Chait however has jumped the shark:

    “Why do all these people with strong antipathy toward the federal government turn out to be racists? Why do all these homosexuals keep sucking my cock?”

    http://nymag.com/daily/intelligencer/2014/04/cliven-bundy-shockingly-turns-out-to-be-racist.html

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  19. I'm Now Kevin's Biatch, on April 24, 2014 at 11:08 am said:

    Aren’t we supposed to snicker at Michelle Bachman’s GAY husband at this point?

    When is it ok to be homophobe? Do you *have* to be a Progressive in good standing?

    #AskingForAFriend

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  20. jnc4p, on April 24, 2014 at 11:13 am said:

    “That is the past that Cliven Bundy believes “the Negro” to have been better off in. He is, regrettably, not alone.

    For all practical purposes, I’d bet he is. I suspect the number of people who would make such a claim is vanishingly small relative to the overall population, or even just the population of self-proclaimed conservatives.”

    Maybe. If Bundy made the comments as reported then he did so because he assumed that his audience would be receptive to them. I don’t think it’s a substantial portion, but I wouldn’t put it at “vanishingly small” either.

    The point I was trying to make with the links is that if you watch the commentary on Bill Maher after A. Pelosi does the NY interviews, it’s in the same ballpark as Bundy’s comments.

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  21. quarterback, on April 24, 2014 at 11:14 am said:

    Chait jumped the shark years ago. How he gets paid for his hysterical ravings is a wonder. Remember, he’s semi-famous for being the pundit who wrote that he does, really, truly hate Bush.

    Now I can write Coates off, too.

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  22. jnc4p, on April 24, 2014 at 11:23 am said:

    This is good:

    “White Male Privilege Squandered On Job At Best Buy
    News in Brief • gender • race • Lifestyle • ISSUE 50•16 • Apr 21, 2014 ”

    http://www.theonion.com/articles/white-male-privilege-squandered-on-job-at-best-buy,35835/

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    • ScottC, on April 24, 2014 at 11:46 am said:

      Good article by George Will on Obama’s adolescent rhetorical devices:

      First came the invocation of a straw man. Celebrating the ACA’s enrollment numbers, Obama, referring to Republicans, charged: “They said nobody would sign up.” Of course, no one said this. Obama often is what political philosopher Kenneth Minogue said of an adversary – “a pyromaniac in a field of straw men.”

      Heh…I like that one.

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    • ScottC, on April 24, 2014 at 12:31 pm said:

      Kevin Williamson delivers another outstanding article. It is longer than the usual daily NR comment, and covers a lot of economic ground.

      Money is a symbolic system, the purpose of which is to facilitate exchange and to act as a recordkeeping technology. That money is so very important to our everyday lives and yet has no real connection with physical reality is the source of many apparent paradoxes and contradictions. These are the best of times, these are the worst of times.

      Measured by money, things look relatively grim for the American middle class and the poor. Men’s inflation-adjusted average wages peaked in 1973, and inflation-adjusted household incomes for much of the middle class have shown little or no growth in some time. The incomes of those at the top of the distribution (which is not composed of a stable group of individuals, political rhetoric notwithstanding) continue to pull away from those in the middle and those at the bottom. The difference between a CEO’s compensation and the average worker’s compensation continues to grow.

      But much of that is written into the code. If, for example, you measure inequality by comparing the number of dollars it takes to land at a certain income percentile, with a hard floor on the low end (that being $0.00 per year in wages) but no ceiling on the top end, and if you have growth in the economy, then it is a mathematical inevitability that incomes at the top will continue to pull away from incomes at the bottom, for the same reason that any point on the surface of a balloon will get farther and farther away from the imaginary fixed point at its center as the balloon is inflated. This will be the case whether you have the public policies of Singapore or Sweden, and indeed it is the case in both Singapore and Sweden.

      Purely symbolic systems are easy to manipulate, which is why any two economists can take the same set of well-documented economic data and derive from it diametrically opposed conclusions.

      With economic models, we are a little like Neo in The Matrix, before he takes the red pill: We are not in the real world, but in a simulacrum of it, one that has rules, but rules that can be manipulated by those who understand the code. Economic models and analysis are very useful, but it’s worth taking the occasional red-pill tour, leaving behind the world of pure symbolism and taking a look at the physical economy.

      Welcome to the paradise of the real.

      Also, a very important point that explains much:

      For the conservative, people are an asset — in the coldest economic terms, a potentially productive unit of labor. For the progressive, people are a liability — a mouth to be fed, a problem in need of a solution. Understanding that difference of perspective renders understandable the sometimes wildly different views that conservatives and progressives have about things like employment policy. For the conservative, the value of a job is what the worker produces; for the progressive, the value of a job is what the worker is paid. Politicians on both sides frequently talk about jobs as though they were economic products rather than contributors to economic output, as though they were ends rather than means. The phrase “there aren’t enough jobs” is almost completely meaningless, but it is a common refrain.

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  27. I'm Now Kevin's Biatch, on April 24, 2014 at 12:47 pm said:

    This is the succesful government run program that should be instituted for all.

    http://thinkprogress.org/health/2014/04/24/3430217/veterans-dying-va-backlog/

    #SinglePayerWillSaveUs!

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  28. quarterback, on April 24, 2014 at 2:06 pm said:

    Yes, Williamson is a genius. His explanation of the mathematical inevitability of growing inequality is one I have made or tried to make many times at PL and (I think) here. I’ve always thought there must be a term for this principle.

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    • ScottC, on April 24, 2014 at 2:31 pm said:

      qb:

      I’ve always thought there must be a term for this principle.

      How about tautology? To say that the economy is growing is, by definition, so say that inequality is growing.

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  29. quarterback, on April 24, 2014 at 2:07 pm said:

    I liked the Will column as well. It certainly makes an observation of something many of us have noticed, but there is much more that could be said about Obama’s childish rhetoric (and behavior).

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  30. jnc4p, on April 24, 2014 at 2:33 pm said:

    Reposting something I came across a while back. This is the left’s version of Bundy’s argument:

    “The novel suggests that the ownership of the beloved old house, Howards End, doesn’t depend on who actually owns it, but rather who is most connected to the place in spirit.”

    http://opinionator.blogs.nytimes.com/2012/08/16/who-owns-that-house/?ref=opinion

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  31. quarterback, on April 24, 2014 at 2:41 pm said:

    How about tautology?

    I suppose it is that in a sense, but doesn’t it have some mathematical name?

    The socialists among us probably think it isn’t a tautology, because you are falsely assuming that the lowest earners must always be at or near zero, when in a just society with just distribution of resources and income everyone’s income and wealth would necessarily rise together, with the result that no absolute increase in inequality would occur, and a relative decrease would occur.

    Also, if my dog were a large cat with big fangs and orange and black stripes, it would be a tiger.

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    • ScottC, on April 24, 2014 at 2:57 pm said:

      qb:

      Also, if my dog were a large cat with big fangs and orange and black stripes, it would be a tiger.

      Exactly!

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  33. jnc4p, on April 24, 2014 at 4:04 pm said:

    Salon won’t get with the program though:

    “It’s not just wing-nuts! Slate gets liberal opposition to the Common Core all wrong

    Slate oversimplifies Common Core debate as Obama vs. the Tea Party, and misses serious, sophisticated left critique

    Jeff Bryant
    Thursday, Apr 24, 2014 11:54 AM EST”

    http://www.salon.com/2014/04/24/its_not_just_wing_nuts_slate_gets_liberal_opposition_to_the_common_core_all_wrong/

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  34. jnc4p, on April 24, 2014 at 4:07 pm said:

    FYI – NYT on the housing market.

    “The Housing Market Is Still Holding Back the Economy. Here’s Why.
    APRIL 24, 2014”

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  35. Kevin S. Willis, on April 24, 2014 at 4:15 pm said:

    @yellojkt: “because they never learned how to pick cotton. ”

    I never learned how to pick cotton. No wonder my life has been so empty!

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  36. Kevin S. Willis, on April 24, 2014 at 4:20 pm said:

    Common Core is terrible. Especially at the elementary level. The basics are fine (as they often are) as far as they go (insufficient math this year, I know that: way insufficient . . . not a hundred percent sure I can blame common core, but … )

    The kinds of open ended questions they ask about ambiguous reading materials for 2nd and 3rd graders, all coming out of Common Core, are horrendous. You don’t teach kids how to think critically without providing examples of critical thinking and lots of facts and experience and basic tools to think critically with. And some of the questions are open ended, but there’s a right and wrong answer? Some of them I read, as a 45 year old adult, and I can’t say that one answer is definitely right and the rest wrong. But that’s how they are graded.

    Hate to be a old codger, but: reading, writing, and ‘rithmetic. The basics first.

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  37. Kevin S. Willis, on April 24, 2014 at 4:24 pm said:

    @ScottC: “A couple days ago Jonathan Chait asserted that modern conservatism is “doomed” because it is “rooted in white supremacy.” The first claim may or may not be true, but there’s little doubt about the second.”

    Lower taxes, less government (of the kind we don’t like) = white supremacy. I think the formula makes it obvious. Neither liberalism or conservatism are ever “doomed”. They may change and fracture (social liberals, big government conservatives) but they aren’t doomed. That’s always wishful thinking.

    Liberalism is clearly rooted in Stalinism. Little doubt about that.

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  38. Kevin S. Willis, on April 24, 2014 at 4:30 pm said:

    @quarterback: “If I ever respond again to anything yello says, someone remind me to ignore him. What a despicable individual.”

    I love yello (great band, too) and I love yellojkt. I share water with him. I grok great goodness in him. 😉

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  39. Kevin S. Willis, on April 24, 2014 at 4:33 pm said:

    @yellojkt: “I hope you are right, but that is a really, really low bar to clear. However, the number of slavery apologists out there is not zero. There is this guy from CPAC a few years ago:”

    It depends what you mean by apologist. Thomas Sowell has both excoriated slavery, and pointed out that most of the dings against American slavery (insurance companies insuring slaves as property, 3/5ths rule) as being the sorts of things that helped put an end to slavery, and reduced slave mortality greatly compared to the rest of the world. Which has made him an apologist for slavery, although that’s not accurate.

    I doubt Michelle Bachman is an apologist for slavery, although I will believe that she put her foot deep, deep inside her mouth.

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  40. I'm Now Kevin's Biatch, on April 24, 2014 at 6:27 pm said:

    He also knows what we’re secretly thinking.

    #Mind:Blown

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  41. jnc4p, on April 25, 2014 at 9:00 am said:

    Worth a note:

    “Yellen Concerned Fed Model Fails to Predict Price Moves
    By Rich Miller 2014-04-25T03:08:39Z”

    http://www.bloomberg.com/news/2014-04-25/yellen-concerned-fed-model-fails-to-predict-price-moves.html

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