by _ ➕follow (8) 💰tip ignore
« First « Previous Comments 35 - 74 of 120 Next » Last » Search these comments
Why are home builders so low? KB has a pe of 7?
Why did they fall so much when this is probably the only sector of the economy that is guarantied a lot of business and good prices independently of whatever happens in China/emerging markets?
Besides the article above if you listen to why I said the Builders didn't have value on CNBC last year it makes sense
Theme of 2015
“You get my drift: The bar for housing is so low that some housing bulls might try the predictable tactic of bellowing about exponential growth portending a miraculous recovery when all that is occurring is a bump up from a pitifully low base. I take a more measured (or perhaps jaundiced) view of what the future holdsâ€
They were doomed from the start, they could never hit their sales metric so the pricing was based on a thesis that they would
2:21 Mark
Why are home builders so low? KB has a pe of 7?
Why did they fall so much when this is probably the only sector of the economy that is guarantied a lot of business and good prices independently of whatever happens in China/emerging markets?
I assume partially because of what happened in 2008. The bubble was in full burst mode while major talking-heads still pushed housing. Another reason could be margin pressure as affordability is coming to an end, so they have to build and sell relatively "cheaply" on pricey land.
all that is occurring is a bump up from a pitifully low base. I take a more measured (or perhaps jaundiced) view of what the future holdsâ€
They were doomed from the start, they could never hit their sales metric so the pricing was based on a thesis that they would
It doesn't explain much: Ok they have a low baseline. Ok they grow from there. They meet a target or not, BFD. They are growing.
Why does TOL, a growing company with probably years of growth in front of it, trade at a forward pe of 8, when CVX trade at 17?
Housing is rare and much more expensive than production price.
Oil is cheap and plentiful.
My theory is that people think Home Builders will not do well if rates are rising.
But first rates (mortgage rates) are not rising, second credit is not the barrier to more building. Permits are more likely the culprit.
If so we are likely to see much more building just because housing is rare and the population keeps growing, and authorities may want high prices, but not so high that the economy gets killed. Therefore they will be under pressure to up the supply.
It doesn't explain much: Ok they have a low baseline
Everyone assumed housing was strong that was their first mistake
They were always going to miss their mark so once the market place finally got it, they sold them off
That was my call for 2015, 8%-12% growth with upside if Median Price fell
Median price fell we got 14.5% growht that is a 10%-27% miss on sales expectations
My theory is that people think Home Builders will not do well if rates are rising.
We had one rate spike in 2014, Builders missed their sales metric points by 20%-28% in 2014
It doesn't explain much: Ok they have a low baseline. Ok they grow from there
The CNBC discussion is perfect clear on why the Builders had no value last year, I even amazed myself how right I was ;-)
Everyone assumed housing was strong that was their first mistake
During the crisis, existing home sales fell far less than new home sales, as we had overbuilding.
Now this situation will reverse as we move into far under built territory. People maybe had incorrect hopes for new home sales, but building MUST happen sometime .
They were always going to miss their mark so once the market place finally got it, they sold them off
That was my call for 2015, 8%-12% growth with upside if Median Price fell
Median price fell we got 14.5% growht that is a 10%-27% miss on sales expectations
The CNBC discussion is perfect clear on why the Builders had no value last year
I don't understand. They had a pe of maybe 10, now fall to 7.
At what point exactly did the market get ahead of itself?
That is your definition of no value? pe 10 with a growth of 10+%? In what other sector do you see that?
We had one rate spike in 2014, Builders missed their sales metric points by 20%-28% in 2014
Is there a rate spike now?
And again the problem is not that credit is hard to get or expensive, even in 2014. The key problem on buyer side is that prices are ultra high.
The entire reason why sales are low and prices are high is because they are not building enough.
"Not building enough" cannot be a barrier to more building.
At what point exactly did the market get ahead of itself?
If you based the pricing multiple and book value on new home sales hitting 24%-41% sales growth for last year, you were lead to believe a false model of growth
Rate of sales were decelerating from the start of the year but no one picked that up until it was too late
People forget headline sale numbers are misleading both up and down, revision trends are key for new home sales, I wrote about that a lot last year
and now everyone is wondering why the builders got smacked
It's because they missed their sales estimates
Is there a rate spike now?
Work of 4.5% 30 year as a test level 10 year is 1.73% basically the low level of the mortgage rates range I have talked about for 2 years now, we are in a channel now on 10's
It's because they missed their sales estimates
What was the final growth?
What pe you would generally associate with that growth rate, and why?
What was the final growth?
14.5% which means that if you didn't have such a miss in new homes sales in 2014 new home sales would have been down negative 6 -8 percent
Over estimating sales for the 3rd year in a room
Hence why a lot builders and the XHB are 2012/2013 levels
A lot Wall Street people lead investors to believe there was a escape velocity thesis when all it was was a slow and steady rise for a post WWII low level
A lot Wall Street people lead investors to believe there was a escape velocity thesis when all it was was a slow and steady rise for a post WWII low level
It was always obvious we would go through years of slow building, after such a massive building boom.
But we are now getting under built.
This is being controlled. It was kept slow because they wanted prices to rebound. Now this is done, the incentive will align on the "build more" side.
If all this is true, this is probably the best buying opportunity right now.
It is unlikely rates will be a problem considering the rest of the economy.
If all this is true, this is probably the best buying opportunity right now.
It is unlikely rates will be a problem considering the rest of the economy
The reason I mentioned median price falling is good, is because it means they're selling smaller priced homes
We have over 5 months inventory for new homes and they still missed sales by double digit, this is a demand problem only
they still missed sales by double digit, this is a demand problem only
Demand is low because prices are too high.
They should have plenty of room to lower price/focus on more basic homes/apartments.
Still grow.
They should have plenty of room to lower price/focus on more basic homes/apartments.
Profit margins
Bread and Butter are single family homes that sell big, that's their issue, even their lower end homes that don't have the bells and whistles ... they can sell them but it isn't as profitable
That gets into a complicated game with the builders, I minded everyone to just keep an eye out on conference calls, and when DHI the new wall street darlings began to speak their stock went down too.
So demand is one things but how much $$$$$$$$$$$$ you can make is the other factor
Bread and Butter are single family homes that sell big, that's their issue, even their lower end homes that don't have the bells and whistles ... they can sell them but it isn't as profitable
No one says they can't continue to sell luxury houses for the same margin. The question is whether they address the demand for more basic homes thus making an extra profit.
Profits growth trump margin.
The question is whether to buy CVX with a pe 17, a profit margin of 3%, and revenues down 35% in an environment where oil prices are FUCKED.
OR I could buy DHI with a pe of 9, a margin of 7% and revenues up 5% in an environment where housing is rare and expensive.
Hummm....
OR LGIH, pe 6.5, margin 8%, revenue growth 88%.
Stock down 35% from October.
In Yahoo, the show book value at 35.50B, market cap at 9B. If true why no one buys them and sell them in pieces?
If true why no one buys them and sell them in pieces?
Its never that easy or that fast.
KB Homes stock chart looks like a walking dead going down the hill
However, if you want value, there it is right there
In Yahoo, the show book value at 35.50B, market cap at 9B. If true why no one buys them and sell them in pieces?
I think you're looking at the wrong stock, it's KBH vs KB (which has more debt than cash).
Very surprising to me.
I would have thought this is the one sector with a lot of demand in front of it.
I would have thought this is the one sector with a lot of demand in front of it.
It was just over hyped last year, that's it
Trend sales are at cycle highs, but people were paying way too much for the builders in 2015 ... (Value) that's the point I made on CNBC last year because the builders were the favorite trade for 2015
It was just over hyped last year, that's it
I don't think the need for building to happen is hype. Your own graph shows that.
I don't think the need for building to happen is hype. Your own graph shows that.
It's price you pay for the company
We are selling new homes at recessionary level markets, so the profits have to be very high..
There is a reason why the Builders got smacked in 2013 and 2015 because those 2 years everyone was over hyping the story line to show top line revenue was going to be booming ...
It was impossible for that to happen in this cycle
It was impossible for that to happen in this cycle
Why is it impossible to build more and make a profit when prices are ultra high?
Do you think, we will continue the slow sales at recessionary level until the next cycle?
Something has to give. You can't have prices go up forever and no one answering demand for cheaper structures, while people go increasingly homeless.
Why is it impossible to build more and make a profit when prices are ultra high?
You don't have the proper demand curve this cycle. Which was my thesis from day 1, years 2020-2024 will be better though.
For the the most part the builders knew this, I always give them kudos that they tried their best to manage this cycle because they know their homes are too expensive compared to existing homes
Mass supply of cheaper homes is a problem for them
I doubt anything will be better in 2020-24
College educated dual Income Americans will buy more homes then just based on the supply of more of them
It won't happen
It will happen. Just not in the US. But the US will not be left unaffected.
It will happen. Just not in the US. But the US will not be left unaffected.
We don't import recessions only export them.
Demographic economics is going to get better for us soon, No Great Depression, it will be a normal recession and we will have better household formation capacity for better trend growth for a mature country in the next cycle
We don't import recessions only export them.
What we are looking at is a deep change in financial conditions, of the way finance works world wide.
What we are looking at is a deep change in financial conditions, of the way finance works world wide.
?
FCX is at 1998 level.
BID at 1989 level.
TOL at 2004 level.
Deal?
I mean look at the max chart and ignore the big crazy bumps in the middle... What's a deal in this background?
I have no idea.
« First « Previous Comments 35 - 74 of 120 Next » Last » Search these comments
#Housing
#Economics
#Investing
http://loganmohtashami.com/2016/01/25/home-builders-new-homes-sales-and-the-affordability-myth/