Morning Report: Good numbers out of the builders 4/21/16

Markets are flattish after the European Central Bank declined to initiate further stimulus measures. Bonds and MBS are down.

The Chicago Fed National Activity Index fell slightly in March as the economy continues to grow slightly below trend.

Initial Jobless Claims printed below  250k last week, The last time we saw an initial jobless print below 250k? Late 1973. For all the fears of mass layoffs in the oil patch, we aren’t seeing evidence of it in the jobless numbers.

The FHFA House Price Index rose 0.4% in February, according to the FHFA House Price Index. Prices are up 5.6% overall. The index, which only looks at a subset of the housing market, has surpassed its bubble highs. The West Coast markets continue to be the hottest, while New England continues to bring up the rear.

In other economic news, the Philly Fed manufacturing index fell, while the index of leading economic indicators improved. Consumer comfort fell.

Homebuilder PulteGroup reported better than expected earnings this morning. Revenues increased 28%, while backlog rose 31%. Average selling prices rose 9%. The CEO characterized the housing market this way: “Looking to the broader housing market, we remain pleased with overall demand and expect new home sales will continue to move higher over the coming years as the industry benefits from an improving economy, ongoing employment and wage gains, low interest rates, a limited supply of homes and the gradual release of pent-up demand, We believe our business is extremely well positioned to be successful in this type of operating environment given our disciplined investment practices and focus on investing in high returning projects.”

We also heard from D.R. Horton this morning, who also put out better-than expected numbers. Revenues increased 16%, while backlog increased 14%. D.R. Horton is up about 80 cents a share this morning. They took up guidance for the year, which means perhaps the slowdown in the energy sector is not affecting their geographies. DHI has a lot of Texas exposure.

Millennials may want to buy a home, but they are not saving enough for a downpayment. The article assumes a 20% downpayment is required, and doesn’t mention FHA loans, which only require 3.5% down. If journalists aren’t aware that you don’t need 20% down, it means the industry still has some more educating to do.

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