Zacks Industry Outlook Highlights: PulteGroup, D.R. Horton, Hovnanian Enterprises, Lennar and Toll Brothers

    Zacks Industry Outlook Highlights: PulteGroup, D.R. Horton, Hovnanian
                    Enterprises, Lennar and Toll Brothers

PR Newswire

CHICAGO, Dec. 24, 2013

CHICAGO, Dec. 24, 2013 /PRNewswire/ --Today, Zacks Equity Research discusses
the Homebuilders, including PulteGroup, Inc. (NYSE:PHM-Free Report), D.R.
Horton, Inc. (NYSE:DHI-Free Report), Hovnanian Enterprises, Inc.
(NYSE:HOV-Free Report), Lennar Corporation (NYSE:LEN-Free Report) and Toll
Brothers, Inc. (NYSE:TOL-Free Report).


Industry: Homebuilders


The housing momentum seen in 2012 and in the first half of 2013 has slowed
down a bit in the past 3-4 months due to the recent spike in mortgage rates,
rising home prices, tight credit availability and the political uncertainty in
Washington. While interest rates are rising, they are still below historical
levels and housing is still affordable. In addition, accelerating job growth
and increasing consumer confidence are also boosting demand for new homes.

Supply, however, is constrained by low home inventories, both of new
single-family and multi-family homes. A shortage of land and labor is
restricting the construction of homes, both single and multifamily. Home
prices have thus started to move up with market demand gaining momentum and
supply remaining limited.

Rising home prices and the spike in interest/mortgage rates since May this
year slowed down the pace of orders and traffic. Buyers were taken unawares
by the sudden increase in rates and a few put off their purchase decision,
thereby increasing cancellation rates and lowering orders for most
homebuilders in the last reported quarter.

Orders declined around 17% at PulteGroup, Inc. (NYSE:PHM-Free Report), 2% at
D.R. Horton, Inc. (NYSE:DHI-Free Report) and around 9% at Hovnanian
Enterprises, Inc. (NYSE:HOV-Free Report). Though order trends improved year
over year for others like Lennar Corporation (NYSE:LEN-Free Report) and Toll
Brothers, Inc. (NYSE:TOL-Free Report), they slowed down from the past quarter.

However, most homebuilders believe that this is only a temporary factor and
are confident of demand picking up in the forthcoming quarters. These builders
expect buyers to adjust to rising prices and interest rates and return to the
market. Also, Federal Reserve's promise to keep interest rates low for some
time despite tapering its $85 billion stimulus plan by $10 billion from Jan
2014 removes a major overhang for the homebuilders.

A slew of housing data released lately clearly shows that the housing recovery
is still very much intact. Data released by the U.S. Department of Housing and
Urban Development and the U.S. Census Bureau showed that sales of newly built,
single-family homes rose 25.4% in October. Another data release by the
department showed that November housing starts surged to their highest in
nearly six years.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market
Index (HMI), known as the homebuilder sentiment index, jumped 4 points to 58
in December from 54 in July. This was the seventh consecutive monthly increase
in the index showing that the recent interest rate hikes have not dampened the
housing recovery completely.

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